Oak brook, Ill. – Operational inefficiencies throughout its manufacturing footprint took a toll on TreeHouse Foods’ performance during fiscal 2017. As part of the company’s TreeHouse 2020 restructuring effort management is committed to reducing its overall manufacturing structure by 20% and reduce stock-keeping units by 25%.
Steps taken during the fiscal year to achieve its goals included the closing of manufacturing plants in Plymouth, Ind., and Brooklyn Park, Minn., and decommissioning 19 manufacturing lines. Additional steps to be taken in fiscal 2018 include the partial closing of a plant in Dothan, Ala., the full closure of plants in Battle Creek, Mich., and Visalia, Calif., and the decommissioning of 15 additional manufacturing lines.
“We will announce further plant closures as those determinations are finalized,” said Matthew J. Foulston, chief financial officer, during a Feb. 15 conference call to discuss financial results. “We clearly must do a better job with operating performance. As such, we are in the process of standardizing our operating procedures and deploying T.M.O.S. (TreeHouse Management Operating Structure) throughout our network …
“We will implement and lock into weekly production schedules, so we limit our exceptions and changeovers and increase our operational efficiency. What it will give us is better order fulfillment and improved manufacturing performance, allowing plant managers the chance to win and giving our general managers the opportunity to focus their efforts on our go-to-market strategy, (which) in turn, will drive better revenue and cost outcomes.”
For the fiscal year ended Dec. 31, TreeHouse Foods recorded a loss of $286.2 million. The loss follows fiscal 2016, when the company recorded a loss of $228.6 million.
Sales for the year ticked up to $6,307.1 million in fiscal 2017 from $6,175.1 million the year prior.
A key item affecting the company’s bottom line was a $549.7 million impairment of goodwill and intangible assets charge taken in the fourth quarter related to the company’s Snacks business unit.
“This segment did not achieve the forecasted results for the year, and as a result, future revenue and profitability expectations were reduced,” the company said. TreeHouse’s management team has put the Snacks business under strategic review
“We decided to do that with the advice of an outside consultant with great experience in the industry,” said Sam K. Reed, chairman, president and chief executive officer, during the Feb. 15 call. “And at this juncture, what is different than past is that over the course of the last year, Snacks operated on five different I.T. platforms as five different businesses.
“We were taking it through a series of TreeHouse 2020-related projects to reduce its unutilized capacity, right-size its distribution network. And along the way, we dramatically reduced the customer count. In fact, it's only half of what it was a year ago. And during that period of time, we developed a greater focus on strategic customers of large scale.”
Mr. Reed said 2017 was like “none other” and that 2018 “will be a year of transition, subject to economic headwinds affecting the whole of the beverage and food sector.”
Mr. Foulston said, “We believe we have the right initiatives in place, … but it's going to take some time for these improvements to manifest themselves in the results. This year, we are anticipating sales of $5.9 billion to $6.1 billion.”
The company is forecasting full-year earnings will be in the range of $2 to $2.40. Mr. Foulston added that volume and mix will be headwinds due to the s.k.u. rationalization program and manufacturing plant closings.
Mr. Reed provided an update on the company’s search for a new c.e.o. He said the field of candidates has been narrowed to a select few and that TreeHouse’s board of directors is moving forward “expeditiously.” He did not provide a timeline for when the process may be completed.