My condolences, FredE:
Molson To Close Brewery, Lay Off
414
By Amran Abocar
TORONTO (Reuters) - Molson Inc., Canada's second-largest brewer, continued its
``reinvention' Thursday, revealing plans to close one Ontario brewery and pour
C$100 million into upgrading its sole remaining Ontario brewing facility.
The closure of Molson's Barrie, Ontario, brewery in September 2000, means 414
jobs will be lost as the company consolidates its Ontario operations to improve
capacity utilization in its core brewing unit.
Molson will invest C$100 million over five years to upgrade its Toronto facility, a
move which it said could raise national capacity usage from about 82 percent now to
the 90-percent range by 2004.
``We know we have to improve productivity to be globally competitive,' Chief
Operating Officer Dan O'Neill said. ``We'll be focusing (like) a rifle shot toward
driving productivity and the Ontario target is to double productivity in the next
three-year period.'
O'Neill said the focus will be on expanding Toronto's bottling line and brewing
capacity. Molson has ``no plans' to close any other breweries in Canada, he added.
Molson has breweries in Montreal, Vancouver, Edmonton, Regina, and St. John's.
The changes will lead to a one-time C$188 million charge in the third quarter related
to the closure of Barrie plant, while Molson's brewing division will take an extra C$19
million charge.
Molson, which has been on a so-called reinvention program that targets C$100 million
in annual cost savings over three years, said the Barrie closure would lift annual
earnings by C$30 million before interest and taxes, with C$10 million of that reflected
in the next fiscal year.
``When one looks at the simple cold arithmetic, with their two plants running at about
74 percent of capacity, something had to be done about it (but) it'll be a big one-time
hit to earnings,' said analyst Bill Chisholm of Dundee Securities.
Last month, the 213-year-old company said it will lay off 18 percent of the salaried
staff in the brewing division as it reorganized its corporate structure. It also put a ``for
sale' sign on assets in its underperforming sports and entertainment division. Molson
will keep the Montreal Canadiens of the National Hockey League, however.
``These are the toughest two decisions and they're now behind us,' Molson's O'Neill
said in a conference call. ``Our target is just to improve our share position and to turn
around the decline (in market share).'
The impact of the closure of the Barrie brewery on Molson's market share in Ontario,
Canada's biggest market, has been 'taken into consideration,' O'Neill said.
Molson now has a 51 percent share of the Ontario market.
Molson said it has 45.3 percent market share in Canada -- a decline of about 7
percentage points over the past decade -- while Belgian-owned rival, Labatt Brewing
Co., has a 45.6 percent market share, according to Labatt's James Villeneuve.
``Whether (Molson's) can grow the business in Canada, the jury's still out. I don't see
them getting back to the 52 percent they had,' Chisholm said. ``To gain market share
in the brewing business, you have to come up with a successful new product or
technology or hope your competitor falls asleep and stumbles. Labatt seems to have a
pretty firm grip on their business.'
Molson class A shares gained 45 Canadian cents to C$25.00 on the Toronto Stock
Exchange Thursday afternoon. |
