Konecranes Vows to Improve Efficiency, Reduce Costs
As preliminarily communicated in the stock exchange release on June 19, 2013, Konecranes (KNCRF)’ profitability development has been unsatisfactory amid the current challenging business environment, the company said in a news release. In addition, the economic environment remains uncertain, and Konecranes said it will prepare accordingly. The company is planning new measures to reduce annual cost base by EUR 30 million by the end of 2014 of which roughly two-thirds relates to the Business Area Equipment and one-third to the Business Area Service. Furthermore, Konecranes is planning new actions to reach savings in variable costs.
The considered key actions are:
- consolidation and transfer of production between sites
- optimization and productivity improvements in the manufacturing processes
- consolidation of and efficiency improvements in administration and support functions
- consolidation of sales units to cover larger areas
- improving productivity and restructuring of underperforming operations
The total cash-based restructuring costs are estimated at maximum EUR 20 million for the years 2013 to 2014. In addition, the company expects to book non cash-based restructuring costs not exceeding EUR 20 million. The considered actions are estimated to impact maximum 600 people through redundancies, temporary lay-offs and early retirement. Konecranes employs approximately 12,000 persons currently.
“The world is changing rapidly and we cannot expect the world economy to provide a lot help to our growth. We also expect the tough pricing environment to continue. Our overall cost is too high for our volume outlook, and, we plan to adjust our cost base and the size of our organization to market realities. In addition to fixed cost reduction, we are preparing several initiatives to rationalize our supply chain, to push down our variable costs. There is potential for savings in our non-personnel related spending as well, but, unfortunately, effects to personnel cannot be avoided,” says Pekka Lundmark, President and CEO.
“We will improve our cost efficiency, but we also continue our three major initiatives for future competitiveness. First, we are introducing new technologies that enable real-time visibility to the condition and performance of the lifting devices and machine tools that we service. Second, we develop a totally new product family mainly for emerging markets. Third, we rebuild our fragmented IT systems to create real-time visibility to customer demand, field service, supply chain, and financials. All of these three strategic initiatives require new skills. Our competence development will therefore be of key importance in all of them,” he continues.
Further information will be provided during the course of the cost savings program, the company added.