One month after cutting its sales estimates for this year and announcing a major cost-cutting plan, Zoetis ($ZTS) is pulling out the pink sheets at its global headquarters in Florham Park, NJ. The company plans to cut 165 jobs there, according to a notice filed with the state. The cuts will be made by the end of 2016.
|Pershing Square's Bill Ackman|
During its first-quarter earnings announcement, Zoetis--which is under pressure from Pershing Square Capital's Bill Ackman--promised to boost its operating profit margin from 25% in 2014 to 34% by 2017, largely by eliminating 5,000 SKUs and selling 10 manufacturing plants. By consolidating its four regions into two, the company said it would cut a quarter of its workforce, or about 2,500 people.
Zoetis CEO Juan Ramón Alaix told FierceAnimalHealth after the earnings announcement that the cutbacks would make the company more efficient, because resources dedicated to lifecycle management of underperforming SKUs could be shifted to new product development.
But Ackman is a longtime critic of Zoetis' cost structure, and there's little doubt he's been active behind the scenes pushing for these changes. The restructuring plans come shortly after Zoetis named William Doyle of Pershing Square to its board, along with Actavis--now Allergan ($AGN)--Executive Chairman Paul Bisaro, an Ackman ally.
A spokeswoman for Zoetis told NJ.com that the layoffs are not related to the company's $255 million acquisition of Abbott Animal Health last November. In an e-mailed statement, the company said it is trying to minimize the impact of the layoffs through "attrition, divestitures and tighter expense controls."
Zoetis expects the downsizing to result in $300 million in cost savings, which should offset a $280 million drop in revenue and a $100 million hit to gross profit. "The implementation of this plan will allow Zoetis to become more competitive by being more focused and cost-efficient, while taking full advantage of our company's scale and business model," the statement says.