McCormick to Realign Foreign Operations, Take Earnings Hit
Spice company McCormickannounced today it will take a $27 million charge related to the reorganization of its Europe, Middle East, and Africa (EMEA) regional operations, including shutting down its Netherlands unit. The move is connected to the company's "comprehensive continuous improvement," or CCI, cost savings program initiated in 2009.
The $27 million charge, $25 million of which will be taken in the fourth quarter of 2013, in connection with its EMEA reorganization, is expected to reduce this year's earnings by $0.14 per share, the company said. The hit to earnings in the fourth quarter for the operational changes comes in addition to McCormick's previously announced $20 million charge, equal to $0.10 a share, to settle a pension agreement in the U.S.
McCormick said cash expenditures associated with the change in EMEA operations will amount to an estimated $18 million, most of which will be incurred in 2014.
McCormick has revised its projected 2013 earnings per share to be at the lower end of a $2.89 to $2.95 range.
McCormick expects the changes will produce $10 million in expense savings annually in the EMEA region by 2015. The long-term CCI-related savings objective for the EMEA market is $45 million. The overseas operational changes, McCormick said in its statement, along with the U.S. pension-related expenses, are expected to negatively impact this year's annual operating income by approximately 7%.
The company said it intends to use a local, third-party distributor to replace its Netherlands operations, as well as centralize shared service activity across its EMEA region into Poland.
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