FOSTER’S “HANGING IN THERE.”

In a research note appropriately titled “Hanging in There,” analyst Andrew Kovacs at Macquarie Research noted that Fortune is forecasting a “very strong” first half performance in beer and wine. However, first half constant currency earnings are expected to decline due to mix and higher California costs in the Americas.

“Previous Americas guidance had warned that ‘strong’ FY08 growth would be weighted to the 2H, with management still confident of ‘solid’ FY08 constant currency earnings growth,” said Andrew. “In summary, Foster’s Group believes it can continue the strong constant currency performance achieved in the 2H07 through FY08.”

When it comes to the difficult Australian 2008 vintage, Andrew writes that Foster’s “is well advanced in its grape and bulk wine contracts, although the bottom line is that a very small V'08 is going to hurt FGL's FY09 earnings.”

Andrew believes the company will pursue synergies more aggressively to offset currency and vintage problems.

“Another positive is that management has said that the tightening grape supply in Australia and California is opening up potential for further price increases.”

To read WSD’s coverage of the meeting, click here.