AUSTRALIA: Southcorp announces A$59m in merger write-downs and costs
The Australian wine group Southcorp has announced write-downs of A$45m (US$23m) in wine inventory folowing the merger with Rosemount Wines.
Chief executive Keith Lambert also said that previously announced wine group
redundancies of 150 people, costing A$10.5m in the fiscal year just ended, had
occurred and normal merger costs to effect the integration, costing a further
A$4.0m, would be charged against fiscal 2001
Lambert said: "We have approximately 23m litres of lower grade wine in excess of our fiscal year sales forecast. This is made up of around 16m litres of dry white wine and 7 million litres of dry red wine. We have now written down the inventory to a price reflecting current world market bulk wine prices.
"The company obtained an independent valuation of the bulk wine inventory by a recognised international firm.
"The excess inventory has built up over the past two years. We want to ensure that the future sales focus on our premium brands is not diluted by having to deal with this wine in the normal course of business. The recorded bulk wine value writedown is $25m. This is higher than my earlier indicated estimate of $15-20m and is principally due to a soft market for this grade of bulk wine," he said.
Lambert said the integration of the Southcorp and Rosemount businesses would
still generate strong profit growth in 2001-02.
"The Board and I remain confident that systems and plans are now in place to achieve strong profit growth this financial year, driven by improved sales and market mix through the focus on our strategy to grow our core premium brands in the Australian and international markets. In addition, our results will benefit from merger synergies, which will substantially exceed the initial assessment of $20m per annum achievable within 2-3 years. The revised outlook is being prepared and will be detailed in our results announcement on 21 August 2001," Lambert said.
The World Market for Wine 2001
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