FOSTER'S has served up the dregs to investors with its first profit fall in 16 years.

FOSTER'S has served up the dregs to investors with its first profit fall in 16 years.

But Foster's chairman David Crawford is upbeat the worst may be over after writing down $730 million from its struggling wine business.

Despite market speculation that Foster's may look at selling some under-performing wine brands, Mr Crawford refused to confirm pending sales or rule out the acquisition of more wine businesses.

The troubled drinks company yesterday reported a 0.4 per cent drop in annual profits, excluding the major wine writedown, to $713 million.

Annual sales dropped 4 per cent to $4.3 billion with the heaviest losses coming from the US wine markets.

In the second half, earnings from the American wine markets fell 52 per cent to $52.5 million, while revenues from Europe and Australia dropped by 3-7 per cent.

Market sources said Foster's was facing an uphill battle trying to stem the losses from its wine business without a chief executive -- former boss Trevor O'Hoy resigned in June.

Mr O'Hoy stepped down after the company was forced to concede that it overpaid acquiring wine giant Southcorp for $3.7 billion in 2005.

Mr Crawford said the search for a new boss was "on track" and an announcement would be made before the end of the year with a shortlist expected to go before the board within a month.

Acting chief executive Ian Johnston yesterday ruled himself out of the running for the job after reporting an 88 per cent drop in profits to $111.7 million, including the massive wine writedown that happened before his tenure.

"Put simply, financial returns from wine have not met our expectations," Mr Johnston said.

He said the much vaunted multi-beverage scheme of using the same sales force to promote everything from the common man's VB to $500 bottles of Grange was clearly not working.

But Mr Johnston refused to elaborate on any of the wine review's other findings so far.

In a bid to make sure of continuity with the new chief executive's plans for the future, the board has decided the wine review won't be completed until the new boss has been appointed.

Investors, buoyed by Foster's direct approach to its problems, lifted the share price by 7 to $5.40 -- its highest closing price since June.

Analysts said the rejuvenation of the company through the wine review and a new chief executive would act as a "positive catalyst" for the stock over coming months.

There are, however, growing concerns among investors that any sales of Foster's existing assets will generate very poor returns and should be postponed until the financial markets improve.

Foster's beer business led by power brands Victoria Bitter and Carlton Draught remains strong, but with limited scope for big sales and profit growth.

The Australian and Asian beer business reported a 3.5 per cent lift in net sales to $2.2 billion helped by innovative new beer brands such as the low-carb Pure Blonde and Cascade Green.

"We expect the beer market to remain resilient, with brand innovation driving value growth," Mr Johnston said. "VB remains Australia's favourite beer, with the healthy growth of VB Gold returning the brand to overall growth."

But he admitted that overall beer volume growth had slowed as price competition between the major retailers was affecting sales.

The Foster's board declared a final dividend of 14.25 -- almost 10 per cent higher than last year.

Record date for the dividend is September 8 with payment on October 7.