Aggressive action program to make NCC leaner but sharper

Aggressive action program to make NCC leaner but sharper In the next few years, NCC will become a smaller, leaner and more selective company. At the same time, it will become more focused, sharper and more profitable. These will be the effects of the action program currently under way. It is estimated that the workforce will be reduced by approximately 2,500 employees. Following the comprehensive analysis of the NCC Group that was initiated during autumn 2001, a wide-ranging action program has been gradually formulated and introduced. As a result of this analysis, it was concluded that a forceful program of change will be required in order to make NCC profitable. Many measures have been implemented and the resulting restructuring costs were charged against earnings during 2001. "Initially, the changes will result in NCC becoming a smaller, leaner and more selective company, with the Nordic region as its domestic market. At the same time, the new structure and strategic direction will make the Group sharper and more profitable," says Alf Göransson, President and Chief Executive Officer of the NCC Group, commenting on the process of change. "Unprofitable units will be phased out or restructured. Proactive measures will be taken within segments where NCC has strong market positions, where the Group has a competitive edge and where the potential for healthy profitability exists. Profitability will be considered more important than volume. The portion of project development and partnering assignments will be increased, the development of commercial properties and housing projects will continue in the Nordic market and we will endeavor to add value to a larger part of our customers' value chain - through NCC Roads, for example. Customers will not pay us for our presence; they will only pay us for the value we create," says Alf Göransson. The feasibility of divesting non-core operations is being evaluated. The installation company NVS has already been sold. We intend to sell our holding of managed properties, which had a market value of approximately SEK 3.7 billion at year-end, within a period of two years. Scope for expanding profitable operations will be created as other operations are sold or discontinued. During 2001, nonrecurring costs (restructuring costs, goodwill write- downs and an adaptation to more cautious profit-recognition methods) amounting to approximately SEK 1.7 billion were charged against earnings. In the year-end report, these measures are referred to as items affecting comparability. In addition, operating earnings were charged with approximately SEK 800 M for write-downs of various projects (read more in the year-end report). It is estimated that approximately 2,500 employees, mainly in Sweden, will have to leave the NCC Group due to restructuring measures. The aggressive and defensive measures being implemented during 2002 will form a platform for increasing NCC's key financial objective - the return on equity after tax - to 15 percent, which is in line with the level achieved by our Nordic competitors. The equity/assets target of approximately 30 percent will remain unchanged, as will the goal that cash flow be positive. The forecast for 2002 is that NCC will report profit of at least SEK 1 billion after net financial items. The cost savings resulting from the restructuring measures are expected to gain their maximum effect during 2003. Summary of ongoing restructuring measures: · A new organizational structure, characterized by smaller corporate offices and fewer staff functions, was introduced at the beginning of 2002. The number of positions at Group and business area level has been halved. The former Contracting, Housing, Telecom and Service business areas are now coordinated under the name NCC Construction in each country. NCC Industry has been restructured and is now called NCC Roads, which also includes paving and road-marking operations. NCC International Projects consists of major Nordic and international civil engineering projects. The new structure results in faster decision-making channels, because there are fewer levels (two management levels have been removed), while reducing costs. · Machinery operations, formerly part of NCC Industry, have been moved to a separate company named Altima, in order to increase the proportion of non-Group customers. Using Altima as a base, the feasibility of participating in a restructuring of the Nordic machinery- rental market will be investigated. · Specialist operations are being reviewed and restructured, in part through a sharp downsizing of loss-making tunneling activities. The BOT unit is being phased out and responsibility for BOT activities is being distributed among the operating units. · As a result of the restructuring and streamlining of road- related operations conducted in NCC Roads, the possibility of divesting concrete operations, which had sales of approximately SEK 1 billion in 2001, will be assessed. NCC Roads' new organization has fewer levels and reduces central costs. · In Sweden, unprofitable offices and geographic units will be closed or restructured. Large parts, corresponding to two thirds of total operations in the segment, of building service activities outside metropolitan regions will be phased out. The remaining building service activities will be integrated in NCC Construction Sweden. Increased coordination and fewer staff units will result in cost savings at corporate level. Facility Management is being phased out. The number of regions is being reduced from 23 to six (excluding Housing). · In Denmark, civil engineering operations on Jutland and Fyn are being phased out. Regions and staff units are being coordinated and trimmed. · In Finland, civil engineering and telecom operations are being phased out. · In Norway, civil engineering operations are being reduced sharply and telecom operations are being phased out. Staff units are being trimmed and the number of regions reduced. A more selective policy for contract tendering is being introduced. Espen Pay has been appointed new president of NCC Construction Norway, effective May 1. · NCC no longer regards Poland as a domestic market. Housing projects in progress will be completed, but no new assignments will be started. Building operations have already been phased out. · In Germany, overheads are being cut. · For further information, please contact: Hans-Olof Karlsson, Senior Vice President Corporate Communications NCC, tel +46 8 585 52279 Gisela Lindstrand, Press Relation Manager NCC, tel +46 8 585 52346 or +46 70 392 9500 All of NCC's press releases are available on www.ncc.se NCC is one of the leading construction and property development companies in the Nordic region. NCC has annual sales of approximately SEK 45 billion, with 27,000 employees. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/12/20020212BIT00610/bit0002.doc http://www.waymaker.net/bitonline/2002/02/12/20020212BIT00610/bit0002.pdf