Sandvik's SMT Division To Cut Costs By About SEK500 Million

Swedish industrial group Sandvik AB (SAND.SK) Tuesday launched a cost-cutting program aimed at turning around its Sandvik Materials Technology, or SMT, business area within two to three years.

Sandvik wants the division to reach "significantly higher and sustainable profitability" and it hopes to do so by cutting approximately SEK500 million in costs over a two-year period.

The cost reductions will be implemented through reduction of staff and administration costs, cost optimization of the sales organization and increased cost efficiency in production support and purchasing, Sandvik said.

"We will face tough challenges and will need to take some hard decisions but I'm fully convinced that we will create a really strong and attractive Sandvik Materials Technology for the future," Jonas Gustavsson, president of SMT, said.

Sandvik also wants SMT to take "a more aggressive approach to shift the product mix towards more advanced and profitable products," and pursue "selective growth to ensure leadership in profitable key segments," the company said in a statement.

The program is expected to increase return on capital employed, or ROCE, by at least 10 percentage points, Sandvik said. It estimates one-off costs of SEK800 million-SEK900 million as a consequence of the program, of which SEK300 million-SEK400 million will affect cash flow.

-By Niclas Rolander, Dow Jones Newswires; [phone]; [e-mail]