Sara Lee is planning a year of transition as it splits itself in two

Sara Lee is planning a year of transition as it splits itself in two

Sara Lee's next financial year is set to be a "year of transition", according to chairman Jan Bennink, as the company completes a number of disposals and realises plans to split the business in two.

Bennink today (11 August) revealed that the US company plans to dispose of two further units ahead of the spin off, announcing that it has put its Spanish bakery and French refrigerated dough businesses on the block.

He said there had been a "lot of interest" in the two divisions and Sara Lee expects to reveal buyers in either the first or second quarters of the new financial year, which started on 3 July.

The two disposals will mean that Sara Lee would have sold a number of businesses in the last year, including its North American fresh bakery to Grupo Bimbo and its North American refrigerated dough unit to Ralcorp Holdings, a deal it announced earlier this week.

With much of the company's energy focused now on disposals and the spin off, Bennink played down the possibility of further acquisitions. He said that while acquisitions "never come at the right time", the company is "focused on the spin".

Bennink laid out the timetable for the company's spin off, which was announced in January. During the first quarter of the new fiscal year, Bennink said Sara Lee will "further optimise its portfolio to achieve its objective of profitable growth".

Then, he said, the company plans to accelerate its innovation process, with the first new products set to hit the shelves in the fourth quarter. He said Sara Lee is making "enormous progress" in innovation and that the company is set to release "lots of good stuff".

The company will also look to reduce fixed costs beyond current identified targets as well as working to improve gross margins. To do this, the company plans to optimise its procurement processes, work on mix management and push the right products in a very transparent way as well as implementing the "appropriate price increases".

Sara Lee has had to push through significant price increases over the past year, as the company has seen input costs rise $646m over the full year, much higher than the initially forecast $200m in price increases.

Company CEO Marcel Smits said the company's first priority has been on maintaining margins as commodity costs filtered through. He said with the company's price increases meant it has been willing to take "short-term risks on the volume side, and we've been quite upfront about that".

Sara Lee said that, over the year, prices in its North American retail division were up 5.5%. Prices in North American foodservice unit rose 9.5% and were increased 6% in its international beverage division.

Price increases are set to continue in the 2012 fiscal year, with Smits forecasting a further $500m in commodity cost increases.

While Smits admitted that Sara Lee has "led the way" on price increases, the company still has the "fire power" to engage in promotions to maintain share.

In terms of the company's spin off plans, the company expects it will be ready to announce the strategy, guidance, capital structures and organisation of both companies by February 2012, with the separation to take place during the first half of the 2012 calendar year.

CFO Mark Garvey outlined some $180-200m in savings through the restructuring actions, which will offset some $50-60m of stranded costs and corporate expenses absorbed by the two businesses.

Meanwhile, he added that the company expects to incur around $425m in charges relating to the restructuring plan, with $300m to be spent on the restructuring and a further $125 in transaction related expenses.