What is Kirin going to do with Lion?
Japanese brewer Kirin bought the then National Foods in 2007 for $2.8 billion and then outlaid another $910 million for Dairy Farmers in 2008. This combo, Lion Dairy & Drinks, buys nearly 1 billion litres of milk each year and is Australia’s second-largest milk processor.
But the acquisition hasn’t all been plain sailing for Kirin as pricing pressure from the major supermarkets, strong competition in the marketplace and rising costs have seen declines in sales and earnings. Kirin has written down the value of Lion Dairy & Drinks by $2.14 billion since 2010.
To counteract this, Lion has undergone substantial restructuring: closing plants, shutting down its international unit, selling its everyday cheese business, trimming staff and slashing the number of product lines to reduce costs. Savings realised have been reinvested into innovation and new product development.
Lion Chief Executive Stuart Irvine has indicated that the restructuring is now complete and significant improvements to the company’s profitability are anticipated. Kirin is forecasting a 27% increase in Lion’s earnings to $79 million on sales of $1.85 billion in 2018.
With Lion seemingly on the road to better business performance, Kirin has announced a strategic review of its Lion Dairy and Drinks Oceania unit, with a sale of the business touted as an option.
In their 11 September Investor Relations news release, Kirin said that no decision has been reached yet but that the company would investigate all potential options for Lion Dairy & Drinks, from retaining and investing in the business to selling it.
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