E-Malt.com News article: 4582

Canada: InBev, the world’s largest brewer by volume, announced on March 31 that Labatt’s Toronto brewery will cease major brewing operations on November 4, 2005, with the brewery site formally closing by the end of the year. About 265 employees will be affected by the closure and will be provided fair and equitable severance packages as well as support services. “We have provided our employees with as much advance notice as possible to allow them to plan for their futures,” said Carlos Brito, President of Labatt Breweries of Canada.

After an extensive review of Labatt’s operations, which took over a year, the Canadian Labatt management team has decided to close the Toronto brewery by the end of the year. Labatt’s decision to close the Toronto brewery is based on excess capacity, particularly in Central Canada, and the competitive disadvantage, which this creates. “This decision was a difficult one to take and follows considerable debate and analysis,” said Carlos Brito, President of Labatt Breweries of Canada. “After an extensive review of our brewery network, the Canadian management team has decided to cease major brewing operations in Toronto on November 4, 2005 with the brewery site formally closing by the end of the year.”

As a result of the Toronto brewery closure, new investments will be made and jobs will be created at Labatt’s London, Ontario brewery. The company said it would have to spend some $25 million to expand the London brewery. “We will be taking steps to ensure that Toronto brewery production is transitioned to the rest of our brewery network before the closure takes place,” said Charles Oliver, Labatt's Vice President, Supply Chain. “And we plan to work consultatively with Toronto City Council to ensure the de-commissioning and re-development of the brewery lands is done in the best interests of the community.”

The closure will leave Labatt with one Ontario plant in London, 185 kilometres west of Toronto, and breweries in Edmonton, Creston, B.C., Montreal, Toronto, London and St. John's, Nfld. The two Ontario plants produce more than 40 % of the company's beer in Canada.

Founded in London , Ontario in 1847 and the proud brewer of more than 60 quality beer brands, Labatt is Canada 's largest brewing company. Labatt, has its beer distributed in 40 countries.

The closure announcement comes after Labatt's conducted a review of its Canadian operations, which came after the merger of Belgian brewer Interbrew S.A. with Brazil's Ambev, to form the world's largest brewer by volume. Under the 2004 merger, control of Labatt's was transferred from Interbrew to Ambev.

The Toronto closure follows an announcement in September that Labatt will close its brewery in the Vancouver suburb of New Westminster on April 21, cutting 180 jobs.

InBev expects total one-off costs related to the site closure, which has a capacity of 2.4 million hectolitres, and brewed the Labatt Blue and Labatt Blue Light brands, of 50 million euro; about half of these expected one-off charges are non-cash costs. The total capital expenditure (CAPEX) needed for the relocation of production will be approximately 19 million euro. The EBITDA and EBIT benefits are expected to be 8 and 7 million euro respectively for 2006 and 11 and 9 million euro respectively for 2007.

The closure is part of a drive by Chief Executive John Brock to make InBev as efficient as U.S. rival Anheuser Busch, Reuters commented. His target is an EBITDA margin of 30 percent by 2007. InBev's margin stood at 24.6 percent last year. Brock has spoken about the possibility of closing some of the more than 100 breweries run by InBev throughout the world. "If they continue like this, then the EBITDA margin target will be achievable," said Bank Degroof analyst Marc Leemans.

InBev is a publicly traded company (Euronext: INB) based in Leuven, Belgium. The company's origins date back to 1366, and today it is the leading global brewer by volume. InBev’s strategy is to strengthen its local platforms by building significant positions in the world's major beer markets through organic growth, world-class efficiency, targeted acquisitions, and by putting consumers first. InBev has a portfolio of more than 200 brands, including Stella Artois®, BRAHMA®, Beck’s®, Skol®—the third-largest selling beer brand in the world—Leffe®, Hoegaarden®, Staropramen® and Bass®. InBev employs some 77,000 people, running operations in over 30 countries across the Americas, Europe and Asia Pacific. In 2004, InBev realized a net turnover of 8.57 billion euro (including four months of AmBev).


03 April, 2005