Hershey reveals expansion plans and job cuts

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Hershey plans to spend $250-$350 million in capital investments to improve and expand its facilities, while cutting up to 600 jobs as part of its overhaul.

The ‘Next Century’ capital investment includes a $200-$225 million plant expansion of the existing West Hershey facility and approximately $50-$75 million in distribution and administrative facilities located in Hershey, Pennsylvania.

As part of the project, production will transition from the company’s century-old facility to a planned expansion of the West Hershey facility, which was built in 1992. This change is expected to result in the reduction of approximately 500 to 600 jobs as investments in technology and automation result in enhanced efficiency in the new building.

David West, president and CEO, says, “Our investment will create a highly flexible, cost-effective manufacturing facility that will enable us to remain competitive with global players. The old factory is a proud part of the company’s heritage, but the facility is over 100 years old, and simply cannot be modernised to meet the manufacturing needs of a 21st century business. We operate in an ever-changing global marketplace and will continue to make the difficult decisions necessary for our business to succeed over the long term.”

Hershey estimates that the Next Century program will incur pre-tax charges and non-recurring project implementation costs of $140-$170 million over the next three years. This estimate includes $20 million in project implementation and start-up costs. At the conclusion of the program in 2014, ongoing annual savings are expected to be approximately $60-$80 million.

The Company expects 2010 net sales to increase 6-7%, including an approximate one point benefit from foreign currency exchange rates. Operational savings from project Next Century will not begin to be realized until very late 2011 and will be fully achieved in 2014.