Colgate to Eliminate About 3,000 Jobs
NEW YORK (AP) _ Colgate-Palmolive Co. said today it will eliminate 3,000 jobs, or about 8.5 percent of its worldwide workforce, and expects earnings will be reduced by the economic woes in Mexico _ a major market for its consumer products.
In addition, Colgate said the cuts will result in an aftertax charge against earnings of $369 million, or $2.54 a share, in the third quarter, resulting in a loss for the period.
Following the announcement, Colgate stock tumbled almost 9 percent and was down $6.37 1/2 at $65.37 1/2 a share in early trading today on the New York Stock Exchange.
During the next two years, Colgate will close or significantly change operations in 24 of its 112 factories and eliminate about 3,000 jobs from its workforce of about 36,000, said Reuben Mark, chairman and chief executive.
Savings from the restructuring are expected to begin in the second half of 1996, with significantly growth in savings in 1997 and beyond, Mark said in a statement announcing the changes.
``These increases will benefit the company’s profit growth, and provide funds necessary for increased new product activity, advertising and global geographic expansion,″ he said.
``These are not easy decisions as they affect so many valued Colgate people, but we believe they are in the best longterm interest of all our stakeholders, including employees, stockholders and customers,″ he said.
Colgate said it will provide benefit and severance packages and arrange for job counseling and employee assistance.
Colgate-Palmolive is known for toothpaste and other products for personal care, the home and pet care. Its brands include Colgate, Palmolive, Mennen, Ajax, Fab, Soupline, Suavitel, and Hill’s Science Diet and Hill’s Prescription Diet pet foods.
About three-fourths of the restructuring will occur in North America and Europe. Cuts also will affect some Latin American operations.
Colgate did not disclose all of its proposed cuts, saying it wanted to discuss them first with employees. But it provided these examples of the actions it intends:
_Closing of Colgate’s factory in Hamburg, Germany, and consolidation of production with focused factories _ those with just one category of products _ in other countries. The production of dental care products would be consolidated with Colgate operations in Britain, soap in Italy and household products in France.
_Acceleration of the move in the United States to one-category factories. Liquid dishwashing detergent products manufactured at the Jeffersonville, Ind., plant would go to one of the company’s liquids facilities, and powder detergents would be contracted out to a manufacturer, leaving Jeffersonville to focus on toothpaste.
_Consolidation of several manufacturing facilities within trade zones in Latin America.
_Continuation of the consolidation and modernization of Mexican manufacturing and support operations.
_Consolidation of a variety of administrative functions in Europe and at corporate headquarters.
A restructuring charge that would reduce earnings by $369 million, or $2.54 a share, in the third quarter would be enough to offset more than twice the company’s profit of the same period a year ago, when Colgate earned $151 million, or $1 a share.
In addition, the company said Mexican operations are dragging down third-quarter earnings, which will be reported next month.
It said results are expected ``to show excellent momentum outside of Mexico, with worldwide sales up approximately 10 percent ...″
But Colgate predicted it would earn 76 cents to 79 cents a share before the restructuring charge in the third quarter, falling short of the consensus of $1 a share as reported by Zacks Investment Research, which tracks industry analysts.
In the fourth quarter, Colgate said it expects earnings from operations, or before restructuring charges, in the range of 81 cents to 84 cents a share compared with analysts’ expectations of 94 cents.
It said it expects earnings of $3.57 to $3.60 a share for all of 1995, compared with a consensus forecast of $3.95 a share.
A year ago, it had fourth-quarter earnings of $137.1 million, or 91 cents a share, and full-year profit of $580.2 million, or $3.82 a share.
``The primary reason for lowering our expectations is Mexico, where recession has worsened as the year progressed, reducing employment and real wages to the point that the consumer categories in which we compete have shrunk significantly,″ Mark said.