Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Timothy Thein – Citigroup.
Timothy Thein – Citigroup
First question is a bit more of a longer term question, in terms of if you look at your kind of operating footprint if you take out the high cost melting capacity in some of your six sigma and other productivity measures I’m trying to see if you can give any color in terms of kind of a cost per ton measure going forward in terms of what you’ve reduced that by? Ultimately what I’m trying to get at in terms of what your incremental margins could look like if and when we do finally get a volume recovery?
Second, the question quickly was on the wine segment in Europe of obvious importance given the size both to mix as well as to profitability. Can you give any color there in terms of what you saw in the first half in terms of shipments relative to end demand and what you think you’ll see there in the back half of the year as we get closer to the harvest?
Albert P. L. Stroucken
With regard to your first question, since not all of the productivity improvement as well as the lean six sigma efforts are concentrated on manufacturing costs, not all these benefits will really show up in the cost per unit of manufacturing so it’s very difficult to really tie it back to a manufacturing or dollars per ton. But, it is obvious that what we have been trying to do is move our productivity improvements higher from the trends we’ve seen in the past.
I think you’ve heard in the past of a 1% improvement in productivity per year and we’re clearly trying to strive that to a 2% productivity improvement which may not sound like a huge difference but over a period of time that really creates significant competitive advantage. Now, with regard to the win business and Europe it really had behaved differently depending on the wine region and some of that also has to do with the product mix.
For instance, Italy and Spain are holding up pretty decently as far as volume is concerned whereas France has seen the biggest drop off but a lot of that is due to France of course does have a fairly significant component of champagne which really has been much more affected than many of the other less costly wines that you would typically get from Spain or Italy or even some of the [inaudible] that you can get in France. I’d say that is really the only difference that we see. Then of course, as we had mentioned in the previous conference call, we really saw a reluctance of people to bottle their wines in the first quarter which has somewhat diminished in the second quarter.
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