Severfield Regulatory News (SFR)

29 Sep 2009 10:00



29 September 2009

Statement regarding Review of Costs and Capacity

In the half year results, published on 25 August 2009, the Directors announced that market conditions had become extremely challenging and that it was likely that 2010 would be the "trough" year in relation to UK demand and prospects. At the same time, it was announced that the company was in the process of an internal consultation to review costs and capacity.

The consultation process, which was undertaken throughout the Group, has now been completed and as a result the following changes are proposed:

At Watson Steel Structures (Bolton), Fisher Engineering (Ballinamallard, Co Fermanagh) and Rowen Structures (Sutton-in-Ashfield) staff, management and workforces have agreed to salary reductions and other cost saving measures which will ensure that these businesses maintain their competitive base and should be able to maintain operations at close to normal capacity.

Agreement has also been reached with the staff and management at Severfield-Reeve Structures (Dalton) and Atlas Ward Structures (Sherburn) for salary reductions and other cost savings measures. However, no agreement has been reached with regards to pay with the operational workforces.

Against a backdrop of reduced demand, falling price levels and increasing pressure on margins, the Group's total production volume will be reduced by 20%. As a consequence, it is now intended that outputs at Severfield-Reeve Structures (Dalton) and Atlas Ward Structures (Sherburn) will be reduced, with the resultant number of staff, management and operational workforce jobs at risk being 95 at Dalton and 60 at Sherburn, between now and the end of 2009.

 As was announced in August, the Board and Executive Management Committee have agreed to a reduction of their basic salaries of 20% from January 2010.

The Board would like to thank all its employees for their support through this difficult and delicate period and are confident that these steps will help the Group to compete within the UK market during this very turbulent period, as well as assist it to develop its export opportunities. 

The measures announced today will generate cost savings of approximately £10 million per annum from January 2010 and are essential in ensuring the long term future of the Group and to position it well for when the market improves. 

The Company will continue to evaluate the trading conditions in its domestic and overseas markets and may implement further contingencies, subject to developments in supply/demand balances and market pricing.

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