Reynolds American Inc. (RAI) said it plans to reduce its U.S.
work force by about 10% by the end of 2014 in a bid to save on
labor costs and refocus its business.
The tobacco company said job eliminations during that period
will be partially offset by the hiring of new employees, adding
that a majority of employee departures are being undertaken on a
voluntary basis.
As a result, Reynolds American said it expects to generate
savings of about $25 million by the end of 2012. Those savings are
expected to increase to about $70 million annually in 2015.
Reynolds American pegged the expected cost of the work-force
reduction at about $110 million, which reflects severance payments
and other costs. The company noted it will take a charge in the
first quarter that will include those costs.
"Our businesses' four key brands are all on a growth
trajectory," said Chief Executive Daniel M. Delen. "In order to
sustain that growth, we need to ensure we have the financial
resources and employees aligned behind the right programs and
processes."
As cigarette volumes have declined across the tobacco industry,
Reynolds American, the nation's second-largest tobacco company
behind Altria Group Inc. (MO), has shifted its focus toward a few
key brands. The company has also diversified into smokeless
tobacco.
The company last month reported fourth-quarter earnings rose 16%
though declining cigarette volume contributed to
lower-than-expected revenue.
Shares closed Tuesday at $41.86 and were inactive in premarket
trade. The stock is up 1.1% since the start of the year, lagging
gains in the broader market.
-By Mia Lamar, Dow Jones Newswires; 212-416-3207;
mia.lamar@dowjones.com