Heinz Says Severance Cost Climbs to $300 MillionZachary Tracer
HJ Heinz Co., the ketchup maker taken private this year by Warren Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital, almost doubled its projection for severance costs after cutting more jobs.
Severance will cost about $300 million for the fiscal year that began in late April, the Pittsburgh-based company said today in its second-quarter regulatory filing. That compares with the $160 million projection three months ago when the 2014 “productivity initiative” had eliminated about 1,200 jobs.
The number of jobs targeted climbed to 2,000, according to today’s filing and the company projects $250 million in annual savings. Heinz said last month it would fire 1,350 people as it closes plants in Florence, South Carolina; Pocatello, Idaho; and Leamington, Ontario. Bernardo Hees, who became chief executive officer in June, has been cutting costs to help pay down the $12.6 billion in borrowing supporting the deal.
“The tomatoes are going to go to the plants that have the low production costs, when you get right down to it,” Buffett said last month at an event in Detroit. “It’s really a question of having an unprofitable plant and concentrating production in a more profitable plant.”
Heinz had about 32,000 employees at the end of its last fiscal year. Buffett holds $8 billion in preferred stock that receives a 9 percent dividend, or $720 million a year.