Kirin Re-values National Foods Assets

The Company continues to optimise its manufacturing footprint and undertake initiatives to leverage its scale and route to market.

12/21/2010 --- Kirin Holdings Company Limited has aannounced that it has made changes to the carrying value of brands and goodwill on its balance sheet relating to the National Foods business.

The Company has written-down the value of brands and goodwill by ¥38.8 billion (A$485 million) following a strategic review of core brands and reflecting difficult trading conditions, especially in the white milk and juice sectors.

As previously communicated, conditions in both the dairy and juice sectors have eroded since Kirin purchased National Foods in 2007 and Dairy Farmers in 2008 and remain very challenging for farmers, processors and brand owners alike.

National Foods is still a long way from achieving acceptable margins with FY09 EBIT margin at less than 5 per cent and the business faces some considerable headwinds. Input costs remain relatively high by historical standards and National Foods endures ongoing challenges to maintain adequate operating margins in a very competitive retail environment.

Against this backdrop, the National Foods business is making strong progress in integrating the former Dairy Farmers business. The Company continues to optimise its manufacturing footprint and undertake initiatives to leverage its scale and route to market. The combined business has quality brands that require investment to reach their full potential.

National Foods is committed to patient investment in its core strategic assets – our people, brands and production assets – to deliver sustainable growth over the long term. National Foods has instituted a new strategy of focussing marketing investment around a portfolio of core ‘Power Brands’ to drive value. This initiative involved an assessment of the cashflow generating potential of brands, including the none-core brands, and contributed to the revaluation.