Since
January 2009, a range of actions has been taken to reduce capacity and output
around the Group to match customer requirements.
The NSG Group recently issued an update on its restructuring
program progress and current trading conditions in its global markets. Good
progress has been made in implementing the initiatives announced in January
2009, building on action already taken by management in response to the sudden
and rapid changes in the global economic environment. The total investment in
the restructuring program was announced as 22 billion yen. The overall
objective of the program is to protect the business in the short term and to
reestablish profit growth from fiscal year 2011 onward.
Since January 2009, a range of actions has been taken to
reduce capacity and output around the Group to match customer requirements. In Automotive, production
capacity has been reduced in Europe and North America. In addition to the
announced closure of the Group's plant in Eisenerz, Austria, and a reduction of
laminating capacity in Ylöjärvi, Finland, action has been taken to close
laminating operations at Kings Norton, UK, and a value-added plant in
Braunschweig, Germany, with reductions in sidelight production in Sagunto,
Spain.
Other reductions have been made at Orja, Sweden, and San
Salvo, Italy. Discussions are currently underway on overhead reductions in
Automotive Corporate functions in the UK. In North America, reductions in
capacity are being made at Collingwood, Canada. Other initiatives designed to
align the Group's production capacity to demand have also been implemented in
South America, Japan and Asia. In China, these include a reduction in
laminating capacity at Tianjin and capacity reductions in Changchun and Guilin.
Production will be suspended indefinitely at the Group's dedicated Automotive
float plant at Lahti in Finland.
In Building Products, the Group has made capacity and
overhead reductions in Lathrop, USA and Llavallol, Argentina and closed its
White Goods business in São Paulo, Brazil. In the UK, the rolled glass processing
site at Doncaster has been shut. Three downstream sites have been closed in the
UK, with shift reductions across others, and the Bjerka, Norway, site has
closed. Discussions are currently underway on overhead reductions in the
Building Products Technology and Engineering functions in the UK.
The Group has also taken action to reduce its float glass
capacity. This has involved taking out capacity equivalent to two float lines
in Europe and a 15% reduction of float capacity elsewhere in the Group.
Production at the VGI float line at My Xuan in Vietnam has been suspended. A
float line in the UK remains on extended shutdown following scheduled repairs.
In Specialty Glass, the overall headcount has been reduced
by more than 1400 people, primarily in China and the Philippines. The Group has
introduced the “stand by at home” system at its Sagamihara and Yokkaichi plants
in Japan and expects it to be extended to other plants in the near future.
Under the current restructuring program, the aim is to
reduce overall headcount in the Group by approximately 5800 people by March
2010, representing a reduction of around 15% in the total global headcount.
3000 of these employees had already left the NSG Group by March 31, 2009.
Since the Group’s third quarter earnings announcement in
February 2009, it has become clear that its forecast of challenging market
conditions in Automotive and Speciality Glass are proving to be correct, but
that Building Products markets, particularly in Europe, have deteriorated
further. As a consequence, the NSG Group will be taking steps to extend its
restructuring program beyond that announced in January 2009. This will result
in a further restructuring charge (likely to be in the region of JPY 3 billion)
in the current financial year, FY2010, ending March 31, 2010.
Automotive markets, particularly in the developed markets of
North America, Europe and Japan, have demand levels for new vehicles at around
35% below the prior year, although some individual government initiatives are
beginning to have a positive effect. This is not expected to improve until the
second half of fiscal year 2010, at the earliest. Automotive Replacement Glass
markets continue to hold up reasonably well.
All of the Group's major Building Products markets remain
depressed and have continued to decline in the last three months. Current
market demand levels in Building Products' markets are 25% below last year in
most markets. European price levels for commodity glass continued to erode
through February and March and are now 40% below the levels of 12 months ago.
Recovery is not expected until the second half of fiscal year 2010, at the
earliest.
The Group's Specialty Glass business continues to be
adversely affected by the downturn in demand for displays, office equipment
and, in the glass cord sector, by reduced automotive build.
Additional details are available at
www.nsggroup.net.
