Kraft to Cut 6% of Its Workforce
Kraft Foods Inc. said Tuesday that it would eliminate 6,000 jobs, or 6% of its workforce, and close 20 plants worldwide over the next three years as part of a restructuring that follows more than a year of disappointing sales and earnings for the biggest U.S. food company.
About 1,300 salaried positions in North America will be eliminated in the first quarter, with the remaining cuts occurring by 2007, the maker of Oreo cookies, Jell-O desserts and Oscar Mayer hot dogs said.
The moves were disclosed in Kraft’s fourth-quarter earnings release, which detailed the company’s latest earnings disappointment: a 7% drop in profit from a year earlier, to $869 million, and a warning that 2004 earnings also would be lower than expected.
The job cuts have been expected since the Northfield, Ill.-based company shook up its top management last month and announced other changes after several quarters of sluggish sales, particularly for cookies and pizza.
Chief Executive Roger Deromedi, who was given sole control of the company last month when Co-CEO Betsy Holden was removed from that post and put in charge of global marketing, had signaled his intent to take Kraft in a different direction to try to snap out of the slump in sales and new products.
On Jan. 8, he reorganized Kraft’s business units and said it would take a more global focus in a strategy aimed at making it more nimble. That move entailed shifting some units to new locations and giving top executives new roles.
The company anticipates that the restructuring will result in pretax charges of as much as $1.2 billion over the next three years and generate an estimated $400 million in annual savings by 2006.
Kraft has about 50,000 employees in the U.S. and slightly more than 100,000 worldwide.
At the same time it is laying off employees, Deromedi said, the company also will spend $500 million to $600 million more on marketing in 2004. He said Kraft intended to focus on healthier snacks and other new products, stronger marketing and a better strategy to address consumers’ health and wellness concerns.
Earnings for the last three months of the year amounted to 50 cents a share, matching the consensus estimate of analysts surveyed by Thomson First Call. That compared with a profit a year earlier of $931 million, or 54 cents a share.
Revenue grew to $8.3 billion from $7.8 billion, up 6% thanks to a boost from the weak dollar.
Citing the restructuring, Kraft lowered its estimate for 2004 earnings to $1.63 to $1.70 a share. Analysts were forecasting $2.01 a share.
For the full year, net income was $3.48 billion, or $2.01 a share, up 2% from $3.4 billion, or $1.96 a share, in 2002. Revenue climbed 4% to $31 billion from $29.7 billion.
Kraft’s shares fell 35 cents to $32.13 on the New York Stock Exchange before the report was released. It is down 13% in the last year. It fell 34 cents in the extended session.
