Sandvik Implements Second Phase of Supply Chain Optimization Program, as Well as Further Adjustments to Cost Base
05 March 2015 - 5:15PM
Business Wire
As initially communicated in 2013, Sandvik’s supply chain is to
be optimized, reducing the number of production units from 150 to
about 125 over three to four years.
The first phase has progressed according to plan and was
initiated in the fourth quarter of 2013, involving 11 unit closures
(of which five closures had been implemented at year-end 2014).
Sandvik is now launching the second phase comprising a total of ten
unit closures, predominantly in Europe. In addition, Sandvik
implements further measures to adjust the cost base to current
demand as well as making a project write-down related to Mining
Systems.
The total group savings are estimated of approximately 1.1
billion SEK, yearly run-rate by the end of 2016. Nonrecurring
charges associated with the initiatives, totaling about 1.9 billion
SEK, will impact the first quarter of 2015.
SUPPLY CHAIN
OPTIMIZATION PHASE II ADJUSTMENT TO COST
BASE GROUP TOTAL ESTIMATED SAVINGS
RUN-RATE YEAR-END 2016 600 480
1,080 NON-RECURRING
CHARGES Q1 2015 1,220 650
1,870 OUT OF WHICH CASH FLOW
960 550
1,510
“We are now continuing the optimization of our supply chain,
which brings several benefits. Notably, by reducing the number of
production units, we will achieve significant productivity
enhancements as a result of a reduction in the cost base over time.
However, just as importantly, we will increase flexibility, move
closer to our customers and raise our capital efficiency. It is
essential that we adapt to a changing global market, where the
ability to act and react quickly is crucial for long-term success,”
says Olof Faxander, Sandvik’s President and CEO.
Supply chain optimization program phase II
The second phase in the supply chain optimization program
targets a run-rate of annual savings of approximately 600 million
SEK by year-end 2016 at a cost of 1,220 million SEK, which will be
charged to the first quarter of 2015. Information concerning
individual units will be announced locally on a case-by-case basis,
pending union consultations. A certain degree of investment is
required to facilitate the move of production between units.
For Sandvik Machining Solutions, the closure and downsizing of
production units represent key steps in addressing current
overcapacity and reducing production costs. The first quarter of
2015 will include 450 million SEK in nonrecurring charges, with
estimated run-rate of annual savings of about 130 million SEK by
year-end 2016.
Sandvik Mining will realign its supply chain footprint to
improve the business area’s cost structure and gain a competitive
advantage by improving its ability to offer better service to its
customers. The scope of the plan involves the closure and
downsizing of units, including the discontinuation and transfer of
operations to other sites. It also implies investments in new sites
located in fast-growing markets and the expansion of existing
facilities. Nonrecurring charges of 630 million SEK related to the
second phase of the supply chain optimization program will be
booked in the first quarter of 2015. These actions are
expected to generate a run-rate of annual savings of approximately
400 million SEK by year-end 2016.
For Sandvik Materials Technology, the downsizing and
optimization of production flows will address current overcapacity
and reduce production costs. The first quarter will include 140
million SEK in nonrecurring charges, resulting in a run-rate of
annual savings of about 70 million SEK by year-end 2016.
SANDVIK MACHINING
SOLUTIONS SANDVIK MINING SANDVIK
MATERIALS TECHNOLOGY GROUP TOTAL PHASE
II launched Q1 2015
GROUP TOTAL PHASE I launched
Q4 2013
GROUP TOTAL PHASE I & II ESTIMATED
SAVINGS RUN-RATEYEAR-END 2016 130 400 70
600 800
1,400 NON-RECURRING CHARGES 450 630 140
1,220 900
2,120 OUT OF WHICH CASH FLOW 400 500 60
960 450
1,410 CAPEX INVESTMENT - 350 - 350 650 1,000
Adjustment to cost base
Planned actions to adjust the cost base to the current demand
are expected to generate a run-rate of annual savings of
approximately 480 million SEK by year-end 2016. Nonrecurring
charges of 650 million SEK related to the adjustment will be booked
in the first quarter of 2015. This includes Sandvik Mining making a
project write-down related to Mining Systems.
SANDVIK MACHINING
SOLUTIONS SANDVIK MINING SANDVIK
MATERIALS TECHNOLOGY SANDVIK
CONSTRUCTION SANDVIK VENTURE GROUP
ACTIVITIES GROUP TOTAL ESTIMATED
SAVINGS RUN-RATE YEAR-END 2016 150 - 95 160 25 50
480
NON-RECURRING CHARGES Q1 2015 200 100 130 160 10 50
650 OUT OF WHICH CASH FLOW 200 - 130 160 10 50
550
Telephone conference
A telephone conference for investors, analysts and financial
media with Olof Faxander, President and CEO of Sandvik, is
scheduled for 5 March 2015, 09:30 – 10:00 CET.
Dial in details for the conference call:
SE: +46 8 505 201 14
UK: +44 207 1620 177
US: +1 334 323 6203
Password: Sandvik, at least 10 minutes before the conference
starts
Stockholm, 5 March 2015
Sandvik Aktiebolag
For further information, please contact Ann-Sofie Nordh, Vice
President Investor Relations, Sandvik AB, tel: +46 8 456 14 94,
Oskar Lindberg, Investor Relations Officer, Sandvik AB, tel +46 8
456 12 30 or Pär Altan, Vice President External Communications,
Sandvik AB, tel: +46 8 456 12 37.
The Sandvik Group
Sandvik is a global industrial group with advanced products and
world-leading positions in selected areas – tools for metal
cutting, equipment and tools for the mining and construction
industries, stainless materials, special alloys, metallic and
ceramic resistance materials as well as process systems. In 2014,
the Group had about 47,000 employees and representation in 130
countries, with annual sales of about 89,000 million SEK.
This information was brought to you by Cision
http://news.cision.com
Sandvik ABAnn-Sofie Nordh, +46 8 456 14 94Vice President
Investor RelationsorOskar Lindberg, +46 8 456 12 30Investor
Relations OfficerorPär Altan, +46 8 456 12 37Vice President
External Communications
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