Chiquita to Consolidate Midwest Fresh-cut Fruit Processing Capacity
Chiquita Brands International announced Dec. 6 that it would close processing facilities in Manteno, Ill., and Kansas City, Mo., by February 2006 as part of a supply chain optimization plan. This plan is expected to eliminate redundancies in fresh-cut fruit processing capacity in the Midwestern United States, improve plant utilization and reduce costs.
This consolidation effort is one component of Chiquitas previously announced integration plan, which aims to achieve $20 million in annual cost synergies within three years after the acquisition of Fresh Express. The company expects this consolidation to deliver about $3 million in annualized cost savings, which will begin to be realized in the second quarter of 2006.
This is an important step toward reaching profitability in this strategic value-added fruit category, which we believe holds significant long-term growth potential for Chiquita, said Fernando Aguirre, chairman and chief executive officer.
Over the past several months, we carefully analyzed our national fresh-cut fruit operations, where, as a result of the Fresh Express acquisition, we now have three Midwestern plants two in the Chicago area and one in Kansas City, Aguirre said. While its never easy to make a decision that results in fewer jobs, our analysis clearly determined that closing two of these facilities and shifting production to others would improve plant utilization throughout our supply chain and drive down operating costs, while continuing to provide the freshness, quality and value that our customers demand.
As a result of the closure of the pre-acquisition Chiquita plant in Manteno, the company will incur a charge of about $7 million, of which about $5 million will be recorded in the fourth quarter of 2005 and $2 million will be recorded in the first quarter of 2006. The closure of the pre-acquisition Fresh Express plant in Kansas City will result in a $4 million adjustment to goodwill through purchase price accounting, which will be recorded in the fourth quarter of 2005. All of this adjustment is non-cash and relates to asset disposals.
About 100 employees at the companys Kansas City and Manteno facilities will be eligible to apply for open positions at other Chiquita operations. Employees displaced by this consolidation will be eligible for severance and outplacement services based on level of position and length of service. At minimum, employees will receive pay for their normal work schedule for 60 days following this announcement.