woodpecker
Wed, Aug-04-04, 07:52
Kenosha pasta company cutting jobs, citing low-carb trend
(Published Thursday, June 24, 2004 09:13:16 AM CDT)
By Dana Fields/Associated Press
KANSAS CITY, Mo. -- Following two quarters of declining earnings, American Italian Pasta Co. said Wednesday it would reduce employment 14 percent and take other steps to help it weather the low-carb climate.
The 16-year-old company, which is North America's largest producer of dry pasta, said operations at its 48-employee plant in Kenosha, Wis., would be suspended indefinitely in mid-July. The plant's production of ingredients for the food industry and pasta for institutional buyers will be parceled out among the company's three other U.S. plants.
Production will be halted throughout July at the company's plant in Excelsior Springs, Mo., and for seven to 10 days in July at the plant in Columbia, S.C., to reduce inventories.
In all, American Italian plans to cut about 100 positions from its 710-member corporate and production work force through attrition, the suspensions at Kenosha and elimination of some jobs. Some workers will be offered jobs at other plants, company spokeswoman Jennifer Smartt said.
American Italian will take a pretax charge of $10 million to $12 million in the current fiscal year to cover the costs of the restructuring, which is expected eventually to save the company $12 million annually.
Shares of American Italian were down $1.10, to $30.06, in trading Wednesday afternoon on the New York Stock Exchange.
Even with the adjustments, sales and earnings through the final half of the current fiscal year are expected to trail last year's performance, president and chief executive Timothy Webster said in a statement. Details are to be offered during an earnings conference call July 28.
Profits were down 8.9 percent in the first quarter of 2004 and nearly 8 percent in the second quarter, which ended April 2.
Webster cited two years of "difficult pasta market conditions" in which industrywide profits have declined along with consumption - down an estimated 100 million pounds in the past 12 to 14 months alone.
American Italian has responded to the nation's growing enthusiasm for high-protein, low-carbohydrate diets in a variety of ways.
After reaching a deal last year to make a low-carb pasta sold under the Atkins label, the company announced in January it was creating reduced-carb pastas to be sold under its own seven regional brands: Mueller's, Golden Grain, R&F, Ronco, Martha Gooch, Luxury, and Anthony's.
But consumers' response has been "less than expected," Webster said. The company's board concluded this week it was "prudent to adjust our capacity and lower our cost structure and not wait for consumption trends and industry conditions to improve," he said.
Jonathan Braatz, an analyst with Kansas City Capital Associates, said Wednesday that supermarket executives have suggested the reformulated pasta's 19 net grams of carbohydrates per serving might be too high.
"I don't think that was sufficiently low to induce some of the low-carb dieters to buy it," Braatz said. "My own sense is, it has to be below 10."
Braatz said American Italian was taking the necessary steps to adjust to the market.
"You could argue they waited too long, but now they're going to take their medicine and take it in one fell swoop," he said.
(Published Thursday, June 24, 2004 09:13:16 AM CDT)
By Dana Fields/Associated Press
KANSAS CITY, Mo. -- Following two quarters of declining earnings, American Italian Pasta Co. said Wednesday it would reduce employment 14 percent and take other steps to help it weather the low-carb climate.
The 16-year-old company, which is North America's largest producer of dry pasta, said operations at its 48-employee plant in Kenosha, Wis., would be suspended indefinitely in mid-July. The plant's production of ingredients for the food industry and pasta for institutional buyers will be parceled out among the company's three other U.S. plants.
Production will be halted throughout July at the company's plant in Excelsior Springs, Mo., and for seven to 10 days in July at the plant in Columbia, S.C., to reduce inventories.
In all, American Italian plans to cut about 100 positions from its 710-member corporate and production work force through attrition, the suspensions at Kenosha and elimination of some jobs. Some workers will be offered jobs at other plants, company spokeswoman Jennifer Smartt said.
American Italian will take a pretax charge of $10 million to $12 million in the current fiscal year to cover the costs of the restructuring, which is expected eventually to save the company $12 million annually.
Shares of American Italian were down $1.10, to $30.06, in trading Wednesday afternoon on the New York Stock Exchange.
Even with the adjustments, sales and earnings through the final half of the current fiscal year are expected to trail last year's performance, president and chief executive Timothy Webster said in a statement. Details are to be offered during an earnings conference call July 28.
Profits were down 8.9 percent in the first quarter of 2004 and nearly 8 percent in the second quarter, which ended April 2.
Webster cited two years of "difficult pasta market conditions" in which industrywide profits have declined along with consumption - down an estimated 100 million pounds in the past 12 to 14 months alone.
American Italian has responded to the nation's growing enthusiasm for high-protein, low-carbohydrate diets in a variety of ways.
After reaching a deal last year to make a low-carb pasta sold under the Atkins label, the company announced in January it was creating reduced-carb pastas to be sold under its own seven regional brands: Mueller's, Golden Grain, R&F, Ronco, Martha Gooch, Luxury, and Anthony's.
But consumers' response has been "less than expected," Webster said. The company's board concluded this week it was "prudent to adjust our capacity and lower our cost structure and not wait for consumption trends and industry conditions to improve," he said.
Jonathan Braatz, an analyst with Kansas City Capital Associates, said Wednesday that supermarket executives have suggested the reformulated pasta's 19 net grams of carbohydrates per serving might be too high.
"I don't think that was sufficiently low to induce some of the low-carb dieters to buy it," Braatz said. "My own sense is, it has to be below 10."
Braatz said American Italian was taking the necessary steps to adjust to the market.
"You could argue they waited too long, but now they're going to take their medicine and take it in one fell swoop," he said.