TreeHouse Foods (THS) To Close Azusa And Ripon Facilities

TreeHouse Foods, Inc. (NYSE:THS) has been making efforts to cut costs and improve efficiency.

Recently, the company announced its intention to close two manufacturing plants in Azusa, CA and Ripon, WI. The move aims to streamline its operations, meet the needs of its customers and eliminate excess manufacturing capacity.

The Azusa facility, which produces bars and snack products primarily for retail customers, is expected to close in the second quarter of 2017. However, the products produced at the Azusa facility will be moved to other manufacturing facilities within the company's existing network. The plant closure will impact approximately 660 employees.

The Ripon facility produces private label sugar wafer cookies for grocery retailers. However, due to declining demand of sugar wafer products, the company decided to close the unit in the fourth quarter of 2016. The closure will impact approximately 60 employees.

The employees were informed of the decision well in advance. The company will provide severance benefits, transitional support and outplacement services to employees whose positions are being eliminated.

Both facilities were part of the company's acquisition of the private brands business from ConAgra Foods, Inc. (NYSE:CAG) in Feb 2016.

TreeHouse expects to incur approximately $17 million in total cost to close the facilities, of which $14.5 million is expected to be in cash. The company expects $2.5 million of non-cash write offs, $4.3 million as employee related costs and $10.2 million of other closure costs.

Earlier in May, TreeHouse reported better-than-expected first quarter 2016 results. However, it has tightened its earnings view for 2016 due to the lower margin structure of the acquired business of Private Brands.

This Illinois-based food company posted earnings per share of 48 cents per share in the first quarter of 2016. Earnings beat the Zacks Consensus Estimate of 40 cents by 20% and were way ahead of the company’s guided range of 38 - 43 cents. However, earnings declined 18.6% from the year-ago level due to lower gross margin and currency headwinds.

Net sales of $1.270 billion beat the Zacks Consensus Estimate of $1.248 billion by 1.8%. Sales also grew a significant 62.2% year over year due to the inclusion of business from the Private Brands acquisition, partially offset by lower volume/mix, primarily in the Industrial and Export segment, and currency headwinds.

Going ahead in 2016, the company anticipates the overall food industry to face weakness and expects revenues for the industry to remain flat. However, it expects better margins to continue into the second quarter as revenues from most of the Private Brands categories will begin to stabilize in the second half of the year.

TreeHouse has a Zacks Rank #3 (Hold).

Better-ranked food companies in the industry include B&G Foods, Inc. (NYSE:BGS) and Post Holdings, Inc. (NYSE:POST) . Both of them carry a Zacks Rank #1 (Strong Buy).


CONAGRA FOODS (CAG): Free Stock Analysis Report

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TREEHOUSE FOODS (THS): Free Stock Analysis Report

POST HOLDINGS (POST): Free Stock Analysis Report

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