Published in Manufacturing

Steelcase reports quarterly earnings decline amid continued pandemic disruption

BY MiBiz Staff Tuesday, September 22, 2020 06:12pm

GRAND RAPIDS — Office furniture manufacturer Steelcase Inc. continues to face headwinds related to the COVID-19 pandemic, as customers are slow to return to normal order patterns given the disruption the public health crisis has caused to traditional workspaces.

While a strong backlog of customer orders propped up the company to start the second quarter of its 2021 fiscal year, that backlog abated throughout the quarter, which ended Aug. 28, the company said today in an earnings release.

Grand Rapids-based Steelcase (NYSE: SCS) reported a $577 million backlog of customer orders, 8 percent lower than this time a year ago. Orders declined an average of 38 percent during the first three weeks of September compared to the prior year, including by 41 percent in the Americas.

Given that tough operating environment, Steelcase’s quarterly revenues fell 18 percent to $818.8 million, compared to $998 million a year ago. Year over year, revenues from the company’s Europe Middle East and Asia (EMEA) fell by 18 percent on a 22 percent lower order volume. Meanwhile, revenues were off by 15 percent in the Americas division, where order volume plummeted by more than one-third compared to a year ago.

Orders fell 37 percent in June followed by a 34 percent decrease in July and a 22 percent drop in August.

“Our year-over-year order decline rates have moderated for four consecutive months, but the continued high level of COVID cases in the Americas has delayed our customers’ return to the office and suppressed demand levels,” Steelcase President and CEO Jim Keane said in a statement. “In EMEA and Asia Pacific, our order patterns have improved and our opportunity pipelines are increasing as many workers have returned to the office in those markets.”

For the quarter, Steelcase reported net income of $55.5 million, or 47 cents per diluted share, which included $15.6 million in pre-tax restructuring costs related to workforce reductions, as MiBiz previously reported.

Keane highlighted the “better than expected second quarter profitability,” citing the company’s workforce for its efforts to work through the order backlog and cost-containment measures.

“While we have seen some recent improvement in the rate of decline in our year-over-year order patterns in the Americas, day-to-day business and project pipelines remain depressed due to the ongoing economic uncertainty and the high number of customers deferring their return to the office,” Dave Sylvester, senior vice president and CFO of Steelcase, said in a statement. “Accordingly, we decided to make more permanent changes to our cost structure through workforce reductions, which will lower our annualized costs by approximately $40 million.”

In Steelcase’s present third quarter, executives expect to generate $690 million to $725 million in revenue, an organic decline of 24-27 percent after adjusting for the effects of the February 2020 divestiture of PolyVision.

The company said it expects to report earnings of 7 cents and 13 cents per diluted share for the third quarter of fiscal 2021, which compares to earnings of 46 cents per diluted share in the third quarter of fiscal 2020.

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