AUS: Constellation to consolidate Hardy operations

By | 12 November 2007

Constellation Brands is to consolidate the winemaking and packaging operations of its Australian subsidiary Hardy Wine Company.

In a statement released today (12 November) the US drinks groups said that it will be consolidating winemaking and packaging currently taking place at its Buronga winery, to its Berri Estates winery, the largest in Australia. Both are located in the River Murray inland regions of central Australia.

The initiative is part of Constellation's ongoing effort to identify and capture greater efficiency from its global wine production infrastructure, the company said.

The Buronga winery will retain some grape processing and its viticultural staff to support local grape growers. Beginning with the 2008 harvest, winemaking will take place at Berri Estates. In May 2008, packaging will move to Berri Estates.

"Given the ever-changing global marketplace, we continuously review our operations around the world to ensure maximum asset utilisation and to better assure that we are well-positioned for ongoing long-term growth and value creation," said Rob Sands, Constellation Brands president and CEO. "Similar to other production-oriented businesses, we must periodically refine our global production footprint and this is an example of our pro-active approach to address marketplace macro trends. We always look for ways to improve our operational efficiency and improve profitability."

The company said it will also explore international production facility optimisation opportunities.

The statement also added that with today's proposed acquisition of the Fortune Brands US wine portfolio, Constellation will determine the best way to effectively assimilate the brands and facilities from that transaction.

The company said it expects this project to produce cost savings of more than US$5m annually by the end of fiscal 2009.

In connection with the Hardy initiative, the company expects to incur one-time cash charges of approximately $16m and one-time non-cash charges of approximately $6m, for a total of approximately $22m in one-time charges.

The statement added that it expected full year diluted earnings per share to reach between $1.16 and $1.24 on a reported basis and $1.34 to $1.42 on a comparable basis.

Sectors: Wine

Companies: Constellation, Fortune Brands

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