Shares fall as Grand Met announces new restructuring

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The Independent Online
GRAND METROPOLITAN upset investors yesterday by announcing its second big restructuring in a year.

The shares, part of the FT-SE 100 index, fell 3.5p to close at 409p.

Grand Met is reshaping its IDV drinks arm and its European businesses at a cost of pounds 280m. This follows last year's restructuring of the Pillsbury food operation and the Pearle optical subsidiary.

The group wants to focus on international food and drinks brands. It also announced the withdrawal from pet food in the US by selling Alpo to Nestle, the Swiss company, for dollars 510m (pounds 327m) in cash.

Alpo, based in Pennsylvania, is the seventh-largest petfood business in the US. It has a 6 per cent market share of the cat and dog food business. Grand Met forecasts that Alpo will make profits of dollars 47m on sales of dollars 430m for the financial year that ends later this month. The sale will yield a pounds 200m exceptional profit.

Gerald Cobett, who was recruited as finance director last December, would not be drawn on the precise details of what closures will take place and how many jobs will go, but analysts put the figure at about 4,000. Grand Met employs 87,000 worldwide.

'We will be looking at 200 different projects in 50 different countries for IDV alone,' he said. 'We will spell out the changes in detail when we announce results on 1 December . . . because we have not communicated it to all of our staff yet.'

IDV, the drinks business which generated more than half of previously announced group operating profits of pounds 474m for the six months to 31 March, will absorb pounds 145m of the restructuring charge.

Restructuring the European food business will cost pounds 55m and involve the closure of some of its 50 Haagen-Dazs ice cream outlets. Another pounds 32m will be spent on the expansion of the 're-engineering programme' at Burger King, the fast food company.

There are also pounds 28m of charges connected with property activities. These relate to a further reduction in the property portfolio and restructuring Inntrepreneur, the pub company jointly owned with Courage, the brewer.

Inntrepreneur does not form part of Grand Met's long-term plans. Speculation has been mounting in the industry that it will withdraw from the business by selling off pubs in small parcels and possibly sell up to 2,000 pubs to Courage.

Total net cash cost of the restructuring programme will be less than pounds 100m. Grand Met said it would lead to a pounds 90m saving per annum progressively over the next two years, which comes on top of the pounds 70m savings arising from last year's action.

Analysts were sceptical about yesterday's restructuring announcement and the suggestion from the company that it was using cost savings to increase marketing expenditure.

Mr Cobett said marketing spending was up pounds 50m to pounds 879m, which equalled the benefit from the 1993 restructuring. 'This is a clean sweep that sets us up for the 1990s.'

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