Strength of sterling gives the whisky business a headache
Wednesday 01 April 1998
Highland Distilleries, Jefferson Smurfit and Hepworth all admitted the pound had taken its toll on their UK operations.
Jefferson Smurfit, the Irish paper and packaging group, confirmed it was to cut its UK workforce following protracted UK difficulties. Dermot Smurfit, deputy chairman, said: "We would much prefer to see a weaker currency. It is not only hurting our business, it is hurting our customers' businesses too."
Mr Smurfit declined to provide details of the likely scale of UK job cuts, but analysts believe hundreds of jobs could be at risk. Jefferson Smurfit's profits fell 30 per cent to IRpounds 139m (pounds 113m) in the year to December. Profits were hit not only by sterling's strength - which affected only the group's UK business - but also by depressed prices resulting from industry over-capacity. However, the group expects prices to recover in 1998.
Mr Smurfit said the company was on the acquisition trail, but would return capital to shareholders in the absence of value-adding acquisitions.
Highland Distilleries, which makes Famous Grouse and Macallan whisky, said the strong pound would wipe pounds 1m of its profits as it attempts to expand its sales abroad. The rising pound limited the rise in group's profits to just one per cent to pounds 25.1m in the six months to February. At constant rates the group's operating profit would have risen by 11 per cent.
Highland Distilleries has launched a multi-million pound global advertising campaign in an attempt to counter the damaging effects of sterling's strength and the slump in the UK whisky market. It plans to increase its advertising budget by 15 per cent this year and has employed agency Abbot Mead Vickers to devise a series of television commercials starring the grouse featured on the whisky bottles.
The group, which plans to change its name to Highland Distillers, warned the British whisky market would continue to be difficult for some time.
The strong pound also knocked pounds 10m off profits at Hepworth, the heating group which makes Glow-Worm boilers. The damage was largely felt on the translation of profits at its French heating subsidiary, Saunier Duval.
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