Ovako restructuring program 2015-2017

Ovako plans to implement a restructuring program to adapt to the current and expected future market demand. The program affects 300 employees. The annual cost saving for the entire program is estimated to be EUR 45 million, with full effect in 2018. Negotiations with local unions will start immediately.

"We are operating in a market with low expected growth over the next three years. The European production capacity in engineering steel is dimensioned for the market peak in 2007, and this is reflected at Ovako too in terms of overcapacity. This is not sustainable in the long term. Hence, we have decided to take action now in order to reduce costs and ensure the future strength of our business," says Tom Erixon, CEO at Ovako.

The restructuring program is planned to be implemented over the next two years and includes changes across the group.
The main structural initiatives are:

  • Closure of the rolling mill in Hällefors, with production volumes moved to other Ovako units. The closure is planned to be finalized by summer 2017.
  • Closure of the Forsbacka production and distribution unit, with volumes moved to other Ovako units. The closure is planned to be finalized during 2016.
  • Closure of the distribution centre in Turenki and consolidation of Ovako’s distribution in Finland to the newly acquired facilities in Tampere. The closure is planned to be finalized during 2016.
  • Reduction of shifts from 4 to 3 for the steel and rolling mill in Hofors, starting on December 1. As previously announced, the tube mill in Hofors is moving to 3 shifts during the fourth quarter of 2015.

The program will also include a maintained focus on continuous improvements in production, administration and purchasing across the group. Detailed planning of the implementation and negotiations with local trade unions will commence immediately.

"We are obviously concerned about the effects on the communities in which we operate. When possible, we will support our employees in finding new jobs", concludes Tom Erixon.

The total program targets cost savings of EUR 45 million annually, with 300 employees affected and a net reduction of 250 in the group. The program will be implemented over two years, with full effect from 2018. The total restructuring cost for the program is estimated to be EUR 10 million. In addition, capital expenditure of approximately EUR 10 million will be required to adjust the production facilities, which will be handled within normal capex levels.

During and after the transition, Ovako will continue to offer all of its current product lines to its customers. Despite the challenging market conditions, demand during the third quarter was slightly higher than in the same quarter last year, in line with the guidance in the second-quarter financial report. Ovako will publish its report for the third quarter on November 3, 2015.

Further information can be obtained from:
Kristina Grewin, External Communication Manager, +46 739 82 96 81

Ovako develops high-tech steel solutions for, and in cooperation with, its customers in the bearing, transport and manufacturing industries. Our steel makes our customers’ end products more resilient and extends their useful life, ultimately resulting in smarter, more energy-efficient and more environmentally-friendly products.

Our production is based on recycled scrap and includes steel in the form of bar, tube, ring and pre-components. Ovako is represented in more than 30 countries, and has sales offices in Europe, North America and Asia. Ovako’s sales in 2014 amounted to EUR 862 million, and the company had 2,925 employees at year-end. For more information, please visit us at www.ovako.com

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About Us

About OvakoOvako develops high-tech steel solutions for, and in cooperation with, its customers in the bearing, transport and manufacturing industries. Our steel makes our customers’ end products more resilient and extends their useful life, ultimately resulting in smarter, more energy-efficient and more environmentally-friendly products. Our production is based on recycled scrap and includes steel in the form of bar, tube, ring and pre-components. Ovako has over 3,000 employees in more than 30 countries. Ovako’s sales in 2017 amounted to EUR 921 million. Since June 2018, Ovako is part of the Japanese steel corporation Nippon Steel & Sumitomo Metal Corporation that employs 92,000 globally and has a revenue of EUR 37 billion. For more information, please visit us at www.ovako.com and www.nssmc.com.

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Quotes

We are operating in a market with low expected growth over the next three years. The European production capacity in engineering steel is dimensioned for the market peak in 2007, and this is reflected at Ovako too in terms of overcapacity. This is not sustainable in the long term. Hence, we have decided to take action now in order to reduce costs and ensure the future strength of our business.
Tom Erixon, CEO at Ovako