NSG Group Update on Restructuring Initiatives and Current Trading Environment

07 Apr 2009

1. Introduction

The NSG Group is issuing this update on progress on its restructuring program (announced on 29 January 2009) and current trading conditions in its global markets, ahead of the Group's announcement of its full-year results, to be made on 20 May 2009.

2. Update on Restructuring Initiatives

On 29 January 2009 the NSG Group announced restructuring initiatives designed to address the economic downturn and to improve profitability going forward.

Good progress has been made in implementing these initiatives, building on action already taken by management in response to the sudden and rapid changes in the global economic environment. The total investment in the restructuring program was announced as 22 billion yen. The overall objective of the program is to protect the business in the short term and to re-establish profit growth from FY2011 onwards.

Since January 2009, a range of actions has been taken to reduce capacity and output around the Group to match the requirements of our customers.

In Automotive, production capacity has been reduced in Europe and North America. In addition to the announced closure of the Group's plant in Eisenerz, Austria and a reduction of laminating capacity in Ylojarvi, Finland, action has been taken to close laminating operations at Kings Norton, UK and a value-added plant in Braunschweig, Germany, with reductions in sidelight production in Sagunto, Spain. Other reductions have been made at Orja, Sweden and San Salvo, Italy. Discussions are currently underway on overhead reductions in Automotive Corporate functions in the UK. In North America, reductions in capacity are being made at Collingwood, Canada. Other initiatives designed to align the Group's production capacity to demand have also been implemented in South America, Japan and Asia. In China, these include a reduction in laminating capacity at Tianjin and capacity reductions in Changchun and Guilin. Production will be suspended indefinitely at the Group's dedicated Automotive float plant at Lahti in Finland.

In Building Products, the Group has made capacity and overhead reductions in Lathrop, USA and Llavallol, Argentina and closed its White Goods business in Sao Paulo, Brazil. In the UK, the rolled glass processing site at Doncaster has been shut. Three downstream sites have been closed in the UK, with shift reductions across others and the Bjerka, Norway site has closed. Discussions are currently underway on overhead reductions in the Building Products Technology and Engineering functions in the UK. The Group has also taken action to reduce its float glass capacity. This has involved taking out capacity equivalent to two float lines in Europe and a 15 percent reduction of float capacity elsewhere in the Group. Production at the VGI float line at My Xuan in Vietnam has been suspended. A float line in the UK remains on extended shutdown, following scheduled repairs.

In Specialty Glass, the overall headcount has already been reduced by more than 1,400 people, primarily in China and the Philippines. We have already introduced the 'stand by at home' system at our Sagamihara and Yokkaichi plants in Japan and expect it to be extended to other plants in the near future.

Under the current restructuring program, the aim is to reduce overall headcount in the Group by approximately 5,800 people by March 2010, representing a reduction of around 15 percent in the total global headcount. 3,000 of these employees had already left the NSG Group by 31 March 2009.

Since our third quarter earnings announcement on 13 February 2009, it has become clear that our forecast of challenging market conditions in Automotive and Speciality Glass are proving to be correct, but that Building Products markets, particularly in Europe, have deteriorated further.

As a consequence, the NSG Group will be taking steps to extend its restructuring program beyond that announced on 29 January 2009. This will result in a further restructuring charge (likely to be in the region of JPY 3 billion) in the current financial year, FY2010, ending 31 March 2010.

3. Current Trading Environment in the Group's business lines

The current trading environment in the markets of the Group's three business lines is as follows.

Automotive markets, particularly in the developed markets of North America, Europe and Japan, have demand levels for new vehicles at around 35 percent below the prior year, although some individual government initiatives are beginning to have a positive effect. This is not expected to improve until the second half of FY2010 at the earliest. Automotive Replacement Glass markets continue to hold up reasonably well.

All of the Group's major Building Products markets remain depressed and have continued to decline in the last three months. Current market demand levels in Building Products' markets are 25 percent below last year in most markets. European price levels for commodity glass continued to erode through February and March and are now 40 percent below the levels of 12 months ago. Recovery is not expected until the second half of FY2010 at the earliest.

The Group's Specialty Glass business continues to be adversely affected by the downturn in demand for displays, office equipment and, in the glass cord sector, by reduced automotive build.

4. Next Update

The NSG Group will update the market further on 20 May 2009, when the Group will announce its Annual Consolidated Financial Results for FY2009 (from 1 April 2008 to 31 March 2009).

We value your privacy

We use cookies on this website for analytics, remarketing, social media (optional) and content (essential) purposes.

By clicking ‘Accept All’ you consent to the use of cookies for non-essential functions and the related processing of personal data. Alternatively you can reject non-essential cookies by clicking ‘Essential Only’. You can adjust your preferences at any time by visiting our Cookie Policy and access the settings on that page.

For more information please read our