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Treehouse Foods' Bay Valley to Cut Costs with Plant Closure

Treehouse Foods Inc.’s THS wholly owned subsidiary, Bay Valley, has announced that it will shut down the Ayer, MA facility as part of its effort to cut costs and improve efficiency.

While production at the facility, currently employing 100 workers, is expected to cease in the first quarter of fiscal 2017, the full closure of the facility will take place in the third quarter.

The production machinery of the Ayer facility, which primarily manufactures regionally branded and private-label spoonable dressings, is expected to shift to other facilities within the company's existing network.

Treehouse expects to incur approximately $6.5 million in total cost to close the facility, of which $5.3 million is expected to be in cash. The company expects $1.2 million of non-cash write offs, $2.2 million as employee related costs and $3.1 million of other closure costs.

During fourth-quarter fiscal 2015, the company reported better-than-expected results wherein earnings surpassed the Zacks Consensus Estimate by 4.85% and improved 9.1% year over year backed by higher revenues. However, gross margins narrowed from 19.35% in the year-ago period to 18.20%. We believe that the decision to close the facility and consolidate production will help the food processor maintain margins.

The Oak Brook, IL-based company has a long-term earnings growth rate of 16.00%. The company is expected to report fiscal first-quarter results on May 5.

Treehouse Foods currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the food/miscellaneous and diversified sector are Kellogg Company K, Sysco Corporation SYY and McCormick & Company, Incorporated MKC. All these stocks carry a Zacks Rank #2 (Buy).

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