Business | Technology

Newell to cut jobs

Newell to consolidate manufacturing, distribution facilities

  • Reuters
  • Published: 15:38 October 27, 2012
  • Gulf News

New York: Consumer products maker Newell Rubbermaid Inc said it will cut about 2,000 jobs, or slightly more than 10 per cent of its staff, over the next 2-1/2 years, joining a slew of US companies trying to counter slowing sales by reducing costs.

Newell on Friday also reported a higher-than-expected quarterly profit, raised its quarterly dividend by 50 per cent to 15 cents a share and announced a number of outside additions to its executive team. Its shares rose 4.5 per cent to $21 in premarket trading.

The maker of Sharpie pens and Rubbermaid storage containers also plans to consolidate manufacturing and distribution facilities and cut the number of its business units to six from nine in a second round of restructuring under Chief Executive Mike Polk, a former Unilever Plc executive who took the Newell helm in July 2011.

Polk is now reorganizing the company around two broad groups - development and delivery.

Development will include all of Newell’s marketing, insight, design, research and development, and corporate development staff, while delivery will consist of its general management, supply chain, and customer and channel development employees.

The moves will save $180 million to $225 million by the end of the second quarter of 2015, the company said. It expects to take related charges of $225 million to $250 million.

“We like the progress that Newell is making under CEO Mike Polk,” BMO Capital Markets analyst Connie Maneaty said, applauding his efforts to “funnel investment toward its most promising businesses and geographies.”

She has an “outperform” rating on the stock.

While the consumer products maker plans to eventually use the savings to invest in key Latin American markets such as Mexico, Columbia and Brazil, as well as in China, Polk told Reuters that Newell was being very careful with investments over the near term as the so-called “fiscal cliff” looms.

“This is the real political issue out there ... and it’s bigger than the election,” Polk said, referring to the automatic spending cuts and tax increases set to take effect on Jan. 1 if the US Congress fails to act.

“We are being really cautious about (the) kinds of investments we make and the kinds of risks we are taking in this environment,” Polk said, adding that retailers who do business with Newell are being “very, very tight-fisted” in managing inventory.

Several top executives will leave the company, including Penny McIntyre, who headed the consumer business, Ted Woehrle, the chief marketing officer, and Paul Boitmann, the chief customer development officer, Newell said.

In October 2011, Polk announced plans to consolidate Newell’s manufacturing plants and distribution centres and reduce the number of global business units.

The company, which also makes Graco strollers, Calphalon cookware and Paper Mate pens, has benefited from a move away from commoditised, lower-margin products like shelving and wooden pencils. That effort began under former CEO Mark Ketchum.

Newell said it swung to third-quarter net income of $108.3 million, or 37 cents a share, from a year-earlier net loss of $177.6 million, or 61 cents a share.

Excluding restructuring costs, tax charges and other items, the profit came to 47 cents a share, beating the analysts’ average estimate of 44 cents, according to Thomson Reuters I/B/E/S.

Price increases and measures to improve productivity helped Newell offset high raw material costs in the quarter.

Net sales fell 0.9 per cent to $1.54 billion, in line with analysts’ estimates. Core sales, excluding the effects of currency fluctuations, rose 1.5 per cent.

For the year, the company expects net sales to be flat to up 1.5 per cent and core sales to rise 2 per cent to 3 per cent.

Newell stood by its full-year profit forecast of $1.63 to $1.69 a share, excluding special items.

Earlier this week, companies like Dow Chemical Co and Colgate-Palmolive Co said they will cut jobs to protect profits in a weak global economy.

Also as part of the restructuring, Newell hired several Unilever executives.

Mark Tarchetti, the former head of global corporate strategy at Unilever, will join Newell in January as chief development officer and lead the new development group.

William A. Burke III, currently group president of Newell Professional or the unit that caters to commercial customers, was appointed chief operating officer and will lead the new delivery group.

Both Tarchetti and Burke will report to CEO Polk.

Unilever executive Joe Cavaliere will join Newell as global chief customer officer. Richard Davies, also with Polk’s former employer, will become chief marketing and insights officer.

John Stipancich will remain chief legal officer and general counsel and take charge of operations in Europe, the Middle East and Africa.

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