Foster’s Group Ltd (ASX: FGL) says it will proceed with a structural separation to create independent ASX listings for its wine business and its beer, cider and spirits business, as it posted first-half profit below expectations.

Foster's said last May it was considering splitting the high-margin beer unit from the struggling wine business, which has endured nearly A$3 billion of writedowns, after a strategy to jointly market beer and wine failed.

The brewer said today its first-half profit fell to A$312.1 million. Before one-off items, profit slumped to A$335.7, down from A$355.7 million, as the beer market was affected by the subdued consumer environment. That was below analyst forecasts for A$349 million, according to a survey of seven analysts.

“Foster’s has completed a detailed evaluation of the issues, costs and benefits of the demerger and the board unanimously considers that the demerger represents the best path forward and is in the best interests of Foster’s shareholders,” said Foster’s Chairman, David Crawford.

“The performance improvement program implemented following completion of the
Wine Strategic Review in February 2009, including revitalisation of the management team, has produced encouraging results.

“Benefits are now being delivered by the separate organisational structures for beer and wine in Australia, and the Board has formed the view that further benefits will result from a complete separation and now is the right time to pursue a demerger of
Treasury Wine Estates from Foster’s.

“The demerger will allow Foster’s shareholders to benefit from owning Treasury Wine Estates shares and to participate in any value creation within that business including from improved market conditions in the wine category,” said Mr Crawford.

Foster’s expects the split to be completed in May 2011, subject to shareholder and court approvals.

Foster’s is expected to remain in the S&P/ASX50. It is anticipated that Treasury Wine Estates will qualify for inclusion in the S&P/ASX100 following its listing on ASX.

The brewer of Victoria Bitter and Foster’s Lager lost 1.6 percent to A$5.65 at 10:06 a.m. in Sydney trading today, erasing its gains for the year.

With Reuters