Daily Management Review

Hershey's plans global job cuts


American company Hershey Co. decided to carry out global job cuts over the next two years. Hershey, like other food producers, in recent years faced problems such as a change in consumer preferences in the US and weakening pace of business growth in emerging markets, including China.

Hershey is the largest US manufacturer of products made of chocolate. The company expects to increase ratio of adjusted operating profit margin to 23% by the end of 2019 from 20% at the end of 2016. Cutting of 15% employees, or about 2.7 thousand jobs will help to achieve this goal.

Generally, the layoffs will fall on American employees paid by the hour. Some experts, however, believe that Hershey will cut many jobs in China, where the company's costs for labor have increased significantly since purchase of a local chocolate manufacturer in 2014.

As of the end of 2016, Hershey had 16.3 thousand full-time employees worldwide, and 1.68 thousand part-time employees.

At the end of 2016, Hershey announced resignation of President and Chief Executive Officer John Bilbrey. Since March 1, the company will be headed by Michele Buck, who previously was Vice-President and Chief Operating Officer.

Previously, Hershey Co reported a quarterly profit exceeded expectations due to lower cocoa prices and cost-cutting, and unveiled a better-than-expected forecast for adjusted earnings for 2017.

The company reported that adjusted earnings in 2017 will amount to $ 4,72- $ 4,81 per share, while analysts polled by Reuters on average had forecast earnings of $ 4.64 per share.

Hershey, which in June rejected a proposal to merge with Mondelez International Inc. worth $ 23 billion, spent less on advertising and marketing in 2016, despite a slight increase in spending in the fourth quarter ended 31 December.

The company's sales in North America, which accounts for about 85 percent of all sales for the quarter rose 3.8 percent to $ 1.69 billion.

According to Hershey’s forecast, net sales in 2017 will increase by 2-3 percent due to transactions related to acquisitions and growth in demand in the United States.

Net income for the quarter decreased to $ 116.9 million, or 55 cents per share, from $ 227.9 million, or $ 1.04 per share, for the same period a year earlier.

Excluding a number of balance sheet items, profit was $ 1.17 per share, easily beating analysts' average forecast of $ 1.99 per share.

Net sales increased by 3.2 percent to $ 1.97 billion. Analysts had forecast a figure of $ 1.99 billion. 

source: bloomberg.com

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