Reductions in SG&A and improved trade
efficiency expected to be achieved in three years
ConAgra Foods, Inc. (NYSE:CAG) today announced restructuring
plans to improve profitability, advance its growth agenda and
unlock shareholder value. ConAgra Foods expects to realize at least
$300 million of efficiency benefits within the next three years
through a combination of reductions in SG&A and enhancements to
trade spend processes and tools.
Cost savings of approximately $200 million are expected to be
derived from a combination of lower headcount and non-headcount
costs which will be achieved by aggressively embracing zero-based
budgeting, simplifying organizational structure by increasing spans
of control and reducing layers, and outsourcing technology and back
office functions to improve scalability. Additionally, the company
expects to realize approximately $100 million of efficiency
benefits from enhancements to trade spend processes and tools.
The company expects the plan to provide a modest benefit to
fiscal year 2016 earnings. More than half the savings are
anticipated to be realized by the end of fiscal year 2017 with the
balance achieved in fiscal year 2018. These savings are in addition
to the approximately $150 million in cost reductions achieved by
the company over the past two years and are expected to enhance the
company's cost-competitiveness, margins and agility, while also
providing fuel for future brand-building and innovation
initiatives.
The restructuring is expected to result in the elimination of
approximately 1,500 positions or approximately 30% of the company’s
global office-based workforce, and excludes any impact from the
planned divestiture of the private label operations. Plant
positions will not be eliminated in connection with this
restructuring. ConAgra Foods estimates it will incur total
non-recurring charges of approximately $345 million, substantially
all of which are expected to be cash charges, over the next two to
three years in connection with the restructuring.
The company also announced the relocation of its headquarters to
Chicago, Ill. Beginning in the summer of 2016, approximately 700
employees will be located in the new offices in the city’s
Merchandise Mart, including the company’s senior leadership team
and certain functions of the Consumer Foods business, which are
currently located in Omaha, Neb. and Naperville, Ill. The company
will continue to maintain a significant presence in Omaha,
including approximately 1,200 employees within key administrative
functions, as well as research & development and supply chain
management.
“Today’s announcements are important milestones as we continue
to execute against our strategic plan to build a focused,
higher-margin, more contemporary and higher-performing company,”
said Sean Connolly, president and chief executive officer, ConAgra
Foods. “We are making difficult, but necessary, decisions to
enhance productivity, drive standardization and enhance flexibility
to deliver improved profitability. And through our organization
redesign, we will better harness the power of our front line by
deploying our talent against our largest opportunities for future
growth and value creation.”
Mr. Connolly continued, “Locating our headquarters and our
largest business segment in Chicago places us in the heart of one
of the world’s business capitals and consumer packaged goods
centers, enhancing our ability to attract and retain top talent
with a focus on brand building and innovation.”
“Importantly, we will also retain a major presence in Omaha,
where we have deep roots. Together with our new efficiency plan, we
believe this geographic rebalancing will serve as a catalyst for
improved organic and inorganic growth, and ultimately, stronger
value creation for our shareholders.”
“We appreciate the strong support offered by both Mayor Rahm
Emanuel and Governor Bruce Rauner during this process of evaluating
a move to Chicago. Equally, we are grateful to Governor Pete
Ricketts, Senator Heath Mello, Mayor Jean Stothert and Omaha
Chamber President David Brown for the great support we have always
received and continue to receive in Omaha. The decision to move
headquarters was solely based on the strategic needs of our
business and was not a city-vs-city exercise. We feel fortunate to
have a meaningful relationship with two outstanding business
centers,” concluded Connolly.
“I am thrilled to welcome ConAgra Foods' worldwide corporate
headquarters to Illinois,” Governor Bruce Rauner said. “ConAgra has
relied on the hardworking men and women of Illinois for almost 30
years, with over hundreds of employees calling our state their
home. We look forward to the opportunities created by ConAgra's
decision to invest in Illinois, and welcome them to their new
home.”
“I am honored to welcome ConAgra Foods to the City of Chicago.
By choosing Chicago as their new home, ConAgra Foods sees the same
strengths that so many other companies see in relocating their
headquarters here from our talent, to our transportation, to our
quality of life,” said Mayor Rahm Emanuel. “This decision by
ConAgra Foods further solidifies Chicago’s role as one of the
world’s leading destinations for food processing companies. I look
forward to watching them become part of Chicago’s future by
creating even more jobs and opening up more opportunities for the
residents of our city.”
About ConAgra Foods
ConAgra Foods, Inc., (NYSE:CAG) is one of North
America's largest packaged food companies with branded
and private label food found in 99 percent of America’s
households, as well as a strong commercial foods business
serving restaurants and foodservice operations globally.
Consumers can find recognized brands such as Marie Callender's®,
Healthy Choice®, Slim Jim®, Hebrew National®,
Orville Redenbacher's®, Peter Pan®, Reddi-wip®, PAM®, Snack
Pack®, Banquet®, Chef Boyardee®, Egg Beaters®, Hunt’s® and
many other ConAgra Foods brands, along with food sold
by ConAgra Foods under private labels, in grocery,
convenience, mass merchandise, club and drug stores. Additionally,
ConAgra Foods supplies frozen potato and sweet potato products
as well as other vegetable, spice, and bakery products to
commercial and foodservice customers. ConAgra
Foods operates ReadySetEat.com, an interactive recipe
website that provides consumers with easy dinner recipes and
more. For more information, please visit us
at www.conagrafoods.com.
Note on Forward-looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on management’s
current expectations and are subject to uncertainty and changes in
circumstances. These risks and uncertainties include, among other
things: ConAgra Foods’ ability to successfully execute an exit
option for its private label operations within the expected time
frame or at all; ConAgra Foods’ ability to successfully execute its
long-term value creation strategy; ConAgra Foods’ ability to
realize the synergies and benefits contemplated by the Ardent Mills
joint venture; risks and uncertainties associated with intangible
assets, including any future goodwill or intangible assets
impairment charges; the availability and prices of raw materials,
including any negative effects caused by inflation or weather
conditions; the effectiveness of ConAgra Foods’ product pricing,
including product innovation, any pricing actions and changes in
promotional strategies; the ultimate outcome of litigation,
including litigation related to the lead paint and pigment matters;
future economic circumstances; industry conditions; the
effectiveness of ConAgra Foods’ hedging activities, including
volatility in commodities that could negatively impact ConAgra
Foods’ derivative positions and, in turn, ConAgra Foods’ earnings;
ConAgra Foods’ ability to execute its operating and restructuring
plans and achieve operating efficiencies; the success of ConAgra
Foods’ cost-saving initiatives, innovation, and marketing
investments; the competitive environment and related market
conditions; the ultimate impact of any ConAgra Foods’ product
recalls; access to capital; actions of governments and regulatory
factors affecting ConAgra Foods’ businesses, including the Patient
Protection and Affordable Care Act; the amount and timing of
repurchases of ConAgra Foods’ common stock and debt, if any; the
costs, disruption and diversion of management’s attention
associated with campaigns commenced by activist investors; and
other risks described in ConAgra Foods’ reports filed with the
Securities and Exchange Commission, including its most recent
annual report on Form 10-K and subsequent reports on Forms 10-Q and
8-K. Investors and security holders are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date they are made. ConAgra Foods disclaims any
obligation to update or revise statements contained in this press
release to reflect future events or circumstances or otherwise.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151001005803/en/
ConAgra Foods, Inc.MEDIAJon Harris,
630-857-1440jon.harris@conagrafoods.comANALYSTSChris
Klinefelter,
402-240-4154chris.klinefelter@conagrafoods.comwww.conagrafoods.com
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