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Kraft To Lay Off 1,600 Workers During Split Into Two Companies

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KRAFT FOODS
AP


* Job cuts represent about 1.26 percent of total workforce

* Grocery unit to cut U.S. management centers from 4 to 2

* Beverages, Planters to move from Northeast to Chicago area

* 2011 operating EPS seen at least $2.28 v analyst view of $2.27

* Shares hit 9-year high (Adds details on job cuts, stock activity)

Jan 17 (Reuters) - Kraft Foods Inc said that splitting into two companies would lead it to cut about 1,600 jobs in North America this year and that its 2011 profit should be slightly higher than it had previously forecast.

About 40 percent of the job cuts come from the company realigning its U.S. sales division, Kraft said. About 20 percent of the jobs being cut in the United States and Canada are currently open positions, the company said. The planned job cuts do not include any cuts at manufacturing facilities.

The 1,600 job cuts represent about 1.26 percent of the company's total workforce. Kraft has about 127,000 employees, including about 46,500 in North America.

Kraft also said its 2011 net revenue would be up by about 10 percent, as it ended the year with strong momentum around the world despite a tough operating environment.

It expects to report 2011 operating earnings per share of at least $2.28, including a penny per share hit from currency in the fourth quarter. Previously Kraft had forecast operating earnings per share of at least $2.27, excluding any potential currency impact in the fourth quarter.

Analysts, on average, had expected Kraft to earn $2.27 per share this year, according to Thomson Reuters I/B/E/S.

Kraft's 2011 organic net revenue -- or revenue excluding the impact of acquisitions, divestitures, currency and accounting calendar changes -- should be up about 6.5 percent, versus its prior outlook at least 6 percent. The growth was driven by mid-single-digit percentage growth in North America and Europe, and double-digit percentage growth in developing markets, the company said.

Shares of Kraft climbed 1.7 percent to $38.42 in afternoon trading on the New York Stock Exchange, hitting their highest level since early 2003.


MOVING GROCERY UNITS TO CHICAGO AREA

Kraft, the largest North American packaged food company, announced plans to break up back in August. Chief Executive Irene Rosenfeld will lead the snacks business and North America President Anthony Vernon will be CEO of the North American grocery business.

The snacks business, with annual sales of $32 billion, operates in high-growth emerging markets with products like Oreo and Lu cookies, Cadbury chocolates and Trident gum. The North American grocery business, with annual sales of $16 billion, is focused in more mature markets with products like Kraft and Velveeta cheeses, Maxwell House coffee and Capri Sun drinks.

Once the North American grocery business is spun off it will cut its number of U.S. management center locations from four to two. Beverages, currently in Tarrytown, New York, and Planters, currently in East Hanover, N.J., will move to the Chicago area by December. Most employees affected by those moves will have the option to transfer, Kraft said. Also, Kraft will close its Glenview, Illinois, management center by the end of 2013.

The future global snacks company will also be based in the Chicago area, while its North American unit will be based in East Hanover.

Kraft, which is based near Chicago in Northfield, Illinois, said it is still reviewing its manufacturing facilities to consider what will be best for the two companies.

Kraft said its snacks business will deliver products directly to stores, with most U.S. retail sales employees moving over to the North American region of the global snacks company.

The grocery company will use warehouse distribution, with local retail support contracted out to two companies. Acosta Sales & Marketing will become its partner in grocery stores and mass retail channels and Crossmark will continue to support Kraft in convenience stores.

The company plans to report its full 2011 results and give outlook on Feb. 21. (Reporting by Jessica Wohl in Chicago; Editing by Gerald E. McCormick and Gunna Dickson)

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