WK Kellogg to streamline production as slowing demand pressures sales

WK Kellogg Co

06/08/2024 14:41

Aug 6 (Reuters) - WK Kellogg  KLG.N  plans to completely
shutdown its Omaha, Nebraska, plant by the end of 2026 under a
reorganization that will also reduce the cereal maker's
headcount by more than 17%, it said on Tuesday, as it
streamlines its production.
    Shares fell more than 2% in early trading as the Special K
cereal maker projected 2024 adjusted net sales to come in at the
lower end of its prior forecast range of 1% growth to 1%
decline.
    Packaged food companies, including Kraft Heinz  KHC.O  and
General Mills  GIS.N , have flagged sagging sales in North
America and a switch to private labels among consumers grappling
with higher-for-longer interest rates and sticky inflation.
    WK Kellogg, the North America cereal business of packaged
food giant Kellogg before it was spun off last October, also
posted in-line net sales of $672 million for the second quarter.
    The reorganization, approved by the board on July 31, is
expected to result in cumulative restructuring pretax charges of
between $230 million and $270 million.
    Under the plan, the Froot Loops maker will consolidate its
manufacturing network beginning with a phased reduction in
production at the Nebraska plant and scaling back production at
its Memphis, Tennessee facility, starting in late 2025.
    The actions would reduce headcount by about 550 people, WK
Kellogg said, including job additions at plants where production
would increase. It employed around 3,150 workers at the end of
last year.
    The Frosted Flakes and Raisin Bran maker plans to increase
production at its Battle Creek, Michigan; Belleville, Ontario;
and Lancaster, Pennsylvania plants, with planned spending of
about $450 million to $500 million on its supply chain efforts.
    It estimated between $170 million and $190 million in
non-cash charges primarily from accelerated depreciation and
asset write-offs. These charges are expected to be incurred
through 2027, the company said.
    

 (Reporting by Savyata Mishra in Bengaluru; Editing by Sriraj
Kalluvila)
 ((Savyata.Mishra@thomsonreuters.com;))