Glass maker to cut 220 factories
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Your support makes all the difference.Paolo Scaroni, Pilkington's chief executive of two weeks, stunned the City yesterday by announcing a radical shift in strategy that would see the group withdraw from much of its downstream glass-making operations. These businesses, which add value to ordinary sheet glass by toughening or shaping it, represent around a quarter of the group's total pounds 2.9bn of revenues.
One analyst, who did not want to be named, said: "We were expecting something radical from Scaroni, but not this. It is a complete reversal of policy."
Mr Scaroni, who was Pilkington's head of automotive glass and replaced Roger Leverton in a boardroom coup in May, said that he was looking at closing or selling the group's 220 European-based factories involved in downstream operations: "I don't know which ones or how many yet. It depends on their share of the market and how profitable they are."
The group also said it would accelerate its cost cutting programme, currently pounds 20m a year, over the next three years and wanted to cut out unnecessary management layers.
Mr Scaroni said: "I want Pilkington to become the most efficient glass manufacturer in the world. Prices are something we can do very little about. The only variable under our control are costs."
Analysts' responses were mixed: "We are more confused today than we were yesterday. The whole restructuring is too complex. I'm not sure Scaroni knows what he can do," said one
Another said: "By reducing the downstream side, they will lose market share and have to cut back capacity at their float glass business. This could cost them a lot in provisions. And the cost of exit from the downstream factories could be high if the group can't sell them." However, others were impressed with Mr Scaroni's track record and said the group could recover in two years.
Mr Scaroni's comments came as the group revealed an pounds 80m fall in pre- exceptional profits in the year to March to pounds 132m.
Investment Column, page 25
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