Kraft to Cut 1,600 Jobs Ahead of Split

By David Welch – Jan 17, 2012

Kraft Foods Inc. (KFT), the food company planning to split in two this year, said it would eliminate 1,600 jobs and reported preliminary profit for 2011 that trailed some analysts’ estimates.

The job cuts will take place in North America through this year and about 40 percent are a result of reorganizing U.S. sales, the Northfield, Illinois-based company said today in a statement. About 40 percent of the cuts will come from corporate staff and 20 percent are vacancies that will remain unfilled, the company said.

The reductions move Kraft, the world’s second-largest food manufacturer, a step closer toward splitting the company into its snack foods business and the grocery business. Kraft has been working to make the future companies leaner as it moves toward the separation, which is scheduled to happen this year.

“When we announced our decision to create two world-class companies last August, we said both would be leaner, more competitive organizations,” Chief Executive Officer Irene Rosenfeld, who will lead the snacks company after the spinoff, said in the statement. “For the past year, the North American team has been working to streamline operations.”

Kraft is splitting up to help the snacks business push products into emerging markets and make additional acquisitions while the slower-growing, higher-margin grocery business expands in the U.S. and returns cash to shareholders.

Grocery Spinoff

The spinoff will leave a global snacks and candy business with $31 billion in revenue from brands including Cadbury chocolate and Oreo cookies, Kraft said in August.

The grocery company may have about $17 billion in revenue. Tony Vernon, 55, currently president of the North American foods division, will be CEO of the grocery business, Kraft said in December.

Full-year operating income probably rose to at least $2.28 a share, Kraft said in a separate statement. That trailed the $2.29 estimate of analysts surveyed by Bloomberg.

The company previously said it would earn $2.27 a share, excluding a 1-cent per share loss because of foreign-currency fluctuations. The preliminary result includes the currency charge, meaning it tops the company’s projection by about 2 cents a share, Mike Mitchell, a Kraft spokesman, said in a phone interview.

Kraft rose 1.4 percent to $38.32 at 12:55 p.m. in New York. The shares climbed 19 percent last year.

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