Abbotsford sale could save Foster’s $150 million
Australia's largest brewer Foster's Group Ltd could save up to $150 million (US$130 million) by putting its Abbotsford plant in Melbourne on sale, Merrill Lynch analysts said.
In a note to clients, analysts led by David Errington wrote the company could sell the property and use the proceeds to build a brewery north of the city. The new location would be less constrained by unions, surrounding residents and limits on expansion.
Built in 1904, Abbotsford yields about 55 million cases of beer per year, accounting for 47 percent of the production by Foster's CUB domestic unit. A more efficient site would help tighten the $1 a case in higher cost Foster's pays to make beer compared with smaller rival Lion Nathan. The latter is the Australian unit of Tokyo-based Kirin Holdings Co.
"Closing Abbotsford looks a no-brainer to us," wrote Errington, who kept his "buy" rating on Foster's. "Abbotsford is located on prime real estate...and the proceeds from its sale could be expected to go a long way toward if not exceed the construction of a new site."
Spokesman for Melbourne-based Foster's Troy Hey said the company did not agree with Merrill Lynch's thoughts on costs at the Abbotsford plant. He refused to explain further.
Foster's decreased by 2 cents, or 0.4 percent, to close at $5.66 in Sydney, reducing its advance this year to 2.9 percent. The benchmark S&P/ASX 200 index fell 1.6 percent today and has declined 7.9 percent this year.
The company announced last month plans to split its beer and wine businesses, with a final structure to be decided in 2011. The proposed separation comes after the company wrote down its wine assets by more than $2.5 billion in the past five years.