ConAgra to Eliminate 6,500 Jobs in Restructuring
May. 15, 1996
OMAHA, Neb. (AP) _ Despite a steady rise in profits over the last year, ConAgra Inc. will undergo a major restructuring designed to make the huge food company more efficient.
Omaha, Neb.-based ConAgra announced Tuesday that it will eliminate about 6,500 jobs and close or reconfigure 29 plants in a restructuring
``For our shareholders and employees this is the right step to make ConAgra more competitive, more secure, more profitable,'' chairman and chief executive officer Philip B. Fletcher said in a statement. ``But the decision was difficult because many jobs will be eliminated.''
The company said the restructuring will bring pretax charges of $505 million in the fiscal quarter ending May 26. That will reduce its fiscal fourth-quarter profit by about $360 million.
Fletcher said that excluding the restructuring charges, ConAgra expects to post record operating results for the full fiscal year.
ConAgra shares were up $2.25 at $41.25 in trading this morning on the New York Stock Exchange. The announcement came after stock markets closed Tuesday.
ConAgra is a diverse company that in addition to producing food for consumers under brand names like Healthy Choice, La Choy, Armour and Swiss Miss, supplies feed and fertilizer to farmers and produces commodities like grain and beef.
The job cuts will reduce its current work force of more than 90,000 by about 7 percent.
Analysts said the move was part of an effort by ConAgra to lower its cost structure in order to grow more competitive and improve profit margins.
``It's a company of very strong businesses across the food chain. They are a strong performer with good stable operating cash flows,'' said Doris Nakamura, an analyst with Duff & Phelps in Chicago. ``I would say they are taking steps to be more efficient and profitable.''
ConAgra said it would not identify the production plants to be closed until it can notify employees. Most will be notified in the next few days, with all filled in by May 24. Beyond those closures, ConAgra said it would exit or restructure nine smaller businesses.
Today, an Australian meat company that is 91 percent owned by Conagra announced plans to close three plants and spend $50 million expanding another. About 350 workers at Australian Meat Holdings Pty Ltd. will lose their jobs at the three plants to be closed, but about 600 jobs are to be added at the upgraded facility. It was unclear if the announcement was related to Conagra's restructuring plans.
Workers at the company's headquarters in Omaha heard of the restructuring late Tuesday through company e-mail.
``I was shocked. We all were shocked,'' said Sandy Ledger, who has worked for three years in ConAgra's finance department of its frozen foods division. ``No one had any idea this was coming.''
The overall restructuring is expected to produce pretax savings of about $50 million in fiscal 1997, $100 million the next year and $125 million the year after that. ConAgra said it expects the savings to boost profits as well as provide funds to be reinvested in the company.
Fletcher noted the company has undertaken such efforts during the past several years in efforts to ``manage ConAgra aggressively.''
``To date we've accomplished a stream of organizational and management changes to improve ConAgra's structure and leadership,'' he said. ``And we've completed an aggressive divestiture program, pruning noncore businesses to streamline ConAgra's asset base.''
In its fiscal third quarter, ConAgra's earnings rose 8 percent to $128.4 million, or 55 cents a share, on sales of $5.77 billion. On an annual basis, ConAgra put its sales at more than $24 billion.