Drinks group Diageo hits back at criticism over job losses at Johnnie Walker plant and Glasgow distillery
DIAGEO, the drinks group, is this week expected to announce it has boosted profits for the year to June to £2.7 billion.
In results to be released on Thursday, the Scotch whisky distiller led since 2000 by chief executive Paul Walsh will reveal its sales in the US and Europe have risen, thanks to sterling’s weakness against the euro and the dollar.
Simon Hales, a beverages analyst at Evolution Securities, expects earnings before interest and tax of £2.7bn, aided by favourable foreign exchange movements, with organic sales growth at 4%.
The company also said last week it had little intention of reversing plans for a restructuring of its Scottish operations announced in July.
The Johnnie Walker bottling plant in Kilmarnock and the Port Dundas grain distillery in Glasgow are to close, with the loss of up to 900 jobs — but the group will create 400 jobs at its Leven plant in Fife.
Bryan Donaghey, Diageo’s Scottish managing director, hit out on Friday at politicians and media who have lambasted the group over the restructuring plans.
He said “there has been a lack of understanding of what we’ve done, what we’re doing, and a failure to understand that, when we first developed these proposals, we were biased towards keeping as many jobs as possible in Scotland.”
He said that, given the £500m that Diageo had committed to upgrading facilities in Scotland since 2004, including building the Roseisle distillery in Morayshire, and the additional £100m it would invest during restructuring, the company deserved to be considered a good corporate citizen.
Donaghey said he had “fought” to secure the distilling and bottling of vodkas, gins and rums at Leven this decade.
A government-commissioned report last week from BDO Stoy Hayward, the accountants, endorsed the company’s business case. It said it would cost Diageo £1.25m per job — a total of £75m to save 60 jobs — if the Kilmarnock plant was moved to a greenfield site near the Ayrshire town rather than to Leven Fife as planned.
Donaghey said he was “vindicated” by the BDO findings.
But William Hopper, the Glasgow-born co-author of The Puritan Gift: Reclaiming the American Dream Amidst Global Financial Chaos, a former director of Morgan Grenfell and founder chairman of the Institute for Fiscal Studies, questioned Diageo’s plans.
“The company’s chief executive Paul Walsh likes to shoot antelope on his estate in South Africa. As he does so, does he think about the 700 longpstanding employees who he is firing in Kilmarnock.
“The company boasts that it is taking on another 400 people in Fife, but are human beings just interchangeable ciphers? It is not as if the company was in trouble and obliged to undertake major surgery in order to survive; it is in fact highly profitable,” he said.
Sam Hart, an analyst at Charles Stanley, expects Diageo’s organic sales to slide 0.3% compared with the previous 12 months.
While trading conditions were likely to remain tough in the near term, he said, the group’s long-term growth prospects remained good, given its “unrivalled portfolio of brands, industry-leading distribution network and sound balance sheet.”
This article was published in The Sunday Times on 23 August 2009
Diageo looks like a well-managed company and a very profitable business. If they want to lose some of it they could do so by investing in Vijay Mallya’s UB group in India! That way, Mallya could continue buying yatchs, houses and planes, this time with Diageo’s money ! LOL