H.J. Heinz to shut 15 plants, cut 2,700 jobs

Moves echo steps pushed by activist

June 02, 2006|By KNIGHT RIDDER/TRIBUNE

PHILADELPHIA -- H.J. Heinz Co., under pressure by activist shareholders, said yesterday that it plans to cut 2,700 jobs, close 15 factories, buy back $1 billion in shares over the next two years and boost its dividend 16.7 percent.

Heinz described the moves as the tail end of the Pittsburgh company's four-year restructuring effort under chief executive William R. Johnson, who has led Heinz since 1998.

"Today's Heinz is structurally the company I envisioned four years ago," Johnson said in a conference call.

Heinz is best-known for ketchup, but the 137-year-old company's brands include Ore-Ida french fries, Lea & Perrins sauces and Boston Market frozen meals.

Like other packaged-food manufacturers anchored in the slow-growing center aisles of the supermarket, Heinz has trimmed its product lines to focus on those with the most potential.

Johnson said the company had reduced the number of food categories it concentrates on from six to three, and the number of items it handles from 35,000 to 16,500 - still far more than the 57 varieties the company has promoted since the 1890s. The tighter focus should result in better new-product development, the company said.

Heinz said it expected to launch 100 new products this fiscal year, including a ketchup bottle designed to fit into refrigerator door compartments.

The moves announced yesterdays aim to cut costs by $355 million, slash spending on promotions for retailers by $145 million, and increase this year's earnings per share by 10 percent.

The measures echoed a proposed growth strategy published last week by activist shareholders led by billionaire investor Nelson Peltz, who is trying to gain representation on the Heinz board.

Peltz, acting through Trian Fund Management LP, and his partners had suggested $875 million in cost and spending cuts. Trian and partners own 5.4 percent of Heinz' shares.

In the five years before Peltz began applying pressure to Heinz this year, the company's shares had lost 14 percent of their value, compared with a 13 percent gain in the packaged-foods component of the Standard & Poor's 500-stock index.

Since February, when rumors of Peltz's activities began, Heinz shares have climbed 26 percent. They gained 3 cents yesterday to close at $42.38 on the New York Stock Exchange.

Heinz reported fiscal fourth-quarter net income of $167.91 million, down 18.7 percent from $206.49 million in the quarter a year ago. Sales climbed by 7.6 percent to $2.4 billion from $2.2 billion.

Net income for the fiscal year, which ended May 3, was $645.6 million, down 14.2 percent from $752.70 million the year before. Sales were up 6.6 percent to $8.6 billion from $8.1 billion.

Heinz did not identify which 15 of its 91 factories worldwide will be closed, but a spokesman said most are outside the United States.

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