Hershey Co plans to cut 500 to 600 jobs, or up to 5 percent of its workforce, as part of a restructuring aimed at upgrading and enlarging its facilities to compete globally and save some $60 million to $80 milllion in annual costs.
Hershey, known for Hershey's Kisses and chocolate syrup, plans to invest $250 million to $300 million on modernizing and expanding its plant. The company will chalk up a realignment and start-up costs of $140 million to $170 million over the next three years, it said in a statement.
The company forecast on Monday a 2010 adjusted earnings per share of $2.47 to $2.52, roughly in line with Wall Street's expectations according to Thomson Reuters I/B/E/S. It also forecast a 6 percent to 7 percent rise in 2010 revenue from 2009's $5.3 billion, again in line with analysts' estimates.
Much of Hershey's expected capital investment will go toward a $200 million to $225 million expansion of its existing West Hershey, Pennsylvania plant. The company said it will begin realizing annual savings of $60 million to $80 million by the end of the restructuring effort, around 2014.
Hershey has benefited from a better U.S. economy, and also from the fact that the recovery is sufficiently modest to prevent customers from trading up to more expensive chocolates. But analysts worry the relatively small company will face increasing competition after Kraft Foods Inc bought British candymaker Cadbury earlier this year.
Our investment will create a highly flexible, cost-effective manufacturing facility that will enable us to remain competitive with global players, said David West, President and Chief Executive Officer.
Hershey employs more than 12,000 people around the world, according to its website. Shares in the company held steady at $50.88 in after-hours trade.
(Reporting by Edwin Chan, editing by Leslie Gevirtz)