Kennametal issues update on its restructuring actions
January 16, 2020
Kennametal Inc., Pittsburgh, Pennsylvania, USA, has issued an update on its progress toward its previously announced restructuring actions, part of its ongoing simplification/modernisation initiatives to enable a leaner structure and optimise its operations globally, including footprint rationalisation and consolidation.
The company recently completed full closures of its manufacturing facilities in Lichtenau, Germany and Irwin, Pennsylvania, and is said to have consolidated these operations into other lower-cost and newly-modernised Kennametal facilities. Additionally, it has reportedly completed negotiations with the employee representatives of its distribution centre based in Neunkirchen, Germany, where distribution activities have been transitioned to a third-party logistics provider.
“We have made good progress on our restructuring actions and reducing structural costs while also improving efficiency, consolidating plants and driving increased shareholder value,” stated Christopher Rossi, Kennametal President and CEO. “Throughout the process, we have maintained a focus on serving our customers and supporting our employees while we work through these transitions.”
According to Kennametal, these actions will begin to reduce structural costs in the second half of fiscal year 2020. The closures and corresponding savings are part of the previously announced FY2020 Restructuring Actions, expected to result in annualised savings of $35–40 million with pre-tax-charges of $55–65 million. The company also expects to deliver FY21 Restructuring Actions with the original estimated annualised savings of $25–30 million, but with lower estimated pre-tax charges of approximately $55–65 million, down from $60–75 million.
Following negotiations with local employee representatives, Kennametal has agreed to downsize its Essen, Germany, facility instead of the previously proposed closure. The facility will be substantially smaller with considerably lower operating costs. Additionally, a significant reduction in labour will take place as products are moved to other lower-cost Kennametal facilities.
The agreement between Kennametal and the Essen employee representatives is believed to be effective through June 30, 2022. The company stated that it is also evaluating the acceleration of other facility closures as part of its restructuring activities.
Rossi continued, “Our decision to maintain a much smaller presence in Essen was the result of a compelling proposal offered by the local employee representatives. The facility will be more competitive globally with improved productivity from increased work hours, lower costs and a smaller, but more profitable, product portfolio. We recognise the effect these changes will have on our employees, and we will continue to work closely with their representatives to assist them.”