Kraft Foods Inc, the US' largest food manufacturer, plans to eliminate 8,000 additional jobs, or about 8 percent of its work force, and close as many as 20 production plants, including one in Australia, as it broadens an ongoing restructuring effort.
Kraft announced the moves on Monday as it reported fourth-quarter earnings that rose 23 percent, beating Wall Street's expectations.
Kraft said the cuts would save an additional US$700 million in annual costs, atop a targeted US$450 million in savings it says it will achieve through a restructuring that began in January 2004.
The maker of Kraft cheese, Nabisco crackers, Oscar Mayer meats and Post cereals had already announced closures of 19 production facilities and the elimination of 5,500 jobs under the original cost-cutting plan.
Kraft said that those efforts are on track but added that more cuts are needed.
The company said that it intends to shut plants in Broadmeadows, Victoria, in Australia and Hoover, Alabama, but did not announce the other facilities it plans to close. Kraft also said it would trim its product line by another 10 percent, atop a 20 percent cut since 2004.
The Northfield, Illinois-based company said the new cuts would cost US$2.5 billion, bringing the total cost of its overall restructuring to US$3.7 billion.
"Further cost reduction is a necessity in the current environment," chief financial officer Jim Dollive told analysts during a conference call.
Kraft and other food manufacturers have been hammered by higher costs for commodities such as meat, coffee, nuts and packaging. Kraft said on Monday it spent US$800 million more on commodities last year than it did in fiscal 2004.
CEO Roger Deromedi said the high commodity costs offset signs of improvement in the US market in the fourth quarter. He also said flat volume last year has weighed down results.
But some analysts said they were surprised by the scope of the planned reductions considering the other cuts Kraft has undergone over the past two years.
"It's a very large number. It almost feels like the entire kitchen sink went into this restructuring program," Citigroup Inc analyst David Driscoll said.
RSS