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Steelcase profits practically disappear; sales drop 8.4 percent globally

Monday 22 December 2008

The third quarter was grim for Steelcase Inc., and the outlook for the rest of the year is even darker.

Today, the nation\'s largest office furniture manufacturer said its profits nearly disappeared for its quarter ending Nov. 28, posting a slim $400,000, down from a $31.3 million profit a year ago.

Sales dropped 8.4 percent globally, to $811.3 million, while its North American sector fell 11.4 percent.


The results met one out of two expectations for analysts, who had forecast profits of 9 cents per share and sales of $805.2 million, although those expectations typically ignore one-time charges.

The third quarter absorbed several big charges, including $27.5 million for a drop in its cash-surrender value of company-owned life insurance policies. Another $4.7 million paid for restructuring costs. The impact of currency exchange rates cost another $18 million.

Both Steelcase and its Zeeland-based competitor, Herman Miller Inc., restated their quarterly earnings ahead of the official release of results. A deep chill in the demand for office furniture is just one symptom of the widening economic recession.

\"We believe that the slowing of the global economy and related uncertainty will lead to significant reduction in industry demand for the next several quarters,\" said David Sylvester, chief financial officer. \"Accordingly, we have been preparing for a difficult year in fiscal 2010, but we believe the strength of our balance sheet will allow us to continue investing in growth initiatives that will further strengthen our leadership position coming out of this economic cycle.\"

For its current quarter ending in late February, Steelcase expects to post a loss of 4 to 10 cents per share, compared to profits of 22 cents per share in the fourth quarter last year. The quarterly forecast includes a $9 million hit for ongoing restructuring costs. Raw materials costs also are expected to rise by up to $10 million compared to a year ago.

The company is scheduled to host an 11 a.m. conference call today with analysts, available online at steelcase.com.

Steelcase shares are off nearly 66 percent from a year ago. On Friday, it closed at $5.73, unchanged on the New York Stock Exchange.

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