US food giant Kraft Foods has said it is to cut 6,000 jobs as part of a sustainable growth plan aimed at strengthening performance and achieving long-term growth targets.
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The announcement came as the company reported net earnings of US$869m for the fourth quarter to 31 December, compared to $931m in the year-ago period, as lower operating income was partly offset by reduced interest expense and a lower effective tax rate.
Kraft reported full-year 2003 net earnings of $3.48bn, or $2.01 per share, compared to $3.39bn, or $1.96 per share, in the previous year. Full-year 2003 net revenues were $31.01bn, compared to $29.72bn in the previous year.
The company said it is implementing a four-point “Sustainable Growth Plan” that is expected to deliver consistent, long-term growth in volume, revenue and earnings.
The key elements of the plan include “significantly higher investment in brand building through product innovation, more competitive pricing and world-class marketing; transformation of the portfolio in-line with changing consumer and customer trends; expanded global scale, particularly in the fastest-growing developing markets; and reduced cost structure with the reinvestment of savings into brand building initiatives”.
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By GlobalDataThe fourth element of the plan includes a global restructuring programme that is expected to involve the closure of up to 20 of Kraft’s production facilities worldwide and the elimination of about 6,000 positions at all levels of the company, or about 6% of its total workforce, over the next three years.
The company said it initially intends to close three plants in Canton, NY; Farmdale, OH; and Central Europe. Around 1,300 salaried positions in North America are expected to be eliminated in the first quarter.
Kraft said the plan includes a cost restructuring programme that is expected to result in pre-tax charges of up to $1.2bn over the next three years and generate approximately $0.4bn in annual pre-tax savings by 2006.
The company issued 2004 earnings-per-share guidance of $1.63 to $1.70, which reflects a charge of approximately 30 cents per share in total costs associated with the restructuring program.
“While Kraft’s fourth quarter results were in line with our expectations, we clearly are not satisfied with our performance in the quarter or for the full year,” said CEO Roger K. Deromedi. “The corrective actions we began in late 2003 are showing progress, and the stronger steps we are announcing today will get us back on track for sustainable growth.”
