Beiersdorf Realignment Aims For €90 Million In Annual Savings
This article was originally published in The Rose Sheet
Executive Summary
Hamburg, Germany-based Beiersdorf, marketer of NIVEA and Eucerin, announces realignment effort to streamline its business and help improve profitability and competitiveness.
Beiersdorf AG is initiating a new realignment effort that will strengthen its regional business focus and generate annual cost savings of approximately €90 million ($121.3 million) before taxes, starting in fiscal 2014.
The Hamburg, Germany-based marketer of NIVEA and Eucerin notes the strategy was agreed upon by its Executive Board and Supervisory Board, according to its Nov. 30 release.
The realignment represents the final phase of its “Focus on Skin Care. Closer to Markets” strategy announced last year, which prioritizes skin care and structures the firm’s business more closely along regional lines (Also see "Beiersdorf Stays Skin-Care Course, Withdrawing From Cosmetics In Germany" - HBW Insight, 20 Dec, 2010.).
“The final strategy implementation will further strengthen the regions and assign roles and responsibilities in the markets more transparently,” the company says, noting it will also help the firm “react quickly to regional consumers and market requirements.”
Ultimately, the new realignment will help it improve profitability and competitiveness, Beiersdorf says.
As part of this next phase, however, the firm will trim approximately 1,000 employees worldwide from its payroll, or about 5% of Beiersdorf’s total workforce, investment bank Jefferies estimates in a Dec. 1 analyst note.
In Germany, 230 employees will be affected, including management positions, though the firm will attempt to find “fair solutions” for all involved, it says.
Headcount reductions and further business streamlining, which includes a SKU reduction program, will result in savings of €25 million ($33.7 million) in 2012 and €75 million ($101.1 million) in 2013, before reaching about €90 million ($121.3 million) in 2014, Beiersdorf says.
Additionally, the company is writing down about €140 million ($188.6 million) on intangible assets from its 2007 acquisition of Chinese hair-care business C-BONS (Also see "Beiersdorf acquires interest in C-BONS" - HBW Insight, 8 Oct, 2007.).
The company is budgeting for total extraordinary one-time expenses of about €265 million ($357.2 million) in connection with the realignment, the majority of which it expects to incur in fiscal year 2011.
The final phase goes into effect as the company prepares for new leadership under Stefan F. Heidenreich, who will replace Thomas-B. Quaas on Jan. 1 (Also see "Analyst: Outsider Heidenreich Brings Fresh Perspective As Beiersdorf CEO" - HBW Insight, 10 Oct, 2011.).
In an investment research note by EquiNet Bank dated Dec. 1, the German bank says it regards the latest realignment positively, but suggests the move is being taken because a 2010 restructuring was “not enough” to “improve the competitiveness of its consumer division.”
The company has struggled of late to generate significant financial gains, but the freshening of its leadership is expected to instill confidence in investors. EquiNet notes that new management will be “key” in successful implementation of the new realignment effort.