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Constellation Brands set to reduce Australian presence

Published:  11 August, 2008

Constellation Brands is to reduce its presence in Australia, after confirming that it is looking to sell three of its ten wineries in the country.

Constellation Brands is to reduce its presence in Australia, after confirming that it is looking to sell three of its ten wineries in the country.

The US-based wine company, whose best known Australian brands include Hardys and Banrock Station, has said that it plans to sell certain assets and implement changes to its wine portfolio and production footprint. It plans to focus more on its higher-priced wine brands. The announcement follows a strategic review of its Australian business.

As well as selling off three of its wineries, the company plans to consolidate its bottling operations, sell of more than 20 of its vineyard properties and scrap more than 30% of its production lines. Up to 350 employees will lose their jobs as a result of the move.

"This project is part of our ongoing efforts to enhance operating efficiencies, improve cash flow and return on invested capital and reduce existing borrowings," said Rob Sands, Constellation Brands president and chief executive officer.

"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."

Adds Bob Ryder, Constellation Brands chief financial officer, "We are eliminating less profitable SKUs, focusing on brand-building and increasing pricing to restore appropriate levels of profitability. We are also monetizing certain elements of our production footprint and increasing efficiencies. These actions are designed to reduce our cost base and improve our margins.

"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."

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