Brewing giant Foster’s Group may be forced to write down the value of its wine assets by another $700m, as part of the findings of a strategic review that is due to be released in coming weeks. The possibility is related to its $3.2bn acquisition of wine group Southcorp in 2005.

In August 2008, the group wrote down the value of its intangible wine assets by $471m and reallocated $575m of goodwill from its wine division to its beer division. However, in a research note, Goldman Sachs JBWere analyst Ian Abbott has warned that Foster's still has $2.2bn of wine-related intangible assets on its balance sheet. Abbott noted, "Given that the global economy has deteriorated in the six months since the previous review of carrying values, we believe there is a risk of further write-downs”.

Abbott did add, however, that the drop in the value of the Australian dollar could reduce the amount to be written down. He wrote, "This depreciation should have a large positive impact on Foster's assessment of net present value and will likely ameliorate some of the negative effects of any reduction in assumed growth rates or any increase in discount rates".

The note went on to say that if the growth in EBITDA fell by 2 percentage points, Foster's could make write-downs of up to $200m on its US wine assets and up to $500m on its Australian wine business.

NamNews - Tuesday 27th January 2009

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