Sandvik Starts Supply Chain Optimization; to Book 4Q One-Offs

Swedish engineering company Sandvik AB (SAND.SK) said Tuesday that it has started to implement the first phase of its earlier announced "supply chain optimization" which includes a reduction of the number of production units to 125 from 150 over the next three to four years, and will book one-off charges of around SEK1.8 billion in the fourth quarter.

 
   MAIN FACTS: 

-The initial phase aimed at optimizing the supply chain affects about ten production units, predominantly in Europe.

-The move targets annual structural savings of approximately SEK800 million by the end of 2015 at a cost of SEK900 million to be charged to the fourth quarter.

-The next phase is expected to be announced and a provision posted in the accounts at the beginning of 2015.

-Additionally, Sandvik Mining is implementing actions to further adjust costs to current demand, as communicated earlier. These actions are expected to yield an annual saving of SEK500 million and will entail nonrecurring charges of about SEK400 million in the fourth quarter.

-A total of SEK500 million will also be charged to the fourth quarter pertaining to costs resulting from reviews of mining systems projects, impairment losses arising from the very low demand for exploration equipment and other non-cash items.

-Consequently, the fourth quarter of 2013 will be impacted by nonrecurring charges totaling about SEK1.8 billion, half of which will impact cash flow.

-At 0807 GMT, shares were up 0.4% at SEK87.95 against a 0.2% drop in the wider Stockholm market.

Write to Gustav Sandstrom at [e-mail]

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