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May 9, 2019

Hostess Brands to shift distribution centre to boost efficiencies

Hostess Brands plans to relocate its main distribution centre as the US bakery products maker seeks to improve cost efficiencies.

By Dean Best

Hostess Brands plans to relocate its main distribution centre as the US bakery products maker seeks to improve cost efficiencies following a drop in first-quarter profits.

The Twinkies and Ding Dongs owner will switch the site to Kansas from Illinois by the first quarter of next year, bringing its distribution resources closer to the company’s largest bakery and providing “enhanced infrastructure for future profitable growth”, the Missouri-based firm said in a statement.

Once the move is completed, Hostess Brands said it will be “able to reach customers faster, reduce transportation costs and improve service levels”. The Kansas state government is also offering the company tax incentives, it added.  

Nasdaq-listed Hostess Brands made the announcement in conjunction with its latest financial results showing net income declined 9% to US$26.6m in the three months to 31 March. Last year’s performance included a profit warning issued during the summer.

Revenue climbed 6.7% to $222.7m, with organic growth contributing 3.45 percentage points. Adjusted EBITDA rose 5.1% to $49.4m.

Hostess Brands acquired part of the Cloverhill bakery business last year from Swiss-Irish food group Aryzta, along with another buyer Bimbo Bakeries, the US arm of Mexico-based Grupo Bimbo.

Andy Callahan, Hostess Brands’ president and chief executive, said in the statement: “We are encouraged by our strong start to 2019, fuelled by the breadth and depth of our sweet baked goods product offerings. In executing on our pillar to drive agility and efficiency, we have made the decision to relocate our primary distribution centre from Illinois to Kansas…..We expect this geographic move will support profitable growth, better service to our customers and increase cost efficiencies. Looking ahead, we continue to believe we are well positioned to achieve our 2019 annual outlook.”

In terms of guidance for the year, Hostess Brands did not provide an actual target revenue figure but said “growth will be well above” the sweet baked goods category. Adjusted EBITDA is expected in the region of $200-210m, 7-13% more than 2018.

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