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“standfirst”>Diageo to invest in scotch, Diageo is investing £100 million in its Scotch whisky operations in response to…Hedge fund targets Sapporo, Sapporo holdings, the parent company of Sapporo Breweries, has been the target of an unsolicited takeover bid by….
Diageo to invest in scotch
Diageo is investing £100 million in its Scotch whisky operations in response to growing demand for its Scotch brands in Brazil, Russia, India, China and Mexico.Of the £100m, around £80m will be used to expand capacity in malt and grain distilling while £20m will be spent on improving packaging and warehousing facilities. As part of the investment programme, Diageo will build a new malt distillery in northern Scotland as well as expand the Cameronbridge distillery in Fife. The company will also increase bottling capacity at the Shieldhall packaging plant in Glasgow and extend the warehousing capacity in central Scotland.According to Bryan Donaghey, MD of Diageo Scotland, this is Diageo’s largest single investment in Scotland in nearly 20 years. “This Government’s support for the Scotch whisky industry, including its long-term freeze on UK duty levels, has helped create and maintain the positive environment in which the investment can be made,” he says.Diageo expects to create 200 new jobs as a result of the investment plan and hopes to open the new distillery in 2009.
Diageo has just raised guidance for its full-year organic operating profit growth from 7% to 8% following strong performance in the first half of 2006. This was largely driven by strong sales of Scotch, where net sales grew by 11%. Brands such as Buchanan’s, Old Parr and Black & White are performing strongly in Latin-America while Windsor and Benmore are doing well in Asia.
Hedge fund targets Sapporo
Sapporo holdings, the parent company of Sapporo Breweries, has been the target of an unsolicited takeover bid by an existing shareholder.The bidder, US hedge fund Steel Partners, is looking to increase its stake in the Japanese brewer from 17.5% to 66.6%, giving it effective control of the company. The bid offer values Sapporo shares at Ò°825 each, amounting to a total deal value of Ò°157.3 billion (US$1.3bn).Sapporo strengthened its poison pill defences after the Warren Lichtenstein controlled fund launched a hostile takeover bid for Japanese noodle company Myojo Foods last year. As a result, any shareholder with an equity stake of 20% or more is now obliged to disclose information. If the shareholder refuses, the brewer can issue stock warrants to other investors, diluting the potential acquirer’s shares.Steel Partners has asked Sapporo Holdings for permission to perform due diligence on the company but is widely expected to continue with its bid with or without the company’s cooperation.
With only a 13% share of the domestic beer market, Sapporo is far behind leading brewers Kirin and Asahi, which have approximately 38% each. But Sapporo’s overseas beer business is expected to grow following last year’s acquisition of Canadian company Sleeman Breweries. The brewer also has an attractive portfolio of property in Tokyo, where rents are steadily rising.
Champagne boosts LVMH profits
LVMH has witnessed outstanding growth in its wines and spirits division with operating profit reaching E962 million.
Reported revenue increased by 13% to just under E3 billion, largely due to the strong performance of its Champagne brands, which saw a sustained volume increase over the period, particularly in prestige cuvée and rosé. Moët & Chandon grew in Central Europe and China while Dom Pérignon became the leading brand in the luxury Champagne market thanks to growth in Japan. Veuve Clicquot continued to grow in the United States and the United Kingdom, while Krug and Ruinart generated double-digit volume growth.
CCE losses lead to job cuts
The coca-cola Company saw its profits fall last quarter because of problems at Coca-Cola Enterprises, in which it has a 36% stake. Coca-Cola’s net income fell 22% to US$678 million compared with $864m in the same period last year as CCE struggled with a $2.9 billion impairment charge related to asset write-offs and restructuring. But, apart from this one-off cost, Coca-Cola’s underlying performance exceeded analyst expectations. Emerging markets showed strong growth, counter-balancing weak market conditions in North America, where sales of carbonated drinks continue to fall.
CCE is responsible for bottling and distributing Coca-Cola products and handles over a fifth of Coke’s global volume. According to CCE, the rising price of aluminium cans and increased cost of fructose corn syrup (used as a sweetener in soft drinks) contributed significantly to the $1.7bn net losses reported last quarter. The bottler announced that it would be cutting 3,500 jobs after reporting the results.
Asian tigers in fine form
Share prices rise as Japanese brewers resist hostile takeovers
All the action was in Asia last quarter. The Tsingtao Brewery saw its share price rise by 40.51% following a reorganisation of its share structure. The share reform plan met with approval from the market, which is reassured by the fact that the Qingdao government no longer has a direct share in the company.Investor confidence in Asahi Breweries continued to grow as the company reported a 6.4% increase in sales at its soft drinks division. Asahi Soft Drinks expects its full year sales to reach Ò°241 billion with net profit for 2007 around Ò°5.3bn. Asahi Breweries announced that it would be adopting a poison pill defence to protect itself against any possible future takeover, reflecting recent investor interest in Japanese companies. Arch rival Kirin Brewery is still snapping at Asahi’s heels, recording a rise in share price of 7.71%. The brewer plans to increase its operating profit by 28% over the next three years. Meanwhile, the price of Sapporo Holdings continued to rise (matching that of Asahi) following the announcement of a hostile takover bid.
Anheuser-Busch shares rose amid speculation of an imminent tie-up with InBev in Brazil. The MSCI Hotels, Restaurants and Leisure, ACWI Beverages and ACWI Food Products indices all rose towards the end of the quarter, despite gloomy predictions of falling consumer spending.
© db March 2007