October 25, 2007
Electronics manufacturing services (EMS) provider Elcoteq has decided to continue the action plan that was started at the beginning of 2007 by launching further actions. The company warns that these actions will result in one-time costs.
With the new actions the company aims to ensure a competitive cost structure, growth opportunities and the implementation of the IEMS strategy (IEMS = Integrated Electronics Manufacturing Services) in an ever-tighter market as well as achieve its financial targets in the 2008 financial year. The company believes that the cost-savings and higher operational efficiency achieved from the new action plan will enable it to reach operating income level of about two percent in 2008.
The company’s profitability has been improved by balancing the customer base, by expanding the service portfolio and by means of the action plan started up at the beginning of 2007. The savings achieved have measured up to expectations but are not sufficient for reaching long-term objectives.
Elcoteq prepared itself for substantial growth in production volumes in 2007 on the basis of forecasts from a single customer. The customer’s forecasts had been very accurate in the past. However, the received orders fell substantially short of the forecasts and the profitability of this business has weakened significantly. Pricing in 2007 was based on the higher delivery volumes expected by this customer. The company has initiated negotiations with this customer in order to clarify operating methods. For these reasons, the company has not met its financial targets even though sales to other customers in 2007 were up 30% on the previous year.
New action plan has three major focuses:
- adoption of a customer-centric organization model
- turning around loss-making operations into profit or downsizing them
- additional operational savings
The customer-centric organization model comprises three business areas, which are: Personal Communications, Communications Networks and Home Communications. The business areas are profit and loss units responsible for the management of customer accounts, the supply chain and service development. Group functions focus on improving company-level profitability, strengthening synergy benefits and business development.
Deputy CEO, COO Jukka Jäämaa is responsible for the implementation of the new organization model. The following persons from Elcoteq’s management have been appointed to head up the business areas and take on profit responsibility:
- Personal Communications, Anssi Korhonen
- Communications Networks, Tommi Pettersson
- Home Communications, Vesa Keränen
The new organization model will be launched on January 1, 2008. The current organization will be responsible for achieving the set targets until the end of 2007.
The company’s unprofitable business operations will be downsized in 2008. These measures may involve cuts, mergers or divestments of production capacity, especially in Europe.
Additional savings in operations will be gained particularly from improving efficiency in materials management and the more flexible use of production machinery.
The new action plan will lead to one-time costs that the company will seek to recognize in the last quarter of 2007. The company will release information on the specifics of the program during the final quarter.
Source: www.elcoteq.com
Get list of EMS manufacturers for your requirements (Its free)
Save time and money. Find quality EMS manufacturers. Fast. Venture Outsource has a massive, global database of contract electronic design and manufacturing capabilities. Speak with a Provider Advisor.
“Was able to very quickly find details on the important elements of setting up EMS and ODM partnerships, talked with an advisor for personalized info on quality providers matching our requirements while getting up to speed quickly about the industry and connect with key staff from like-minded companies and potential partners. Great resource.”
— Jeff Treuhaft, Sr. Vice President, Fusion-IO
Advisors tell you matches we find for your needs, answer your questions and, can share EMS industry knowledge specific to your industries and markets.
