These are expected to incur non-recurring costs of SEK1.5 bill in total, of which SEK1.1 bill was charged to the third quarter. Some SEK500 mill has been put aside to pay for redundancies of some 700 employees.
Of the SEK1.1 bill, some SEK600 mill is estimated to be non-cash items. Savings, excluding effects on COGS, are expected to reach around SEK300 mill.
Three initiatives will be introduced -
• The creation of a leaner organisation, as well as adjustments to the weak demand situation in the oil & gas and marine sectors.
• The separation of some product groups from the new organisational structure.
•The restructuring of the manufacturing footprint.
“We must adjust the size of our organisation to existing market conditions,” said Tom Erixon, Alfa Laval Group president and CEO. “However, before launching any short-term initiatives, we wanted to be perfectly clear about the long-term direction of the company.”
The new strategic direction is a long-term commitment for Alfa Laval, with the objective to support organic growth. It also includes efforts to manage the short-term challenges caused by weaknesses in certain end markets, the group said.
A move towards a leaner organisation is expected to largely implemented by the end of the second quarter 2017.
Alfa Laval’s strategic review also identified three product groups in need of special attention - commercial/industrial air heat exchangers, commercial tubular heat exchangers and heat exchanger systems.
These units will be included in an initiative called ‘Greenhouse’, which will be managed separately from the new divisional structure. The aim is to provide these units with the best possible conditions to improve performance and develop the activities in a focused manner.
The third area is the step by step implementation of a leaner and more competitive manufacturing footprint. This initiative will gradually be implemented over several years, starting in 2017 and completed by the end of 2019.
The need for action was illustrated by the figures for the third quarter of this year, which showed that the order intake had fallen to SEK7.5 bill, compared to SEK8.7 bill in 3Q15. Net sales amounted to SEK8.6 bill, compared with SEK9.7 bill in 3Q15.
The result after financial items crashed by 93% to SEK93 mill down from SEK1.3 bill in 3Q15.