As the world economy remains in a state of shock, Air Products has now announced that it will take a restructuring charge to earnings in its fiscal 2009 first quarter and adapt to the ever-deepening downturn across the globe.
The restructuring charge will see the company move to a lower cost structure and better align its businesses to reflect rapidly declining economic conditions around the world.
Air Products also announced that it is revising its earnings outlook for its fiscal 2009 first quarter.
The pre-tax charge to earnings in the first quarter is expected to be in the range of $140-160m, or approximately $0.43-0.50 per share. Around three-quarters of this restructuring charge is for severance costs related to the elimination of approximately 1,300 positions, or about 7% of Air Products’ global workforce.
Fellow US gases major Praxair announced similar such actions of late, including a reduction in workforce of about 1,600 as a result of a fall-off in demand and further reduced volumes that are expected.
Likewise, reductions by Air Products are targeted at reducing overhead and infrastructure costs, reducing and refocusing elements of the company’s technology and business development spending, and lowering its plant operating costs. The remainder of the restructuring charge is for business exits and asset management actions.
The restructuring charge is expected to reduce fixed costs by approximately $50m in fiscal 2009, with savings expected to exceed $110m in fiscal 2010 and beyond.
Chairman, President and CEO John McGlade explained, “These cost-reduction actions are necessary to reach our margin improvement goals. They are also in response to declining business conditions around the world. This is clearly one of the weakest business environments we have seen across our end-markets.”
“However, our financial position remains strong, and with a significant portion of our business under medium- and long-term supply contracts, we expect to continue generating strong cash flow.”
Air Products plans to provide full fiscal 2009 first quarter financial results on 21st January 2009.