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Ruukki to Adjust Steel Production, Boost Efficiency

12/02/2008 - ABSTRACT: Rautaruukki plans a range of actions to bring steel production and other operations in line with weakened demand and stock levels, including the initiation of employer-employee negotiations about possible lay-offs, redundancies and part-time working schedules.

Rautaruukki announced it will adjust steel production and other operations in line with weakened demand and stock levels, but now expects comparable consolidated net sales for the current year to be slightly higher than in 2007. The company also expects operating profit, excluding non-recurring items, to be at the same level as in 2007.
 
The company earlier expected comparable consolidated net sales would remain somewhat below the 10% growth target and operating profit would be higher than in 2007. Rautaruukki is continuing actions to further improve operational and cost efficiency under the Boost programme that was launched in October of this year.
 
In the context of adjustment and efficiency measures, the company is planning to initiate employer-employee negotiations about possible lay-offs, redundancies and part-time working in different market areas, with the number of lay-offs to become clear as negotiations proceed. Ruukki said that it would also reduce its use of temporary and agency workers.
 
Actions to improve efficiency aim at permanent cost savings of around EUR 60 million at an annual level. The company said it expects its efficiency measures in Finland would involve the loss of a maximum of 520 jobs, most of which relate to improving efficiency within the steel business and steel service centers. Corporate-wide, the company estimates it needs to reduce around 1000 jobs. Where possible, the company said that it would also use retirement arrangements, and that it is also studying the possibility of staff relocation. These actions are expected to result in non-recurring costs of around EUR 10 million, which will be recognized in the last quarter of 2008.
 
"We consider that our chosen focus areas of business still have strong growth potential,” said President & CEO Sakari Tamminen. “However, the global credit crunch has weakened demand in Ruukki's customer industries over the past few weeks. We are reacting to this by adjusting our own operations accordingly.
 
“Although our people are working hard to meet our targets, the difficult market situation calls for adjustment measures in different market areas,” continued Tamminen. “In addition, we are continuing to make structural changes as planned under the operational excellence programme, Boost, to ensure the company's long-term competitive edge and profitability. This is how we are also creating a permanent platform to be able to improve our market positions so that we are on form when the recession eases and the economy once again returns to an upswing."
 
Production Adjustment—The company said that to adjust steel production, it will temporarily shut down one of the two blast furnaces at the Raahe Works in Finland while also scaling back output at its other units in Finland. Ruukki Metals is also planning to cut back production at its steel service centers.
 
Ruukki Construction is also planning to adjust production and sales operations in different market areas, primarily outside Finland. Ruukki Engineering also will adjust production at the Mo i Rana unit in Norway and at the Kurikka plants in Finland.
 
BOOST Operational Efficiency Programme—The divisions and business support functions continue to implement actions under the Boost programme that was launched in October of this year. Among other things, the programme seeks to optimize the production network by focusing operations on increasingly larger, more competitive units and to improve supply-chain management and sourcing. Through BOOST, the company is also working to improve the efficiency of business support functions supporting the company's operative business; reduce the use of outside specialists; and reschedule the company's investments.
 
Specific projects now being started under Boost include:
 
·     Ruukki Construction is to continue to centralize construction product manufacture in the Baltic states on the Pärnu plant in Estonia, with the small profiling units in Riga, Latvia and in Vilnius, Lithuania to be closed by the end of April 2009. Local sales offices in Latvia and Lithuania will continue to operate, and production and supply-chain efficiency are to be improved across the division.
 
·     Ruukki Engineering is planning to transfer production in Hungary from the Hatvan site to the components plant in Jászberény during the first quarter of 2009.
 
·     Ruukki Metals is planning to close the steel service centre in Tampere, Finland, by the end of June 2009 and to focus parts processing on Raahe and Seinäjoki. The division's business and production units and administration are improving operational efficiency and removing overlapping functions.
 
·     Ruukki Production is to improve production and cost efficiency permanently across the division, mainly by fewer shifts.
 
·     The company’s business support functions are also planning to launch projects to improve efficiency.
 
The company said that the impact on the personnel of all the planned efficiency and adjustment measures will become clear in each unit, country and operation, once employer-employee negotiations have ended. Negotiations are to progress in accordance with the local legislation in each country concerned.