May 26, 2010

$1b write-down for Foster’s … Rough time for global markets … iPhones for 97 bucks …

Foster's to separate wine and beer, tens of billions of dollars were wiped off global markets, US consumers are unmoved, a new iPhone is on the way, so the price plummets and other business news.

Glenn Dyer — <em>Crikey</em> business and media commentator

Glenn Dyer

Crikey business and media commentator

What’s a billion? Foster’s Group is finally going to separate its beer and wine businesses, at a cost of more than $1 billion in write-downs. That finally confirms that the move into wine — done one or two managements ago —  is a complete and utter dud. “Foster’s expects to recognise a non-cash impairment charge of $1100 million-1300 million (pre-tax) to the carrying value of its wine assets in the 2010 financial year,” the company said. The divorce might not happen if markets are too volatile or the economy weak, but it finally looks like happening. Foster’s says the huge loss is “paper” and won’t worry the banks, but shareholders are going to feel some pain and look like wearing the cost. “As a result of the non-cash impairment charge, the timing and payment of dividends over the next 12 months is expected to change, although the total amount received by shareholders is anticipated to be broadly in line with previous years,” Foster’s warned this morning. That means shareholders will eventually get about 27 cents  in dividends for the 2010 financial year, but the payments will be delayed. That’s so typical of Australian companies: management and board make the big deals, draw the big pay packets and bonuses (and golden parachutes when they leave or are jettisoned) and shareholders end up paying the cost.

US rates: another rough day on global markets with tens of billions of dollars in value wiped out. Big falls in Australia, Asia and Europe were first matched in the US, which then staged a late rebound. But the best indicator was the US 10-year Treasury bond yield. Overnight, it hit a 13-month low of 3.06%, lower than the 3.10% on May 6 when the Flash Crash happened on Wall Street. It bounced to 3.16% by the close, which saw the Aussie dollar jump back over the 82 US cent mark and heading towards the 83 cent mark. Yields on all other notes and bonds also fell, with the two-year bond yielding 0.72%, not far from its record low of 0.65%. A month ago the 10-year bond yield was closing in on 4%.

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