Lascelles plans near $1b upgrade of distillery

Published: Wednesday | December 5, 2012 Comments 0
Appleton Estate, home of J. Wray & Nephew's rum distillery.
Appleton Estate, home of J. Wray & Nephew's rum distillery.


Wines conglomerate Lascelles deMercado plans to upgrade its existing distillery at a cost of nearly J$1 billion amid the finalisation of its acquisition by the Italy-based Campari Group.

Construction will last for two years and offer two decades of useful life.

The board of directors of a Lascelles subsidiary, which was not identified, approved the spending of half the funding for the distillery, according to notes accompanying the just-released financials.

Wines and spirits operations are conducted by Lascelles' subsidiary J. Wray & Nephew, which produces the trademark Appleton rum.

According the financials, the board of directors approved but had not committed the capital expenditure of approximately US$5.9 million in respect of phase one of the project, pursuant to meeting certain requirements of the National Environment and Planning Agency relating to its licence to operate a distillery.

This expenditure is expected to be incurred in the next 12 months, it added.

US$10.8M PROJECT

"The total capital cost of the project is approximately US$10.8 million, with annual operating costs estimated at J$35 million," according to the financials.

Managing director of J Wray and Nephew, Paul Henriques told The Gleaner on Wednesday that the note referred to plans to upgrade equipment in the existing distillery. Group Managing director of Lascelles, Fraser Thornton also said on Wednesday that the investment represents the continual upgrade and capital investment to its existing distillery.

J. Wray & Nephew controls the bulk of the local rum market, but its competitors have invested in new plants in recent years. In 2010, National Rums of Jamaica turned its focus on finding new markets overseas after a US$12.7 million upgrade of its distillery at Monymusk Sugar Estate that boosted the plant's capacity by 40,000 litres to 18 million litres.

In 2007, Worthy Park Estates invested some US$5 million to build a distillery, which allowed it to enter the branded rum market.

Lascelles made $5.72 billion in net profit for the year ending September 2012, or 135 per cent more than year-earlier levels, due to the gain on sale of assets at $3.8 billion.

The group recently concluded the sale of its insurance subsidiary Globe Insurance to Guardian Holdings for some US$38 million (J$3.45 billion). It is also selling other non-core assets via a new company, New Transport Group (2012), with a net book value of J$800 million.

The new group will contain Globe Limited, a small investment company separate from the previously sold Globe Insurance; John Crook and subsidiaries; Turks Islands Importers Limited and TIMCO; AJAS Limited; Transportation Agencies; Kingston Industrial Garage; Sterling Motors; and Henriques Brothers.

Last month, Campari formally made a public offer to acquire all ordinary and preference shares of Lascelles' core assets, which include the prized wines division for some US$414 million.

It also indicated that it secured agreement with CL Spirits Limited, Snowdown (2007) Limited and Calla Lilly Limited - all entities controlled by CL Financial Limited - to sell shares.

Campari extended its offer to purchase shares held by minority shareholders for another week ending December 10.

"The offer contemplates cash payments to all accepting stockholders 14 days after closing," Lascelles said. "The board of directors has recommended that the offer be accepted by the minority stockholders," it added.

The original offer deadline set for last Friday resulted in Campari receiving acceptance from some 96.3 per cent of Lascelles shareholding, enough to effectuate delisting of the stock under Jamaica Stock Exchange.

steven.jackson@gleanerjm.com

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