Wellington, New Zealand, October 3, 2005--Feltex has asked its shareholders to hang in there regarding details on the extent of its restructuring, which is expected to improve profitability. Details will be unveiled in two weeks, according to the New Zealand Herald.
The carpetmaker told the stock exchange late on Friday that details of plans to restructure plants and cut jobs would be released during the week beginning October 17.
So far the review -- ordered in June after the company's second profit downgrade in a year -- had identified excess operating capacity that would be reduced by restructuring to achieve "substantial savings".
Although he could not yet give any figures, chairman Tim Saunders said the $4 million a year it had already saved by changes to top level management were minor in comparison. Whether the savings would see the company double this year's earnings was hard to say but, taking away restructuring costs, "it would certainly be up towards that".
"It is significant, so we're saying it makes sense to hang in," he said.
"We're trying to cut back some uncertainty for shareholders and show the company does have some life after death."
The announcement came on the eve of the company's new annual report, which gives fresh details of its operational review looking at cost structures, plant locations and production capacity.
It said it might increase its role as a synthetic carpet importer and was reviewing the extent of its presence in high-volume segments of the carpetmaking market.
Saunders said the restructuring would have to have been carried out "quite some time ago" if the company were to have met the $23.9 million net profit projection made in its IPO prospectus last year.
"If we're going to have this company prosper in the future, we've got to take some pretty drastic action."
Once the report was released, he said Feltex would be consulting with unions and moving quickly to complete as much restructuring by the end of the year as possible.
Already 42 staff members have been laid off in the first phase of the review and up to 800 workers at four New Zealand plants are working four-day weeks.
Judy Attenberger, textile sector secretary for the National Distribution Union, which has 800 Feltex members, said the union was due to meet with the company this week. Negotiations were in the preliminary stages.
"For us, it's about survival of jobs, we're working hard to ensure as many jobs stay in New Zealand as possible."
Saunders said the review was not impeding discussions with Australian rival Godfrey Hirst, which has proposed merging with Feltex after snaring a 5.83 per cent stake in the ailing company in June.
"They have known we've had to at least get a handle on the cost benefits of the restructuring and to get a feel for what we could do within the company itself as an alternative to possibly a full merger or other alternatives such as a partial merger. So everything's very much on the table still."
