Heinz to cut 8% of its workforce

The H. J. Heinz Company, commonly known as just Heinz, said Thursday that its quarterly profit dropped 19 percent and that it would cut 2,700 jobs or about 8% of its workforce worldwide and exit 15 plants as part of a move to cut costs and increase profit.

Heinz, one of the world's largest food companies, said approximately 600 of the job losses would come from shutting four factories in Europe, however, it did not identify which plants had been earmarked for closure.

Sharpsburg, Pennsylvania based company expects to save $ 355 million a year from cost cutting and an additional $ 145m from reducing the deals offered to retailers in return for premium shelf space. The company said it would extend its marketing budget by 19% to $ 317m next year and expend more on research and development. It is considering exiting another five plants in fiscal 2008.

The American Ketchup company aims to launch 100 new products next year, including organic versions of its Classico pasta sauces and further varieties in its Smart Ones packaged meals. Consumers will shortly be able to purchase baked bean-filled sandwiches that can be put in a toaster.

Heinz's restructuring plan came forth to fend off the pressure from a billionaire investor, Nelson Peltz, to increase shareholder returns. It recently refused to accept a cost-cutting proposal (the 28-page proposal calling for Heinz to cut costs by $ 575m and trade promotions by $ 300m) by Mr. Peltz and his Trian Group, which owns about 5.4% of the company.
Peltz is aiming to get five of his allies on the Heinz board.
Heinz's profit dropped to $ 167.9 million or 50 cents a share, from $ 206.5 million, or 59 cents a share, a year earlier. It said earnings were affected by charges connected to asset sales and a write-down of operations in Zimbabwe and gains from the sale of its European Seafood and Tegel poultry businesses, along with other noncore companies.

Now Heinz is formulating a plan to increase its dividend payout by almost 17% and buy back $1bn of its own shares over the next two years. It detailed its plan to restore the business to growth as it reported profits of $ 168m in its fiscal fourth quarter, down from $ 206m in the previous year.

On the other hand, revenue in the period, which ended May 3 and was the fourth quarter of Heinz's fiscal year, increased nearly 8 %, to $ 2.4 billion, from $ 2.23 billion, helped by growth in brands like Classico pasta sauce and Ore-Ida frozen potatoes
William R. Johnson, chief executive of Heinz, said in a conference call Thursday, “With all of this now behind us, today's Heinz is structurally the company I envisioned four years ago," he added, "We have made some of the most important people changes in this company's history."