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Konecranes announces further cuts amidst merger talk

Konecranes announces further cuts amidst merger talk

Konecranes has announced a series of cost-cutting measures as it claims its customers have grown cautious about investment because of slow economic growth.

In a statement, it said: “Companies operating in emerging and commodity markets are particularly under pressure to save costs. However, we still believe in our growth opportunities in specific product segments and geographic areas.”

The company aims to gain annual cost savings of €25m (US$27m) by the end of 2017 with half of these savings realised by the end of 2017.

In a statement, Konecranes identified four ways of cutting fixed costs, some of which are already in progress.

The first is: “Evaluation of business model in certain countries we operate”. Konecranes is currently present in 48 countries. A spokesperson told CM: “The evaluation of countries is still under planning, but we are looking at some emerging market countries for a more efficient business model, for instance in Malaysia and Indonesia.”

The second is: “Closures and rightsizing of manufacturing units and optimisation of the supply chain”. A spokesperson added: “By the end of 2015, we had 22 production plants located in 13 countries. The ones being closed down are, for example, the facilities in Sorocaba, Brazil and Franklin, USA.”

The third is: “Streamlining product portfolio and related resources”. A spokesperson said it was too early to say whether this means the company will halt production of certain products or what those products will be.

The final objective is: “consolidation of regional functions”. The company hopes that focussing operations on three regions will reduce fixed costs by centralising operations on a larger geographical scale.

The company’s internal regions will be reduced from five to three. The Americas region will remain as it is. The Europe region and the India, Middle-East and Africa region will be combined to make a Europe, Middle-East and Africa region. The North-East Asia region and South-East Asia, Pacific region will be combined into Asia-Pacific, which will also include India.

Konecranes CEO Panu Routila also said that the company is proceeding with the planned merger with Terex. This is despite a bid for Terex from Chinese company Zoomlion being made on 26 January 2016.

In a separate statement, Konecranes said that the stock market has undervalued the inherent value-creation potential of the merger.

Konecranes share prices has fallen from €20.79 (US$23.02), when Zoomlion’s bid for Terex was made, to €20.10 (US$22.26) eight days later on February 3.