Outokumpu streamlines its organisation, appoints new Executive Committee and plans up to 1 300 job reductions
STOCK EXCHANGE RELEASE
20 October 2011 at 8.50 am EET
Outokumpu is taking further steps in its transition towards sustainable
profitability, improved cash generation and building a solid platform for future
growth. The company's target is to reduce costs by EUR 100 million by the end of
2012 and working capital by EUR 250 million by mid-2013.
Planned measures include:
- cutting costs and restructuring in all Outokumpu units and functions,
improving cost efficiency in Tornio, reducing the number of production shifts at
Avesta, Nyby, and Kloster as well as outsourcing of some support functions,
- centralising and consolidating the Group's European distribution network, and
- streamlining Outokumpu's organisation and reducing the number of
organisational layers.
CEO Mika Seitovirta: "European market fundamentals have changed substantially in
recent years. Demand has not yet fully recovered following the previous
financial crisis, and now we are facing growing uncertainty on the European
market. The stainless industry is facing significant overcapacity, and imports
into Europe have increased. In this situation, to compete successfully in the
global market, we need to reduce costs drastically, simplify the way we manage
the company and establish clear accountabilities. Reducing complexity and
cutting the number of organisational layers will bring us closer to our
customers."
Cost reductions and negotiations on planned job reductions
To achieve sustainable profitability, Outokumpu plans to initiate a cost-
reduction programme aimed at achieving savings of EUR 100 million by the end of
2012. Planned measures include reducing the number of production shifts,
restructuring the organisation, and outsourcing of some support functions as
well as improvements in overall efficiency.
The planned measures correspond to a reduction of up to 1 300 jobs in global
terms, with most of the reductions taking place in Finland (up to 300) and in
Sweden (up to 600).
"We value our employees' commitment to Outokumpu," says Seitovirta. "To achieve
a fundamental change in our competitiveness, cost-cutting measures which include
planned job reductions will, unfortunately, be necessary. We will carry out the
planned changes in a responsible manner in line with local legislation and
practices."
Negotiations with personnel representatives will begin as soon as possible in
all the affected units and functions, and the results will be communicated in
phases in accordance with the progress in the negotiation process. The outcome
of the planned employee negotiations and consultation processes may result in
negative financial impact on Outokumpu's operating profit in the coming
quarters, with some impacts already in the fourth quarter 2011.
Reduction of EUR 250 million in working capital includes rationalisation of the
Group's European distribution network
To reduce Outokumpu's working capital by EUR 250 million, the inventory turnover
in the Group's entire supply chain needs to be improved. Compared to the number
of inventory days of approximately 110 during the second quarter 2011, Outokumpu
intends to bring inventory days closer to 90 days by mid-2013.
Streamlining and consolidating the Group's captive distribution network in
Europe will contribute to this inventory reduction target and facilitate
identification of the most cost-efficient routes to market which match customer
needs. Outokumpu plans to consolidate stocking operations into a smaller number
of locations in Europe, serve the markets from these key locations, and utilise
its existing processing capacity in the markets efficiently. Outokumpu currently
maintains stocks in more than 20 European countries and has coil-processing
capability at six locations. The Group also has six plate service centres in
Europe.
In parallel with the Group's own network, Outokumpu relies on independent
distributors whose role is of growing importance in delivering Group products to
end customers. Streamlining captive stocking operations may generate
opportunities for deepening cooperation with independent distributors in some
markets.
New organisation
Outokumpu's business is based on the unique nature of the Group's integrated
stainless steel operations. The aims of the new organisation are simplicity,
clarity, accountability, and cost efficiency. Outokumpu's planned business model
will be based on three Business Areas, each with full accountability for sales,
profit and assets, improving the ability to respond to customer needs rapidly.
The three Business Areas will be:
- General Stainless: stainless steel operations in Tornio and the finishing
plant in Terneuzen,
- Specialty Stainless: Special Coil, Special Plate, Kloster and Long Products
including the Sheffield meltshop, and
- Ferrochrome: the Kemi Chrome Mine and ferrochrome production in Tornio.
According to plan, Business Areas will be responsible for their own sales as
well as production and supply chain operations. By planned reductions in the
number of organisational layers, Outokumpu will enhance cost-efficiency and
bring management closer to daily operations and customers. Outokumpu's customers
will also benefit from being able to deal with sales staff who have both mill
and product-specific expertise, and who are supported by a global sales network.
In addition to the Business Areas, Outokumpu has specified APAC (Asia Pacific)
as a Focus Area in order to strengthen the Group's presence and improve its
business in markets with the highest growth potential for stainless steel.
According to plan, Business Areas and Focus Area will be supported by Group-wide
functions when such centralisation or coordination yields synergies.
The new organisation is planned to become effective as of 1 January 2012.
As further changes within the Group's organisation may take place during 2012,
Outokumpu is currently considering changing its segment-based reporting in the
Group's annual and interim statements. Related plans will be communicated in due
course.
New Executive Committee
With effect from 1 January 2012, the composition of Outokumpu's Executive
Committee and the areas reporting will be:
Mika Seitovirta, CEO and Chairman of the Executive Committee: in addition to
Executive Committee members; APAC; and certain Group Functions
Hannu Hautala, Executive Vice President - General Stainless
Jarmo Tonteri, Executive Vice President - Specialty Stainless
Kari Parvento, Executive Vice President - Ferrochrome, Group Research &
Development
Esa Lager, Executive Vice President and CFO; certain Group Functions
Pii Kotilainen, Executive Vice President - Human Resources
Hannu Hautala, currently the head of the Tornio Works business unit, will become
a member of the Executive Committee as of 1 November 2011. Mr Hautala has been
in charge of the Outokumpu Tornio Works since April 2010. He is a Finnish
citizen, born 1965, and holds a Master of Science in Engineering and Industrial
Economics from the University of Oulu. Mr Hautala has previously held management
positions in Elcoteq, Flextronics, and Rautaruukki.
Jamie Allan, Executive Vice President - Supply Chain Management, will leave his
position on the Group Executive Committee on 31 December 2011. He will act as
Senior Advisor and report to the CEO until the end of 2012.
Karri Kaitue, Deputy CEO and Outokumpu have jointly agreed that Mr Kaitue will
leave his position in the Group Executive Committee as of 1 November 2011. His
employment by Outokumpu will end on 30 June 2012.
As of 1 November 2011, the Group's CFO will act as the deputy to the CEO.
Outokumpu will also be appointing Mr Austin Lu as Senior Vice President, APAC
Focus Area. He will join Outokumpu on 1 January 2012 at the latest. Mr Lu is a
Chinese (People's Republic) citizen, born 1971 and holds a Bachelor of Economics
from the University of Guangxi, China and a MBA from the University of Western
Ontario, Richard Ivey Business School, Canada. During his career Mr Lu has held
various management and commercial positions within General Electric, latest as
Vice President GE China and General Manager, South China.
For further information:
Mika Seitovirta, CEO, tel. +358 9 421 3200
Esa Lager, CFO, tel. +358 9 421 2516
OUTOKUMPU OYJ
Attachments:
Organisational chart
Hannu Hautala, CV and picture
Austin Lu, CV and picture
Outokumpu is a global leader in stainless steel with the vision to be the
undisputed number one. Customers in a wide range of industries use our stainless
steel and services worldwide. Being fully recyclable, maintenance-free, as well
as very strong and durable material, stainless steel is one of the key building
blocks for sustainable future. Outokumpu employs some 8 000 people in more than
30 countries. The Group's head office is located in Espoo, Finland. Outokumpu is
listed on the NASDAQ OMX Helsinki. www.outokumpu.com
