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In an effort to accommodate its expanding team in China, Newell Rubbermaid Inc. (NWL - Analyst Report) – the producer of Sharpie pens and Rubbermaid containers – has recently announced the expansion of its Shanghai office. The move reflects the company’s strategy to tap the growing opportunities in the world’s most populous country. Currently, the Shanghai office employs approximately 200 people and has the capacity to accommodate more.

At present, Newell’s Lenox brand steel and Parker Pens are the main growth drivers in China. However, we believe that the Chinese economy is growing rapidly, and hence it provides growth opportunity for all its other brands – Rubbermaid health-care, Dymo industrial labeling products and other stationary brands such as Sharpie, Expo and Papermate.

In October, Newell announced its intention to reduce the workforce by 10% and also take other steps to lower the cost structure. Therefore, this decision to expand in China suggests a transfer part of its operations to lower-cost regions.

The announcement was made concurrent with its third quarter results reported on Oct 26, 2012, Newell has announced the expansion of its Project Renewal Restructuring Program. The company has outlined five new work streams in connection with the expansion.

  • In order to simplify its organizational structure, the company has decided to report its financial results under six new segments beginning in the fourth quarter of 2012. The company has eliminated its Consumer and Professional segments, while retaining Baby & Parenting. The six new reporting segments are – Tools, Commercial Products, Writing, Home Solutions, Baby & Parenting, and Specialty.
  • To reduce costs, Newell will widen its scope of SAP.
  • To simplify decision making, transaction process and information management, the company, along with aligning other resources, will apply SAP.
  • Newell will enhance its efficiencies in customer services and sourcing functions.
  • The company will optimize manufacturing and distribution facilities.

With the completion of the program, Newell expects to save additional $180–$225 million annually from the end of the second quarter of fiscal 2015.

We believe that the Project Renewal initiative will help the company to reduce the complexity of the organization while increasing investments in most important growth areas within its business.

Currently, the company, which competes with Tupperware Brands Corporation (TUP - Snapshot Report), holds a Zacks #2 Rank, implying a short-term Hold Rating on the stock. An impressive record of beating the quarterly earnings expectations, margin improvement, a positive fiscal 2012 outlook, and a decent dividend yield, are the major growth drivers for the shares of this company.

Newell Rubbermaid is one of the leading manufacturers of home and office products in the U.S. The company also possesses a strong portfolio of widely popular brands such as Sharpie, Paper Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid, Levolor, Graco, Calphalon and Goody. Leveraging its strong brand equity, Newell Rubbermaid expects modest earnings going ahead, provided the market scenario improves.

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