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Light at the end of the Tunnel?
Company also expects to raise prices due to high energy costs
By Ashley M. Heher
Associated Press
Published on Wednesday, Jul 16, 2008
CHICAGO: Newell Rubbermaid Inc., which employs about 700 in Mogadore, said Tuesday it would lay off workers, stop making some basic products and raise prices on others as much as 22 percent as it grapples with rising energy costs that make plastic more expensive.
CEO Mark Ketchum said the company hasn't yet determined how many of its 22,500 employees will lose their jobs.
''I think an easy way to say it is the world has really changed,'' Ketchum said. ''Products that once were economical to make out of plastic are becoming less so and they just don't fit our business model of driving innovation and investments and brand building.''
Newell Rubbermaid said it would divest, downsize or leave categories accounting for up to $500 million in sales. Those include some products in the Atlanta company's iconic Rubbermaid line of storage bins and organization gear. Executives said they also planned to trim other basic product lines, such as the plastic floor mats that go under desk chairs.
Prices for higher-margin items, such as stackable food containers will likely rise.
Already this year, Newell Rubbermaid has boosted prices twice, bringing in another $100 million in revenue. It plans a third round of increases in October and will begin adjusting prices for resin products each quarter in January.
''Frankly, we're behind the curve,'' Chief Financial Officer Pat Robinson said. ''We're seeing well in excess of $100 million in inflation.''
Particularly vexing to the company, which also lowered its full-year earnings guidance on Tuesday, are increasing oil and natural gas prices important components of resin, a key ingredient in many of the company's plastic products.
Newell Rubbermaid has seen its shares tumble nearly 40 percent this year.
During an earnings call this spring, executives proclaimed Newell Rubbermaid's new development mantra as ''fewer, bigger, better'' as it warned of challenges controlling escalating costs.
Further fueling the company's trouble is the weakened U.S. dollar, which has fallen against the Chinese yuan. With more than 75 percent of Newell Rubbermaid's source products coming from China, materials from the country cost more.
The company's products include the Rubbermaid and Sharpie brands along with Calphalon cookware and cutlery and office fixtures such as Rolodex organizers and Parker pens.
Newell Rubbermaid said it expected full-year normalized earnings to be between $1.40 and $1.60 per share. That's down from the already lowered projection of $1.80 to $1.90 issued in April.
CHICAGO: Newell Rubbermaid Inc., which employs about 700 in Mogadore, said Tuesday it would lay off workers, stop making some basic products and raise prices on others as much as 22 percent as it grapples with rising energy costs that make plastic more expensive.
Get the full article here.

