ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, June 25, 1996 TAG: 9606250061
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: TRENTON, N.J.
SOURCE: Associated Press
THE SNACK COMPANY plans to eliminate 4,200 jobs from its U.S. and international operations in response to price reductions by competitors in the food industry.
Nabisco Holdings Corp., maker of snack mainstays such as Oreos and Ritz, moved Monday to cut nearly 8 percent of its work force in a restructuring that reflects the increased competition among food retailers.
The subsidiary of food-tobacco conglomerate RJR Nabisco said the retooling will cut its overhead by about $200 million annually and ``accelerate strong, sustainable earnings growth into the next century.''
Nabisco will incur a second-quarter pretax charge of $428 million for the restructuring and $81 million in other costs to be taken through 1997. Those moves, it said, will reduce this year's earnings by $338 million, or $1.26 a share.
In contrast to other job-slashing announcements that have cheered investors in recent months, Wall Street showed little reaction. RJR Nabisco shares rose on the New York Stock Exchange by 25 cents to $32.87 1/2, a gain of less than 1 percent.
Nabisco said it will cut 4,200 jobs from the current 54,000, splitting the trims between its U.S. and international operations. The cuts also will be divided among management, sales and production, said Nabisco spokesman Hank Sandbach. He said no plants would close.
Nabisco is one of the best-known names in the snack and cereal aisles. It also owns the SnackWell's line of reduced-fat munchies and a hodgepodge of brands ranging from College Inn broth to Vermont Maid syrup.
The restructuring move follows an intense brawl between RJR management and outside investors who sought unsuccessfully to separate the food and tobacco businesses.
They argued that the uncertainties of the cigarette industry's future were depressing the value of Nabisco's vast array of grocery staples, and that both the food and tobacco businesses would increase in value if they weren't linked. Management said splitting them apart was premature.
While analysts believe boosting earnings would make Nabisco more attractive, they said the restructuring announced Monday wasn't part of a plan for eventual autonomy of the food business.
``They wouldn't do it for that alone,'' said Edward A. Froelich, vice president at Pershing-Division of Donaldson Lufkin & Jenrette in Jersey City, N.J.
``They're not going to spin it off until '98 at the earliest,'' added John C. Maxwell Jr., managing director at Wheat First Butcher & Singer in Richmond.
Froelich said the restructuring was a reaction to cost reductions and price-slashing elsewhere in the food industry, particularly by cereal makers. Post, Kellogg and General Foods all have cut prices in recent weeks.
Maxwell said the restructuring is intended only to improve ``overall profitability and outlook'' and should benefit Nabisco by next year.
``They would have done this with or without a spinoff'' plan, agreed John M. McMillin, a food industry analyst at Prudential Securities Research in New York. ``The bottom line is there's increased pressure on RJR Nabisco and Nabisco [Holdings] to generate earnings growth.''
RJR Nabisco, the nation's No.2 cigarette maker with such brands as Winston and Salem, owns 80.5 percent of Nabisco Holdings. RJR's stock has been the worst performer among tobacco companies of late.
After several strong quarters fueled by the successful introduction of the SnackWell's line, Nabisco's earnings began to slide in the second half of 1995, with profits plunging 20 percent in the July-September quarter. Earnings rebounded in the first quarter of this year, but the company has said sales, particularly domestic sales, have been flat.
``They've been unable to duplicate the growth of SnackWell's in 1993 and '94 with some new products,'' McMillin noted. ``If you can't grow your sales, you've got to accelerate cost-cutting.''
John Greeniaus, Nabisco Holdings chairman and chief executive, said the restructuring will allow the company to ``move faster, at significantly lower costs, while providing higher levels of service and value to our customers.''
``The fundamental changes we must make require a leaner work force,'' he said.
The company said it would move the headquarters of its Planters Co. and Life Savers Co. from Winston-Salem, N.C., to Parsippany, N.J., where its other offices are housed. Other operations also will move to New Jersey, putting all the company's major domestic operating companies in the New York suburb.
The company also will eliminate smaller brands that bring slight profits and devote production to bigger sellers.
``I think you would see a few less brands on the cookie aisle,'' predicted Standard & Poors analyst Ken Shea. ``They're still going to come out with some new products in SnackWell's; but some of the ones that have lagged, I think they're going to cut back a little bit, as well as the mainstay Nabisco brands.''
Shea and McMillin both said Nabisco is essentially correcting for expanding some product lines too far, such as making four different types of Chips Ahoy chocolate chip cookies.
The company said it would reduce its earnings this year by $338 million to set aside enough money to pay for severance costs and other charges from the restructuring.
``It was clear that the company was spending too much,'' said Laurie Feldman, an analyst at Bear, Stearns & Co. ``The last year has been a very disappointing one. It's a long-overdue look at their cost structure.''
Bloomberg Business News contributed to this report.
LENGTH: Long : 105 linesby CNB