Sandvik AB’s (SAND) divisions making machinery and mining equipment will take the brunt of a cost-cutting program to include site closures, Chief Executive Officer Olof Faxander said in an interview.
Sandvik plans to cut the number of sites to 125 from 150 in three to four years, Faxander said in the interview in Sandviken, where the company held an investor meeting. The focus on machinery and mining divisions reflects their relative size in the group. Gary Hughes, who heads Sandvik Mining, said his area will see eight to 12 sites affected.
The savings program will cost as much as 4 billion kronor ($624 million), Sandvik said. Costs at mining-gear operations will be cut by as much as 700 million kronor by mid-2014 because of weakened demand. Sandvik has suffered as miner BHP Billiton Ltd. (BHP) and others reduced spending, prompting Sandvik to announce almost 1,000 job cuts about a year ago.
“We’re adjusting our cost base to the market situation,” Faxander said. “On a positive note, the downward trend we’ve seen in mining has now stabilized at this low level.”
Faxander earlier this year said the strong krona could affect where the company makes future investments. While the reduction of sites doesn’t target Sweden primarily, there could be an impact on local operations, he said today. Sandvik’s capital expenditure will be reduced in Europe in the coming three to four years and will be focused more on emerging markets, where Sandvik has “invested too little historically,” according to Faxander.
The cost-cutting measures in mining will lead to one-time costs of as much as 400 million kronor.
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