Bekaert to Cut 1,850 Jobs in China, Belgium, on Solar Market
Stock Chart for NV Bekaert SA (BEKB)
Bekaert NV (BEKB), the world’s largest maker of steel cord used in tires, fell the most in six months in Brussels trading after saying it will need to save 100 million euros ($131 million) a year to restore profitability after erasing 1,850 positions amid cutbacks in sawing-wire output.
The shares dropped 3.87 euros, or 12 percent, to 29.40 euros at the 5:40 p.m. close of trading on Euronext Brussels. That’s the biggest decline since July 29 and trimmed the stock’s advance so far this year to 14 percent.
Bekaert is erasing 1,250 positions in Chinese plants producing sawing wire used to slice silicon ingots into wafers for solar cells and plans to cut an additional 600 positions in Belgium, or about 23 percent of its workforce in the country. The Zwevegem, Belgium-based company said it needs to save an additional 100 million euros annually to restore “long-term profitability,” according to a statement released today.
Prices for Bekaert’s sawing wire collapsed last year amid overcapacity for the material as competitors including Xingda International Holdings Ltd. (1899) ramped up output in China and global production of solar panels slowed down. Bekaert aims for earnings before interest and taxes of at least 7 percent of sales. Profitability by that measure shrank to 13 percent in the first half as margins in the Asia-Pacific region narrowed to 29 percent from 38 percent in the preceding six-month period.
“Management indicated that both prices and volumes have continued to decline throughout the year,” said Filip De Pauw, an analyst at ING Groep NV in Brussels. “The cost savings target suggests Bekaert didn’t meet its long-term EBIT guidance in the second half.”
Bekaert may report adjusted profit of 2.22 euros a share this year, according to the average of 12 analyst estimates compiled by Bloomberg before today’s announcement. Management said it expects reorganization costs will exceed the 84 million euros of expenses it made in 2008 for the closure of Belgian plants in Lanklaar and Hemiksem, De Pauw said.
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