STOCKHOLM, Sweden, February 12, 2002 (PRIMEZONE) -- In the next few years, NCC will become a smaller, leaner and more selective company. At the same time, it will become more focused, sharper and more profitable. These will be the effects of the action program currently under way. It is estimated that the workforce will be reduced by approximately 2,500 employees.
Following the comprehensive analysis of the NCC Group that was initiated during autumn 2001, a wide-ranging action program has been gradually formulated and introduced. As a result of this analysis, it was concluded that a forceful program of change would be required in order to make NCC profitable. Many measures have been implemented and the resulting restructuring costs were charged against earnings during 2001.
"Initially, the changes will result in NCC becoming a smaller, leaner and more selective company, with the Nordic region as its domestic market. At the same time, the new structure and strategic direction will make the Group sharper and more profitable," says Alf Goransson, President and Chief Executive Officer of the NCC Group, commented on the process of change.
"Unprofitable units will be phased out or restructured. Proactive measures will be taken within segments where NCC has strong market positions, where the Group has a competitive edge and where the potential for healthy profitability exists. Profitability will be considered more important than volume. The portion of project development and partnering assignments will be increased, the development of commercial properties and housing projects will continue in the Nordic market and we will endeavor to add value to a larger part of our customers' value chain - through NCC Roads, for example.
Customers will not pay us for our presence; they will only pay us for the value we create," said Alf Goransson.
The feasibility of divesting non-core operations is being evaluated.
The installation company NVS has already been sold. We intend to sell our holding of managed properties, which had a market value of approximately SEK 3.7 billion at year-end, within a period of two years. Scope for expanding profitable operations will be created as other operations are sold or discontinued.
During 2001, nonrecurring costs (restructuring costs, goodwill write-downs and an adaptation to more cautious profit-recognition methods) amounting to approximately SEK 1.7 billion were charged against earnings. In the year-end report, these measures are referred to as items affecting comparability. In addition, operating earnings were charged with approximately SEK 800 M for write-downs of various projects (read more in the year-end report). It is estimated that approximately 2,500 employees, mainly in Sweden, will have to leave the NCC Group due to restructuring measures.
The aggressive and defensive measures being implemented during 2002 will form a platform for increasing NCC's key financial objective - the return on equity after tax -- to 15 percent, which is in line with the level achieved by our Nordic competitors. The equity/assets target of approximately 30 percent will remain unchanged, as will the goal that cash flow be positive. The forecast for 2002 is that NCC will report profit of at least SEK 1 billion after net financial items. The cost savings resulting from the restructuring measures are expected to gain their maximum effect during 2003.
Summary of ongoing restructuring measures:
-- A new organizational structure, characterized by smaller
corporate offices and fewer staff functions, was introduced
at the beginning of 2002. The number of positions at Group and
business area level has been halved. The former Contracting,
Housing, Telecom and Service business areas are now
Coordinated under the name NCC
Construction in each country. NCC Industry has been restructured and is now called NCC Roads, which also includes paving and road-marking operations. NCC International Projects consists of major Nordic and international civil engineering projects. The new structure results in faster decision-making channels, because there are fewer levels (two management levels have been removed), while reducing costs.
-- Machinery operations, formerly part of NCC Industry, have been
moved to a separate company named Altima, in order to increase
the proportion of non-Group customers. Using Altima as a base,
the feasibility of participating in a restructuring of the
Nordic machinery-rental market will be investigated.
-- Specialist operations are being reviewed and restructured, in
part through a sharp downsizing of loss-making tunneling
activities. The BOT unit is being phased out and responsibility
for BOT activities is being distributed among the operating
units.
-- As a result of the restructuring and streamlining of road-
related operations conducted in NCC Roads, the possibility
of divesting concrete operations, which had sales of
approximately SEK 1 billion in 2001, will be assessed.
NCC Roads' new organization has fewer levels and reduces
central costs.
-- In Sweden, unprofitable offices and geographic units will be
closed or restructured. Large parts, corresponding to
two-thirds of total operations in the segment, of building
service activities outside metropolitan regions will be phased
out. The remaining building service activities will be
integrated in NCC Construction Sweden. Increased coordination
and fewer staff units will result in cost savings at
corporate level. Facility Management is being phased out.
The number of regions is being reduced from 23 to six
(excluding Housing).
NCC is one of the leading construction and property development companies in the Nordic region. NCC has annual sales of approximately SEK 45 billion, with 27,000 employees.
All of NCC's press releases are available on www.ncc.se
The full text report can be found at the following URLs: www.waymaker.net/bitonline/2002/02/12/20020212BIT00610/bit0002.doc
www.waymaker.net/bitonline/2002/02/12/20020212BIT00610/bit0002.pdf
This information was brought to you by Waymaker http://www.waymaker.net