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Smucker Will Sell U.S. Industrial Business
"ORRVILLE, Ohio -- The J.M. Smucker Co. will sell its U.S. industrial business, discontinue operations at its Salinas, Calif., facility and restructure U.S. distribution operations, officials announced yesterday.Over the past two years, the company has tried to improve the margins of its industrial business by exiting low margin contracts in excess of $50 million. Though margins have improved, officials decided to sell the U.S. industrial business and has entered into an agreement to sell its industrial bakery ingredients business, located in Orrville, to Baldwin Richardson Foods Co., a privately owned food company located in Chicago. The sale is expected to close by the end of this year. Smucker will continue production of industrial bakery ingredients for Baldwin Richardson through September 2005.Smucker also has entered into a separate letter of intent to sell its dairy ingredients business, manufactured in both Oxnard, Calif., and Orrville, to Sabroso Co., a privately owned producer and distributor of fruit products headquartered in Medford, Ore. The sale is expected to close by the end of Smucker's fiscal 2005 third quarter. Smucker will continue to operate the Oxnard plant as a fruit processing facility.The industrial businesses will continue to be reported in continuing operations through their divestiture period. The net impact on fiscal 2005 earnings is not anticipated to be material. Industrial sales planned for 2005 are approximately $60 million.In an effort to provide the lowest delivered costs to customers, Smucker plans to discontinue operations and close the Salinas, Calif., facility and redistribute the production to the Orrville and Memphis, Tenn., facilities. The California plant is expected to close by the end of next year."We are committed to being fair in assisting each employee affected by these decisions," said Tim Smucker, chairman and co-chief executive officer. "We will strive to make an orderly transition over the next 12 months, as we continue to implement our strategy."As a result of the announced actions, Smucker expects to record additional restructuring charges of approximately $15 million, of which an estimated $6 million will be recorded in the current fiscal year and the remainder in fiscal 2006. Included in the restructuring charges are cash outlays of approximately $13 million that relate primarily to severance- related costs and equipment relocation expenses. The company estimates that the annual pretax benefit from the restructuring will be approximately $4 million to $6 million upon full implementation. At least one-third of that amount is expected to be realized in fiscal 2006 and the full amount should begin to be realized in fiscal 2007. Visit the J. M. Smucker Co.: www.smuckers.com"