Foster's profit growth slows on weak U.S. wine sales

By Victoria Thieberger

MELBOURNE (Reuters) - Foster's Group Ltd (FGL.AX: Quote, Profile, Research, Stock Buzz), Australia's biggest alcoholic drinks company, posted its slowest growth in first-half net profit in several years on Tuesday, as U.S. wine sales slumped and the strong Aussie dollar crimped earnings.

Although the world's second largest wine company reported earnings slightly ahead of analyst forecasts, Chief Executive Trevor O'Hoy conceded Foster's had underperformed its targets on wine, and analysts warned of greater competition in its main beer market.

"It was mildly better than the poor expectations that were out there," said White Funds Management portfolio manager Angus Gluskie.

"Beer is becoming more competitive at the moment because you've got both Coca-Cola Amatil (CCL.AX: Quote, Profile, Research, Stock Buzz) moving into beer distribution and the major supermarkets starting their own home brands. But wine is the bigger challenge," Gluskie said.

Foster's shares fell 2 percent but recovered some poise along with a market recovery and were 0.3 percent lower by 0119 GMT (8:19 p.m. EST).

Foster's, the world's second-largest wine company, said net profit before one-offs for the six months to December 31 rose 6 percent to A$393.5 million ($361 million) from A$371.4 million, helped by a strong performance in Australia and Europe.

That beat market forecasts of A$384.5 million before one-offs, according to a Reuters survey of eight analysts, but it was well below the double-digit pace of recent years and the 22 percent rise in the six months to June 2007.

Foster's said it expected earnings per share growth, before one-offs and currency effects, to rise about 10 percent in 2008, in line with market forecasts.