Manitowoc will shut one of its main catering equipment factories and shift production to other locations as part of the next step in its global foodservice manufacturing strategy.
The company said its intention is to transfer products currently manufactured at its Cleveland, Ohio facility elsewhere as it looks to right-size its foodservice business ahead of its spin-off next year. The site is currently used to produce steamers, conveyor ovens and mini combination ovens.
Hubertus Muehlhaeuser, president and CEO of Manitowoc’s foodservice business, said the move would help to address production overcapacity and improve the operational and financial performance of its global manufacturing facilities.
“As part of our ongoing global manufacturing strategy, we intend to close our Cleveland facility, which produces a range of market-leading products including steamers, conveyor ovens, and mini combination ovens,” he said.
“These efforts are essential as we continue preparations for the eventual spin-off of the company’s Foodservice business in the first quarter of 2016. This decision was also driven by the need to improve our operational efficiencies, while also meeting the demands of our customers and enabling us to compete more effectively on a global basis.”
In addition to the intended closure of the Cleveland facility, Manitowoc expects to close its Irwindale, California distribution warehouse. The company said it will discuss these restructuring activities in its third-quarter 2015 earnings release and conference call, as well as the anticipated costs and potential savings generated by these efforts.
News of the restructuring comes after Manitowoc revealed that third quarter sales fell 12% to $863m (£558m). However, approximately 40% of the decline was down to unfavourable foreign currency impacts and challenges in its crane division.
Foodservice sales were up 2% to $425m (£275m) as continued strength in cold-side products and KitchenCare revenues helped to offset foreign currency exchange rates, continued weakness in the APAC region due to reduced spending by large chains and softness within certain hot-side product categories.
The company said that in foodservice it experienced trends that drove margins back to 2013 levels, providing it with “increased confidence” that issues constraining margins in the recent past have been remedied.
“We remain encouraged by the long-term growth potential for foodservice and the near-term opportunities to drive profitability even with modest top-line growth,” stated Kenneth Krueger, recently-named interim chairman, president and CEO of Manitowoc.
“We have also initiated a restructuring plan to focus our resources on those areas that will deliver the highest returns on our investments. This includes product line simplification, boosting productivity and facility efficiency, as well as right-sizing the organization. These initiatives, which include our recently announced intention to close our Cleveland facility and are in addition to our 80/20 product rationalisation program, are anticipated to generate approximately $100m (£65m) in savings over the next three years.