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Diageo

Diageo

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(Adds further detail and analyst comment.) By Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Global drinks giant Diageo PLC (DEO) Wednesday extended its global cost-cutting program, identifying further savings in its Scottish business, where it plans to close a number of plants and cut 11% of its workforce.

The maker of Johnnie Walker scotch, Guinness stout and Smirnoff vodka said that the closure of a packaging plant, a distillery and a cooperage in Scotland would save GBP40 million a year from 2012.

The cost of maturing its whisky stocks will also be cut by GBP10 million a year, though this won't be realized until the stock is sold in future years.

The plans will result in the loss of 900 of Diageo's 4,500 Scottish workforce, though a further 400 new jobs will be created with the expansion of a packaging plant.

Diageo said there would be no compulsory redundancies for at least 12 months.

Diageo said the plans would be an important part of "securing the long-term competitiveness of Diageo's Scottish business." News of the closure of the Port Dundas grain whisky distillery in Glasgow comes just as a new malt whisky distillery is set to open on Speyside this autumn.

Shore Capital analyst Andy Blain said the commissioning of the Speyside distillery was a vote of confidence in Scotch Whisky's future growth prospects.

The subsequent closure of the Glasgow distillery didn't reflect a weakening of these prospects, but was purely about rationalization, he added.

Blain said the extension of the cost-saving program was a positive for the company, though of little importance to the company's bottom line.

The company also extended its GBP100 million cost-savings program announced in February.

It now looks to reduce costs by GBP120 million in the year ending June 30, 2010.

Further cost savings will be made from 2014 due to the restructuring of its Irish brewing operations.

Exceptional charges of GBP200 million in the year ended June 30, 2009, and of GBP210 million in the year to June 2010 will result from the restructuring, it said.

The company launched its cost-savings program in February in reaction to reduced worldwide volumes demand as the global recession hit demand for its products.

Company Web site: http://www.diageo.com -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected]

http://online.wsj.com/article/BT-CO-20090701-703707.html
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