Southcorp routed after profit fall
SYDNEY, Australia (CNN) -- Investors have savaged Australian wine group Southcorp, dumping its stock Tuesday after it reported a 97 percent fall in first-half net profit on poor UK sales.
Southcorp finished down more than 19 percent at A$3.56. That compares with the broader Australian market, measured by the S&P/ASX200, which lost 1.99 percent.
Southcorp reported first-half sales more than halved to A$825.2 million ($495 million) as a poor performance in the key U.K. market and a bungled promotional effort in Australia cut into revenue and earnings.
Net profit was just A$5.7 million, down from A$210 million in the corresponding period a year ago.
Southcorp sacked its CEO Keith Lambert on February 3 after shocking investors with an earnings warning -- its fourth in two years -- two weeks earlier. (Full story)
Southcorp's chairman Brian Finn has acted as chief executive since then, while the company searches for a new CEO.
The wine group, whose lineup includes such premium Australian brands as Penfolds, Rosemount and Lindemans, stunned the market on January 21 when it cut its earnings guidance for the year to next June by 14 percent.
It delivered another shock last Friday, when it sought a share trading suspension ahead of Tuesday's half-year results announcement. That was after the board got an update on trading conditions in the U.K.
Finn said Tuesday that the previous earnings guidance of A$287 million for the full year now would not be met.
He said that because of market uncertainty and volatility, plus a review of the company's sales and promotional activities over the next few months, the board had decided not to set a new target.
Finn said the company's performance had "clearly been unsatisfactory" and attributed it to difficult trading conditions in some areas, poor execution in some parts of the business, and one-off factors such as the writedown in value of its Californian vineyard holdings.
He said results in the U.K. market were particularly weak and the company's promotional spending had cut sharply into margins.
In Australia, Southcorp and other wine producers have been engaged in promotional discounting in recent months under pressure from big retailers such as Coles Myer and Woolworths, which both have extensive liquor chains.
Lambert had come in for criticism over Southcorp's willingness to discount its premium brands.
Southcorp's latest earnings shock has increased speculation that it could become a takeover target. London's Daily Telegraph reported at the weekend that Allied Domecq was looking at making an approach.
Other potential bidders are Foster's Group of Australia, and international beverage giant Diageo.
Shares in Foster's, Australia's largest beer and wine group, finished flat at A$4.30.