Kellogg Co. (NYSE:K) is planning to cut about 7 percent of its global workforce as part of a restructuring plan to boost efficiency and reduce costs, as the breakfast-cereal maker struggles with a slowdown in sales.
The Battle Creek, Mich.-based company, in a statement on Monday, announced a four-year efficiency program dubbed ‘Project K’ aimed at boosting growth and cutting costs, which includes reducing its workforce by more than 2,000 employees by the end of 2017. Kellogg also expects the program to generate savings by helping the company use its supply-chain infrastructure more efficiently.
“We are making the difficult decisions necessary to address structural cost-saving opportunities which will enable us to increase investment in our core markets and in opportunities for future growth,” John Bryant, Kellogg's president and CEO, said in the statement.
The company did not specify the exact number of job cuts, but according to regulatory filings, Kellogg employed 31,006 employees in 2012, suggesting that the company could cut about 2,170 jobs.
According to the statement, the company expects its cash savings to reach an annual rate of between $425 million and $475 million in 2018, and added that Project K would result in total pre-tax charges of between $1.2 billion and $1.4 billion, and the project’s non-cash costs are expected to be between $275 million and $325 million.
Kellogg, which also makes Eggo Waffles, nutritional bars and Pop-Tarts, is struggling to boost cereal sales in its core market in North America, as more people are shifting away from consuming breakfast cereal to other ready-at-hand alternatives.
Kellogg North America’s net sales decreased by 1.3 percent to $2.4 billion in the third quarter and its U.S. Morning Foods segment posted a decline of 2.2 percent in net sales. Kellogg’s earnings for the third quarter, excluding one-time items, rose 2.2 percent to $0.95 a share, compared to the same period a year ago, the company said in the statement.
The company’s reported net sales for the third quarter remained unchanged at $3.7 billion compared to a year ago, while internal net sales increased by 0.5 percent during the period. Analysts expected the company to report revenues of $3.73 billion and earnings at $0.89 a share.
Kellogg also said that weaker-than-expected sales could affect its earnings for the full year in 2013, and the company now expects its reported earnings to be at the lower end of the previously provided range of between $3.75 and $3.84 a share, excluding items.
The company's shares rose 0.69 percent to close at $62.72 on the New York Stock Exchange on Monday.