UST cuts jobs at Greenwich HQ
UST Inc., the largest U.S. snuff maker, has cut 149 white-collar employees, the majority of them at its Greenwich headquarters, as it implements a dramatic cost-cutting program.
About 85 local workers are affected by the job cuts announced yesterday, UST spokesman Michael Bazinet said.
Overall, the company will eliminate 218 positions, or 10 percent of its nonunion jobs, to reduce expenses as Philip Morris USA and R.J. Reynolds Tobacco Co. expand into smokeless tobacco.
UST is leaving another 69 posts unfilled or filling them with workers from other positions, Bazinet said.
The cuts take place "across all areas and all functions of the company," he said.
The firings, the largest in the company's 20-year history, are effective immediately. Employees in Greenwich were told Friday, Bazinet said.
"We feel that our employees who are affected made valuable contributions over the years and they will receive separation packages that are at or above the standard in the consumer packaged goods industry," he said.
The cuts and other restructuring steps will cost as much as $25.5 million this year and next, said UST yesterday in a Securities and Exchange Commission filing.
It may incur additional expenses in its three-year plan to trim costs by at least $100 million.
UST, the maker of top-selling Skoal and Copenhagen snuff, is being "incredibly aggressive" in cutting costs, Chief Operating Officer Murray Kessler said in an Aug. 22 interview. Philip Morris and R.J. Reynolds, the biggest U.S. cigarette makers, are tapping rising demand for snuff as smoking rates decline because of workplace and restaurant restrictions.
UST is reviewing other possible cost cuts, including the relocation of its Greenwich headquarters to another city, Bazinet said. About 315 UST employees remain in Greenwich.
In addition, the company said it is improving efficiencies at manufacturing facilities in Franklin Park, Ill., and Nashville, Tenn.
UST said it will update this year's profit forecast when it reports results for the quarter that ends Sept. 30. The company is evaluating the impact of restructuring costs and savings on full-year profit after predicting in July it would earn $3.02 to $3.11 a share, with a target of $3.07. Seven analysts surveyed by Thomson Financial expected the company to earn $3.07.
Kessler said last month some of the $100 million in savings may be used during the next three years for dividend increases, part of UST's goal of generating shareholder returns of more than 10 percent a year. UST defines total annual shareholder return as a combination of operating earnings growth and its dividend.
UST was formed in 1986 as a publicly traded holding company for United States Tobacco Co., which started in 1911. The tobacco unit was renamed U.S. Smokeless Tobacco Co. in 2001. UST also makes Columbia Crest, Chateau Ste. Michelle and other wines in the state of Washington.
Reynolds and Philip Morris, the maker of top-selling Marlboro, are expanding into the $3.8 billion-a-year smokeless tobacco market as cigarette consumption declines 2 percent to 3 percent a year.
"The cigarette guys are getting into our business because we are converting a fair number of smokers," Kessler said in the interview last month. Two of three smokeless tobacco users previously smoked, he said.
California, New York and 12 other states require smoke-free workplaces for all employees, including for restaurant and bar workers, said Bonnie Herzog, an analyst at Citigroup Inc. in New York.
Philip Morris USA is testing spitless tobacco pouches in Indianapolis, and Reynolds is selling a similar product in Portland, Ore., and Austin, Texas. UST started tests of Skoal Dry smokeless pouches in July in Austin and Louisville, Ky.
In May, Reynolds, the maker of Camel and Kool cigarettes, acquired Conwood Co., the second-largest U.S. snuff maker, for $3.5 billion from Chicago's Pritzker family.
The purchase gave Reynolds a quarter of the U.S. smokeless market.
