BELGIUM-based Bekaert sees further contraction in steel wire solutions in 4Q, will close steel wire plants in Shelbyville, Kentucky, and Ipoh, Malaysia, in 1H 2020 and exit part of the related markets served.
* Bekaert sees tyre markets slowing down in 4Q amid customer destocking after holding up well in first nine months, to relocate hose-reinforcement wire operations in Rome, Georgia to Rogers, Arkansas
* Bridon-Bekaert Ropes Group to close Dubai in-house rigging facility by year-end
* Bekaert sees total additional restructuring charge about 50mil euros, including 30mil euros for social plan in Belgium.
* Bekaert sees inventory writedowns by year-end due to raw material prices dropping more significantly than anticipated.
* Its 9M revenue 3.29bil euros, company-compiled estimate 3.28bil euros.
* 9M organic revenue +1%; net debt 1.18bil, -5.7% q/q; sees net debt below 2.5 Times Ebitda by year-end, sees inventory writedowns on raw materials prices. - Bloomberg
According to its website, Bekaert's core business are steel wire transformation and coating technologies.
It is also the world's largest independent manufacturer of drawn steel wire products.
Below are highlights of its statement:
Bekaert is implementing actions worldwide to raise the competitiveness of its activities and to rebuild the financial performance of the business. In addition to the dedicated focus on the core business performance through improved cost, pricing and mix management, the actions also include measures to optimise the footprint of our operations.
We have started executing the restructuring programme in Belgium after having reached, on 1 October 2019, an agreement with the unions on the related social plan. A provision of € -30 million has been booked for the costs related to the social plan in addition to the one-off elements already accounted for in the first half of the year ( -7mil euros).
Additional footprint actions:
The business unit steel wire solutions has been significantly affected by continued low demand, fierce price competition, and the effects of trade tariffs.
We have decided to close two manufacturing sites and to exit part of the related steel wire markets served. The Shelbyville production site in Kentucky (US) will cease all steel wire operations by January 2020 and the plant in Ipoh, Malaysia, will close in March 2020.
Bridon-Bekaert Ropes Group will close the in-house rigging facility in Dubai by the end of 2019 and has engaged an external partner to provide, from January 2020 onwards, all finishing and distribution services for ropes customers in UAE.
Bekaert is relocating the hose reinforcement wire operations of Rome, Georgia (US) and will integrate them within the Rogers, Arkansas (US) tire cord plant.
The business conditions have trended lower in various sectors as a result of tighter markets and continued uncertainty.
Our tyre markets held up well in the first nine months of 2019 but are expected to slow down in the fourth quarter as a result of the normal seasonality and destocking actions throughout the supply chain in anticipation of a continued weak business climate.
The steel wire solutions activities are projected to further contract in the last quarter, mainly because of the impact of the social protest actions in Latin America, trade tariffs, and further economic slowdown globally.
We do not foresee a downturn in construction markets other than the usual seasonality impact and we expect the business environment of Bridon-Bekaert Ropes Group to remain challenging.
In this scenario of economic slowdown and year-end seasonality, Bekaert continues to implement actions to offset the external headwinds.
These actions are focused on managing cost, pricing, mix and footprint and aim to deliver an improvement of the underlying business performance.
We are also further improving our working capital level and debt position and are well on track to bring our debt leverage below 2.5 by year-end.
Despite our effective inventory reduction actions, we do project significant adverse non-cash adjustments to the year-end inventory valuation due to raw material prices decreasing more significantly than anticipated, driven by the overall economic downturn.
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