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Order intake volume at Swedish manufacturer Sandvik gradually declined in April and May to a level 40% to 50% lower than last year, due primarily to low demand across customer segments. As a result, the company has had to take extensive actions to offset the impact, including reducing staff by 6,000 since October.
In addition to the staff reductions, work hours will be reduced by 15% to 20% for about 12,000 to 14,000 workers beginning in June, and 10 production sites will be permanently closed.
"The current market situation is very weak, which has a substantial effect on a business like Sandvik's. Implemented and approved actions will have a gradual effect, but the weak volume trend in the second quarter and probably also the third quarter will have a significantly negative effect on earnings," said Lars Pettersson, president and CEO.
"At the same time, it is satisfying that the favorable trend in cash flow, inventory reductions and demand in parts of the energy sector that we observed in the first quarter are continuing."
For the full year, the implemented and planned measures are expected to lead to cost reductions of nearly SEK 6 billion (US$756 million).
Sandvik is a global industrial group supplying tools for metal cutting, equipment and tools for the mining and construction industries, stainless materials, special alloys, metallic and ceramic resistance materials as well as process systems. In 2008, it had about 50,000 employees in 130 countries, with annual sales of nearly SEK 93 billion (US$11.7 billion).