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Steelcase plans to cut North American workforce, plant closures after missing profit forecast

Thursday 27 March 2008

After missing its fourth-quarter forecast for profits, Steelcase Inc.announced today it will cut its North American workforce and plan plant closures.

The world\'s largest office furniture manufacturer plans to take a $7 million charge in its current quarter and up to $30 million for the year for restructuring costs.

Profits for the quarter ending Feb. 29 were $30.6 million, or 22 cents per share.

The company had expected 23 to 28 cents for the period, but higher costs in international operations and a lower appreciation on company-owned life insurance values in North America both hurt income.

Steelcase reported fourth-quarter sales of $901.3 million, up 16 percent from a year ago. Most of the growth was driven by international sales, accounting for nearly 31 percent of the quarter\'s results.

For the 2008 fiscal year ending Feb. 29, Steelcase sales grew by 10.4 percent to $3.4 billion, compared to $3.1 billion in 2007.

Results were boosted by an extra shipping week and a favorable currency exchange netting an additional $73 million because of the weak U.S. dollar. Steelcase also distanced itself from company-owned dealerships, with the cost being $70.1 million for buyouts.

Profits for the year increased nearly 25 percent to $133.2 million or 93 cents per share, compared to $106.9 million in 2007 that included $15.6 million in restructuring charges.
A sluggish outlook for 2009 is driving plans for more restructuring.

Steelcase expects sales this quarter to be largely flat, ranging from 2 percent lower to 2 percent higher than a year ago.

Economic uncertainty in the U.S. and the shift away from company-owned dealerships will impact sales, company officials said.

First-quarter profits are forecast at 14 to 19 cents per share, including the $7 million after-tax restructuring charge. At the low end, profits could drop nearly 40 percent below the 23 cents per share recorded last year in the first quarter.

Although Steelcase did not offer annual sales and profit forecasts for 2009, it did detail expected restructuring charges of $25 million to $30 million.

\"These anticipated charges relate primarily to planned facility closures, production moves and specific workforce reductions within our North America segment and \"other\" category,\" the company said in a prepared statement.

The North America segment includes the Steelcase Group, Turnstone and Nurture by Steelcase. The other sector covers the Premium Group, PolyVision, IDEO, and financial services subsidiaries.

Once cuts are made, the company expects savings of about $25 million.

Steelcase shares hit a 52-week low at the close Thursday, down 50 cents to $11.85 on the New York Stock Exchange.

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