DIAGEO ANNOUNCES FURTHER REST

RNS Number : 8761U

Diageo PLC

01 July 2009

 

1 July 2009                            

DIAGEO ANNOUNCES FURTHER RESTRUCTURING AND UPDATES ON EXISTING INITIATIVES

New restructuring initiatives

Diageo has identified further restructuring opportunities which are expected to give rise to cost savings of approximately £40 million per annum in the year ending 30 June 2012. In addition the cost of production of maturing stocks will be reduced by about £10 million per annum in the year ending 30 June 2011. This will initially be reflected in the value of inventory and will not be reflected in reduced cost of goods sold until future years. Related restructuring costs of approximately £120 million will be taken as an exceptional charge in the year ending 30 June 2010. The cash cost of this exceptional charge is estimated to be £90 million which will largely be incurred in the year ending 30 June 2010. 

As part of these restructuring projects, changes to supply operations in Scotland have been announced today including:

• The consolidation of packaging operations from three sites, at Kilmarnock, Glasgow and Fife, to two sites and the closure of the packaging plant at Kilmarnock.

• The closure of the Port Dundas distillery and the adjacent cooperage. 

• The outsourcing of certain warehousing operations.

Update on Restructuring Announcement Made in February

In February 2009 Diageo announced a restructuring programme which was estimated to reduce costs by £100 million in the year ending 30 June 2010. The related restructuring charge was estimated to be £200 million. It is now estimated that this restructuring programme will result in a year on year cost reduction totaling £120 million in the year ending 30 June 2010 which will benefit both cost of goods sold and overheads. The associated cost will result in an exceptional charge of approximately £180 million in the year ended 30 June 2009 and a further exceptional charge of £90 million in the year ending 30 June 2010.

Brewing in Ireland

As previously announced Diageo is carrying out a review of its plans for the restructuring of brewing operations in Ireland. The revised proposal will have substantially the same scope as the original proposal, namely the restructuring of all three Diageo breweries in Ireland and is expected to yield cost savings at least equal to the original proposal. An exceptional charge of £78 million was made in respect of the restructuring of brewing operations in Ireland in the year ended 30 June 2008. There will be further exceptional charges of approximately £20 million in the year ended 30 June 2009 and a similar amount in the year ending 30 June 2010.

Summary

In summary Diageo expects to generate cost savings from restructuring of £120 million in the financial year ending 30 June 2010 and an additional £40 million in the financial year ending 30 June 2012. Additional cost savings will accrue from the financial year ending 30 June 2014 in respect of the restructuring of brewing operations in Ireland. Lower inventory costs for maturing stocks will provide additional cost savings but over a longer timescale. 

In respect of these cost saving programmes Diageo expects exceptional charges in respect of restructuring of £200 million in the year ended 30 June 2009 (being £180 million in respect of the restructuring programme announced in February 2009 and £20 million in respect of the restructuring of brewing operations in Ireland) and of £210 million in the year ending 30 June 2010 (being £120 million in respect of the restructuring programme announced today and £90 million in respect of the restructuring programme announced in February 2009). 

ENDS 

Investor enquiries:

Catherine James 

[phone]

[e-mail]

Media enquiries:

James Crampton

[phone]

[e-mail]

Forward-looking statements

This document contains 'forward-looking statements'. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. In particular, forward looking statements include all statements that express forecasts, expectations, plans, outlook and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability or cost of financing to Diageo, anticipated cost savings or synergies and the completion of Diageo's strategic transactions. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including factors that are outside Diageo's control. All oral and written forward-looking statements made on or after the date of this document and attributable to Diageo are expressly qualified in their entirety by the 'risk factors' contained in Diageo's annual report on Form 20-F for the year ended 30 June 2008 filed with the US Securities and Exchange Commission (SEC). Any forward-looking statements made by or on behalf of Diageo speak only as of the date they are made. Diageo does not undertake to update forward-looking statements to reflect any changes in Diageo's expectations or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Diageo may make in documents it publishes and/or files with the SEC. All readers, wherever located, should take note of these disclosures. The information in this document does not constitute an offer to sell or an invitation to buy shares in Diageo plc or any invitation or inducement to engage in any other investment activities. Past performance cannot be relied upon as a guide to future performance.

 

END

 

 

MSCUUUGAMUPBUMG