Hydro’s rolling business has shown disappointing financial performance over the last years. “We are taking forceful actions to improve our profitability,” says Einar Glomnes, Executive Vice President Rolled Products.
The restructuring includes the planned closure of parts of the foil production at Grevenbroich as well as efficiency measures across the organization.
“Our cost position in parts of our foil business is too high, mainly due to manning-intensive and manual production processes, and we are also facing strong competition in this market segment. As a consequence, we are planning to close our foil mainline,” says Glomnes.
In September 2018, Hydro announced the exit of the foil conversion business by December 31, 2019. These closures combined represents approximately 30% of the overall foil production of Rolled Products.
The total restructuring consists of a planned reduction of personnel cost of up to €60 million per year. This will lead to a redundancy of up to 735 full time equivalents (FTEs). This number includes the FTE reduction of 226 employees through the planned closure of the foil mainline by end of 2020 and 117 FTEs through the exit of the conversion business by end of 2019. Efficiency measures throughout all Rolled Products sites will close the gap up to 735 FTEs and is planned to be delivered by 2024, with the majority by the end of 2022. These measures are necessary to reduce costs and improve profitability at Rolled Products.
The total restructuring cost is around €160 million, of which €100 million to €120 million will be taken as a provision in Q3 2019. Parts of the manning reduction are dependent on limited capital expenditure.
Rolled Products will further strengthen its focus on growth markets like the automotive and can business, where Hydro has recently made significant investments in the new Automotive Line 3 at Grevenbroich as well as a state-of-the-art recycling facility for used beverage cans in Neuss.
“Our products are well perceived by our customers. This feedback is rooted in our high-quality products and product consistency as well as our secure supply and timely deliveries. It is now on us to turn our strength into better results,” says Glomnes.
On September 24, Hydro will host an Investor Day and provide more information on the Rolled Products restructuring and strategic review.
Certain statements included in this announcement contain forward-looking information, including, without limitation, information relating to (a) forecasts, projections and estimates, (b) statements of Hydro management concerning plans, objectives and strategies, such as planned expansions, investments, divestments, curtailments or other projects, (c) targeted production volumes and costs, capacities or rates, start-up costs, cost reductions and profit objectives, (d) various expectations about future developments in Hydro's markets, particularly prices, supply and demand and competition, (e) results of operations, (f) margins, (g) growth rates, (h) risk management, and (i) qualified statements such as "expected", "scheduled", "targeted", "planned", "proposed", "intended" or similar.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Factors that could cause these differences include, but are not limited to: our continued ability to reposition and restructure our upstream and downstream businesses; changes in availability and cost of energy and raw materials; global supply and demand for aluminium and aluminium products; world economic growth, including rates of inflation and industrial production; changes in the relative value of currencies and the value of commodity contracts; trends in Hydro's key markets and competition; and legislative, regulatory and political factors.
No assurance can be given that such expectations will prove to have been correct. Hydro disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
: September 10, 2019