Constellation Brands Inc (CBR) announced that Constellation Wines Australia, formerly Hardy Wine Company, would off-load wine and production assets and cut 350 jobs from its Australian operations. The US based company said it would use the proceeds to reduce debt levels.
The initiative involves the planned sale of three of 10 production facilities, in addition to the sale of more than 20 vineyard properties, consolidation of bottling operations, portfolio streamlining and rationalisation of more than 30% of the company's Australian stock keeping units (SKUs).
The company's Australian employment will be impacted by more than 20%, primarily in positions associated with assets expected to be sold.
Chief financial officer Bob Ryder said the company was eliminating less profitable SKUs, focusing on brand-building and increasing pricing to restore appropriate levels of profitability.
"We are also monetising certain elements of our production footprint and increasing efficiencies," Mr Ryder said.
"These actions are designed to reduce our cost base and improve our margins."
Mr Ryder said the company expected to see sales and profits grow, and return on invested capital improve.
"In addition, we expect this initiative to generate positive cash, with proceeds from asset sales projected to exceed the cash cost of this restructuring by more than $50 million," he said.
Constellation Brands president and chief executive officer Rob Sands said the project was a result of the completion of a strategic review of the company's Australian business.
"Australia remains one of the most important and dynamic New World Wine producing markets, and our Hardys and Banrock Station brands are two of the most recognised and consumed wines in the world," Mr Sands said.
He said Australia was the largest New World Wine exporter based on volume and value, as well as being the second largest producer and it is the third largest consumer market for these types of wines.
"This assessment of our Australian business has led to the development and implementation of an action plan that we believe will allow us to better position this business for success around the world," Mr Sands said.
In connection with the Australian initiative, the company said it expected to incur about $140 million in net onetime costs.
At 1531 AEST, Constellation Brands was trading down 12c or more than 5% at $2.25.