Steelcase Inc. plans to close a production plant in High Point, N.C. within two years and consolidate the work elsewhere.
Part of an “ongoing strategy to improve the competitiveness and overall fitness of its business model,” the move will cost the Grand Rapids-based Steelcase an estimated $8 million over three fiscal years, split evenly between workforce reductions, production moves and manufacturing consolidations, according to a filing with federal securities regulators.
The company expects $2 million in associated costs to come in the 2015 fiscal year followed by $3 million in each of the next two fiscal years. Another $2 million in associated costs in fiscal years 2015 and 2016 will come from “labor inefficiencies” resulting from manufacturing consolidation and production moves, states the filing with the U.S. Securities and Exchange Commission.
Steelcase estimates the plant closing will generate annualized cost savings of about $5 million by the time it’s fully implemented in the 2017 fiscal year.
The facility primarily produces lounge seating for Steelcase’s Coalesse brand that includes elements of the former Brayton International that was funded in High Point.
The plant closing will affect about 230 jobs in High Point as it occurs in phases over the next 18 to 24 months, the company said in a statement. The work will “move to other Steelcase facilities in North America and a few outside suppliers. A small amount of this work may also come to the Grand Rapids wood plant,” the company said.
“This decision is part of Steelcase’s journey to reinvent its industrial model, reduce excess manufacturing capacity and control cost in response to changes in the economy, the office furniture industry and competitive pressures,” the statement said. “Even in relatively good economic times, we need to make difficult decisions in order to stay ahead.”
Steelcase Inc. in March reported sales of $2.98 billion for the 2014 fiscal year, a 4.2 percent increase over the prior year. Sales for the fourth quarter of the 2014 fiscal year that ended Feb. 28 increased by 8 percent to $779.4 million.
Sales for the Americas division that accounts for about two-thirds of corporate revenue grew at an even better rate of rate of 13.3 percent for the quarter to $558.4 million. Sales in the region were up 6.9 percent for the fiscal year to $2.15 billion. Sales through the Europe-Middle East-Asia division declined 4.7 percent for the 2014 fiscal year to $566.9 million and were down 11.1 percent for the quarter to $149.8 million.
Net income for the 2014 fiscal year was $87.7 million, or 69 cents per diluted share, and $23.9 million, or 18 cents per diluted share, for the quarter.
In the present first quarter of the 2015 fiscal year, the Grand Rapids-based Steelcase (NYSE: SCS) expects to generate revenues of $715 million to $740 million, up 7 percent to 11 percent from a year ago, and net income of 12 cents to 15 cents per share.