Elco Holdings subsidiary Elco Brandt has announced the completion of negotiations with the company’s employee representatives for the retirement of 357 manufacturing workers. The plan includes an option for early retirement beginning in 2005 until 2006. Elco Brandt will make a provision of €9 million (NIS 51 million), out of the total cost of €14 million (NIS 80 million), since the French government will share in part of the arrangement. The provision for the plan will be reflected in fourth quarter accounts of this year, although the cash payments will be spread out through 2010.
Elco Brandt’s total provisions for its streamlining measures to date cannot be underestimated. The company made NIS 30 million in provisions in 2003 and another NIS 30 million in the first half of 2004. It is about to announce an additional NIS 43 million in provisions for the third quarter of 2004, for the closing of its refrigerator factory in France and will make an additional provision of NIS 51 million for the fourth quarter for the retirement plan. The provisions total over NIS 150 million altogether.
The provisions, together with the middling results of Electra Consumer Products (TASE:ELEK), Elco Holdings second largest company, have cut Elco Holdings’ net profit for the first half of 2004 by 35% to only NIS 20 million.
The question that has been asked for several quarters is whether Elco Holdings will be able to make its way in the tough European white products market. Will the transfer of some operations to Eastern Europe to cut manufacturing costs, and further streamlining measures at Elco Brandt, bring Elco Holdings to a reasonable level of profits, and most important, how long will it take?
From Globes Online