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WK Kellogg (KLG.N) plans to completely close its Omaha, Nebraska, plant by the end of 2026, a restructuring that will also reduce the cereal maker’s workforce by more than 17% while streamlining production processes, the company said this week.
Shares of the Special K cereal maker fell more than 2% in early trading as it forecast 2024 adjusted net sales to be at the lower end of its previous forecast range of 1% growth to 1% decline.
Packaged food companies including Kraft Heinz (KHC.O) and General Mills (GIS.N) have reported falling North American sales as consumers, frustrated by prolonged high interest rates and inflation, turn to private labels.
WK Kellogg, the North American cereal business of packaged food giant Kellogg Co. before it was spun off last October, also reported second-quarter net sales of $672 million, flat with last year.
The restructuring, which was approved by the board of directors on July 31, is expected to incur cumulative pre-tax restructuring charges of $230 million to $270 million.
Under the plan, the Froot Loops maker will consolidate its manufacturing network, first reducing production at its Nebraska plant in stages and scaling back production at its Memphis, Tennessee plant starting in late 2025.
WK Kellogg said the moves will cut about 550 jobs, including adding positions at plants where production will increase. The company had a total of about 3,150 employees at the end of last year.
The Frosted Flakes and Rain Bran maker plans to increase production at its plants in Battle Creek, Michigan, Belleville, Ontario, and Lancaster, Pennsylvania, and plans to invest about $450 million to $500 million in building out its supply chain.
The company estimated non-cash charges of between $170 million and $190 million, primarily from accelerated depreciation and asset write-offs. The company said the charges are expected to continue through 2027.
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