Diageo to close two Scottish plants
LONDON (Reuters) - Diageo, the world's biggest spirits group, will shed nearly 900 jobs in Scotland with the closure of a whisky bottling plant and grain distillery as it cuts costs to try and cope with the current downturn.
The London-based maker of Johnnie Walker and J&B scotch whiskies said it would create 400 jobs at its largest bottling plant in eastern Scotland, which would result in the group's Scottish workforce being cut by a net 500 to 4,000 staff.
The job losses and restructuring will cut Diageo's costs by 40 million pounds in its financial year to the end of June 2012 as the group looks for efficiencies throughout it business, the whisky giant said on Wednesday.
The bulk of the job losses will come at the smallest of its three bottling plants, Kilmarnock in southwestern Scotland, where there will be 700 redundancies. There will be no job losses for 12 months while talks with employees about the redundancies take place, but the plant is due to close by the end of 2011.
It will shift bottling and packaging over the next two years to its biggest plant at Leven, Fife, in eastern Scotland, where the extra 400 jobs will be created. The company said that its other bottling plant at Shieldhall in Glasgow will be largely unaffected.
The group's Port Dundas grain distillery and adjacent cooperage in Glasgow will also close by the summer of 2010, with the loss of 140 jobs. The distillery produces spirits that are
used in blended scotch whiskies, vodka and gin.
Production will shift to Diageo's other grain distillery at Cameronbridge in Fife, while the cooperage work will shift to the group's Cambus site in central Scotland.
CLOSURE COSTS
The group, which makes more than a third of the world's scotch whisky as well as Smirnoff vodka and Gordon's gin, said it will also cut another 30 related jobs in Scotland.
Diageo said the plant closures and job cuts would cost it 120 million pounds, which it would take as an exceptional charge in its current financial year to the end of June 2010.
UBS drinks industry analyst Melissa Earlam said the cost savings were a necessary measure to mitigate Diageo's weak sales, and she expected underlying sales would be flat in the group's current financial year.
Diageo's underlying sales were flat for the first nine months of its financial year to March after a 7 percent fall in its third quarter countered a 6 percent rise in its first quarter.
In addition, Diageo said it would reduce costs in its current financial year to the end of June 2010 by 120 million pounds rather than the 100 million previously announced, largely from cutting unspecified overheads and its cost of goods.
Diageo's shares were up 1.0 percent at 880 pence by 12:55 p.m. in a London stock market 1.3 percent ahead.
(Editing by Karen Foster)
