American healthcare group Kimberly-Clark is shutting its Huggies nappy factory in Barton, near Hull, with 378 employees set to lose their jobs as part of a plan to stop selling Huggies in Europe.
Kimberly-Clark will stop making and selling nappies in much of Western and Central Europe, closing five manufacturing plants after poor sales in the region.
Factory manager at its site in Barton-upon-Humber, Graham Tongue, who is also set to lose his job, told The Manufacturer that the cut-throat decision was made on by senior executives on Tuesday night before the company posted its quarterly results the next morning.
A spokesperson for the company said “Huggies will no longer be on UK shelves as of early 2013.”
Mr Tongue commented that there has been a significant change of direction away from Western Europe and that he was as shocked as everyone else.
He confirmed that “the company is looking to sell the Barton site.”
The company plans to cut between 1,300 to 1,500 jobs across Europe, which includes closing or selling five manufacturing plants.
Italy, with its close proximity to the the growing Eastern European market, will become the company’s sole manufacturing presence in Europe.
Some production will be transferred to other facilities to improve overall profitability, but while Kimberly-Clark will maintain its nappy making business in Italy, it plans to sell or exit some its consumer tissue making unit in the country and across Europe.
The news arrived alongside an figures that show the company’s net income increased by nearly 20% in the third quarter, helping it to raise its full-year earnings forecast.
Kimberly-Clark’s European restructuring will cost between $250 million to $350 million after tax and is expected to be complete by the end of 2014.
“We’ve been in the European diaper market for more than 20 years and we’ve made a number of attempts to find a winning business model there,” said chairman and chief executive Thomas Falk in a conference call. “We’ve concluded that we can create more shareholder value by getting out of this business rather than by continuing to try to turn it around.”
Falk noted that the European market is challenging, with sales in the region decreasing by 2%.
Volume performance was strong in a number of markets, including Brazil, China, Russia, South Africa, South Korea and Venezuela, with the company set to focus on these high growth countries.
“We are pleased that (Kimberly-Clark) has made this deliberate choice,” said BMO Capital Markets’ Connie Maneaty, who has been looking for household products companies to manage costs better in a slow-growth environment.
Kimberly-Clark has been cutting costs and has benefited from a decline in commodity prices, which for years had been a pressure point for the tissue, toilet paper and diaper maker.
Still, the impact of the stronger U.S. dollar crimps overseas sales, and the company has been spending more on marketing to compete against larger rivals such as Procter and Gamble, which makes Pampers.
Shares of Kimberly-Clark were down 0.9% at $85.16 in late morning on the New York Stock Exchange, while shares of rival P&G were up 1.2 percent at $68.27. P&G is set to report its results on Thursday.