Sandvik Cuts Costs, Capacity Further Due to Weak Demand

   By Katarina Gustafsson 
 

STOCKHOLM--Swedish engineering company Sandvik AB (SAND.SK) Wednesday said it is taking further action to cut costs and capacity due to continuing weak demand.

The company said weak market demand experienced during the third quarter has persisted this far into the fourth quarter, leading the company to take several additional measures to complement the restructuring Sandvik announced last fall when it launched a new strategy.

For its mining equipment business, Sandvik will cut 650 jobs globally and close its unit in North Bay, Canada, and Rocklea, Australia. The company will also terminate third-party contracts with more than 350 people.

Sandvik will also close a U.S. distribution center within its machining solutions unit--which together with a number of other measure will result in cost cuts of 150 million Swedish kronor ($22.4 million).

For its speciality steels business, the Swedish company said its focus is on consolidations and sustainable cost savings of more than SEK300 million and announced it will restructure its wire operations in Barcelona, Spain and cut 220 jobs globally.

Sandvik's construction business has also implemented further action to cut costs, reducing the number of employees by 80 as well as further 180 people employed by third parties.

On basis of the new adjustments, targeted cost savings will amount to more than SEK1 billion by the end of 2013, Sandvik said. One-off charges of SEK1.3 billion are seen impacting its earning, of which SEK900 million will be recognized in the fourth quarter. The total cash flow impact of the charges is estimated to amount to around SEK750 million, mostly impacting 2013.

At 1322 GMT shares traded 1.3% lower at SEK95.90, compared with a 0.7% drop for Stockholm's OMXS30 index.

-Write to Katarina Gustafsson at [e-mail]; Twitter: @DowJonesNordics

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