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Hershey to cut 300 jobs, lowers 2015 revenue outlook

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Staff writer |
Hershey Company   Productivity Initiative Impacts program

The Hershey Company has updated its financial outlook for 2015. North America confectionery business is on track to deliver on its 2015 financial objectives and in China, chocolate growth was below expectations in April and May.

The company estimates full-year 2015 net sales will increase around 2.5% to 3.5%, including a net benefit from acquisitions and divestitures of about 1.5 percentage points and unfavorable foreign currency exchange of approximately 1.5 percentage points. Excluding unfavorable foreign currency exchange rates, full-year net sales are expected to increase about 4.0% to 5%.

This is less than the previous estimate of 6.0% to 7.0%, primarily due to lower than expected confectionery category growth within the China modern and traditional trades that has impacted the company’s chocolate and SGM businesses.

For the full year, the company expects gross margin expansion of 135 to 145 basis points as solid North America gains, driven by price realization, are partially offset by the impact of increased direct trade related to the China trade inventory destocking.

As a result, full-year reported earnings per share-diluted, including charges related to the productivity program of $0.29 to $0.35 per share-diluted, is expected to be in the $3.62 to $3.79 range.

In 2015, the company expects to achieve approximately 15% to 20% of the aforementioned productivity program total pretax savings of $65 million to $75 million. The company expects adjusted earnings per share-diluted to be in the $4.10 to $4.18 range, an increase of 3% to 5% versus 2014, including dilution from acquisitions and divestitures of around $0.20 per share.

Hershey announced the implementation of a new productivity initiative as part of its ongoing efforts to drive long-term growth and margin-enhancement.

Productivity Initiative Impacts program is expected to generate pretax savings of $65 million to $75 million, primarily in 2016, of which a portion will be reinvested back into the company.

The program is expected to result in the reduction of approximately 300 jobs by the end of 2015, with estimated pre-tax charges and costs of $100 million to $120 million, or $0.29 to $0.35 per share-diluted, the majority of which are cash and will be incurred in 2015.

As part of the streamlining of the organization, the company will first offer a voluntary separation program and is committed to assisting all impacted employees during the transition. Manufacturing operations are not included in this effort as efficiencies were attained through previous productivity programs.

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