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Steelcase to close a second European plant

Monday 30 June 2014

Steelcase Inc. plans to close a second European factory. The Grand Rapids Michigan office furniture maker said it will sell or close a factory, which has workforce of between 200 to 250 employees, located outside Strasbourg, France.
Chief executive Jim Keane said the employees were notified on Thursday, June 26, of the company's need to reduce excess manufacturing capacity by closing or transferring the facility and shifting most of the production to its factory in Spain.
Keane's disclosure came as part of a statement reporting the company’s earnings for the first quarter of fiscal 2015. Steelcase failed to meet analysts' expectations.
Shares of Steelcase stock closed at $15.77, down $1.89, or 10.7 percent, on the New York Stock Exchange after its quarterly results and outlook disappointed Wall Street.
The closure of the French factory is expected to save Steelcase about $10 million a year, but between $30 million to $50 million to implement.
“Behind it all is a great team of people and leaders around the world working with the right strategy that will help us add value for shareholders customers and employees," Keane told analysts during a conference call to discuss the financial results.
He said that while each project is evaluated on its own merits, the planned closure reflects a continuing effort to improve the company’s competitiveness.
The French plant is the third facility closing announcement made in the last year.
In October, Steelcase said a plant in Germany, with 265 workers, would be phased out this year. Production is moving to the Czech Republic, where a $25 million new manufacturing facility will open later in the fiscal year.
The company announced in May a longtime North Carolina plant would close in two years, and move operations to other facilities in North America and a few outside suppliers.
The plant’s closure and distribution of its production work will cost about $10 million in restructuring and disruption costs, but will save the company about $5 million when completed in fiscal 2017.
Keane said he was pleased with profits with soared 59% and revenue growth, even though both fell below analysts’ expectations.
The company’s sales in Americas fell short of revenue expectations by $10 million to $15 million. Still, revenues grew by 6 percent, and outpaced the U.S. furniture industry which seems to have declined in March and April.
“We’re feeling good about our win rates, our project pipelines and backlog as we head into second quarter,” Keane said.
The company is seeing growth in its Europe, Middle East and Africa market. In particular, Western Europe is beginning to show signs of improving from deep recessionary levels.
“Our efforts to improve our EMEA performance are accelerating as we take actions to resize and redeploy our footprint,” he told analysts.
Keane said he felt that after the three plants closure, the company’s production footprint in Europe and North America should be stable.
In another note, Keane said he was pleased with the leadership of Susan Lyons, who took over as the president of Designtex about a year ago. The Steelcase division designs fabrics for upholstery and furnishing of commercial and institutional interiors.
“This year we saw the full impact for creativity and connection to the design community,” said Keane, noting that effort to turn around the division seem to be gaining traction.
Designtex received an editor's choice award for Designtex & Wallace Sewell in the textiles, in the upholstery category, at NeoCon earlier this month. It was of several awards Steelcase or its companies garnered at annual Chicago trade show.
Keane said he expects to see single-digit growth in the industry in the coming year.
That’s a conservative view compared to an industry forecast of 10% in 2015 by the Grand Rapids-based Business and Institutional Furniture Manufacturers Association.
“We wouldn’t expect to see dramatic growth in the industry,” Keane said.

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