As reported in September Sandvik’s initial strategy was to strengthen its position in the market. It has now reacted to weaker market demand experienced during the third quarter and that has persisted thus far into the fourth quarter.
At Sandvik Mining, it has reduced 650 employees globally, closing of units in North Bay, Canada, and Rocklea, Australia. Third-party contracts with more than 350 individuals will be terminated. Charges of a nonrecurring nature are estimated at 175 million SEK and will be recognized in the fourth quarter 2012, with a further 175 million SEK recognized in 2013.
At Sandvik Machining Solutions, the distribution centre in Kentucky, US, will incorporate Seco Tools products, and the Seco Tools US distribution centre in Troy will be closed. This is expected to result in a structural reduction in costs of SEK 150 million. The nonrecurring charges associated with these initiatives are expected to impact earnings by just under 100 million SEK in the fourth quarter 2012 and by 200 million SEK in 2013.
Sandvik’s Step Change turnaround programme is being expanded with the aim of further strengthening Sandvik Materials Technology as a long-term value-creating business area. The primary focus is on consolidations and sustainable cost savings of more than SEK 300 million. As part of the ongoing review of the wire business, Sandvik Materials Technology will restructure the wire operations at Sandvik Española in Barcelona, Spain, with parts of the product programme transferred to other units. In total, the changes will lead to a further structural redundancy of approximately 220 positions globally. The fourth quarter 2012 will be impacted by nonrecurring charges estimated at 650 million SEK, of which 400 million SEK relates to impairments and write-downs of predominately fixed assets.
Sandvik Construction has implemented further actions aimed at optimizing the overall cost structure at the business area and addressing the continued subdued market activity. The number of employees is being reduced by 80, in addition to a further 180 employed by third parties. This will lead to minor nonrecurring charges in the fourth quarter 2012. It is estimated that total costs will be reduced by more than 100 million SEK by year-end 2013.
On the basis of these adjustments, targeted cost savings will amount to more than SEK 1 billion by the end of 2013, the company says.
"A year has soon passed since we began the implementation of the new strategy," said Olof Faxander, president and CEO of Sandvik. "A great deal of hard work has been done and much has been achieved. In our drive to continuously improve our company, we have identified several additional opportunities. Consequently, decisions have been taken on a number of actions to adjust costs and capacity. None of these measures affect our ability to grow our business in the long term."