Fresh produce firm Chiquita Brands International has announced that it will close processing facilities in Manteno, Illinois and Kansas City, Missouri by February 2006 as part of a supply chain optimization plan.
This plan is expected to eliminate redundancies in fresh-cut fruit processing capacity in the Midwestern United States, improve plant utilization and reduce costs, it said.
This consolidation effort is one component of Chiquita’s previously announced integration plan, which aims to achieve USUS$20m in annual cost synergies within three years after the acquisition of Fresh Express. The company expects this consolidation to deliver approximately USUS$3m in annualized cost savings, which will begin to be realized in the second quarter 2006.
“This is an important step toward reaching profitability in this strategic value-added fruit category, which we believe holds significant long-term growth potential for Chiquita,” said Fernando Aguirre, chairman and chief executive officer.
“Over the past several months, we carefully analyzed our national fresh-cut fruit operations, where, as a result of the Fresh Express acquisition, we now have three Midwestern plants; two in the Chicago area and one in Kansas City,” Aguirre said. “While it’s never easy to make a decision that results in fewer jobs, our analysis clearly determined that closing two of these facilities and shifting production to others would improve plant utilization throughout our supply chain and drive down operating costs, while continuing to provide the freshness, quality and value that our customers demand.”
As a result of the closure of the pre-acquisition Chiquita plant at Manteno, the company will incur a charge of approximately US$7m, of which an approximately US$5m noncash charge will be recorded in the fourth quarter 2005 and a US$2m charge, primarily for noncancelable lease obligations, will be recorded in the first quarter 2006. The closure of the pre-acquisition Fresh Express plant at Kansas City will result in a US$4m adjustment to goodwill through purchase price accounting, which will be recorded in the fourth quarter 2005. Substantially all of this adjustment is noncash and relates to asset disposals.
The approximately 100 employees at the company’s Kansas City and Manteno facilities will be eligible to apply for open positions at other Chiquita operations. Employees displaced by this consolidation will be eligible for severance and outplacement services based on level of position and length of service. At minimum, employees will receive pay for their normal work schedule for 60 days following this announcement.