Snyder's-Lance moves to cut costs following sale, acquisition
Snyder's-Lance is looking at “operational initiatives and headcount reductions” to offset stranded costs that came from the sale of its private-brand business and a shift toward “better for you” snacks.
The company, which is headquartered in Charlotte, N.C., and has a facility in Hanover, sold the business for $430 million to Shearer’s Foods LLC of Massillon, Ohio, according to a news release. The sale was announced in May and finalized Monday. It is expected to have after-tax proceeds of about $300 million and includes two manufacturing facilities in Canada and the United States.
When combined with the acquisition of Baptista’s Bakery last month, Snyder’s-Lance said it expects an annualized reduction in net revenue of about $250 million and an initial reduction in operating margins of around 20 basis points, primarily due to stranded costs, according to the release.
Snyder’s-Lance said it was implementing a “Margin Improvement & Restructuring Plan” to offset those stranded costs, calling it a major initiative to aggressively manage its cost base.
“This plan is designed to scale the company’s operations appropriately with focus on branded products as well as the (Direct Store Delivery) and Direct Sales networks,” the company stated. “Snyder’s-Lance has increased its operating margin run rate by 140 basis points over the past 24 months and is moving quickly to attack these stranded costs while working to further expand margins.
“Savings are expected to come from a combination of operational initiatives and headcount reductions,” the release stated.
It was not clear if and how this would affect Snyder’s-Lance’s operations in Hanover. Mark Carter, vice president and investor relations officer, was not immediately available for comment.
The company said it expects to cut costs annually by $22 million to $25 million, 125 to 150 basis points, over the next 12 months starting in the third quarter. More details will be given during the company’s second-quarter earnings call in August, according to the release.
By selling its private brands business and buying Baptista’s “better for you” products, the company is aiming to become a differentiated branded company focused on consumer trends and demand, according to the release.
“Consistent with the company’s strategy, these transactions will allow Snyder’s-Lance to focus on its branded products by placing more resources to work on growth categories such as ‘better-for-you’ and premium snacks,” the company said. “These growth categories will benefit from incremental new product innovation, category development and marketing investments.”
Snyder’s-Lance manufactures and markets snack foods throughout the United States and internationally, with products including pretzels, sandwich crackers, pretzel crackers, potato chips, cookies, tortilla chips, restaurant style crackers, nuts and other snacks. In addition to Pennsylvania, Snyder’s-Lance has manufacturing facilities in North Carolina, Indiana, Georgia, Arizona, Massachusetts, Florida, Ohio and Wisconsin. It trades its shares on the Nasdaq under the ticker LNCE.