Industrial tools, storage and safety solutions maker Stanley Black & Decker on Wednesday outlined actions it’s taking to manage business operations amid the expanding impacts of the COVID-19 pandemic, with those actions include major cuts in spending, as well as trimming staff.
The New Britain, CT-based company said it has begun a comprehensive cost reduction and efficiency program that has a focus on the following actions:
- Adjust our supply chain and manufacturing labor base to match the current demand environment
- Substantially reduce indirect spending (currently ~$1.7B annualized)
- Reduce non-essential staffing in a manner that ensures we are prepared for a demand recovery at the appropriate time
- Capture the significant raw material deflation opportunity that has recently emerged
“Throughout our company's 177-year history, Stanley Black & Decker has weathered a series of exogenous shocks and thrived. This is one of the most challenging crises our world has ever experienced,” commented SBD president and CEO James Loree. “We are in a strong position as we face today's challenges and are taking the necessary actions now to protect our employees and the business while positioning the company to thrive into the future."
Is your company an industrial distributor? Take ID's 2020 Survey of Distributor Operations and be entered to win one of five $10 AmEx gift cards. Information and survey link here.
Additionally, SBD plans to temporarily suspend acquisition-related activity and reduce capital spending until the demand outlook is clearer. The company said additional detail will be provided in its 2020 first quarter earnings call, which is set for April 30.
As a result of the current environment, SBD is withdrawing its previously announced guidance for 2020 stated in its 2019 Q3 earnings report, which forecasted organic sales growth approximately 3 percent.
"We have stress-tested our business for a wide variety of demand scenarios and have initiated the necessary actions and contingency plans to ensure we maintain a strong operational foundation and balance sheet during this unpredictable period," said Donald Allan Jr., SBD's executive vice president and CFO. "We are confident that once through this event we will be in a position to capitalize on a recovery."
The company said it believes it is in a strong financial position and has the flexibility needed to navigate the current volatile period, noting that it maintains strong investment grade credit ratings, has substantial cash on-hand, carries $3 billion of revolving credit facilities and has the ability to generate additional cash proceeds of $750 million in Q2 2020.
SBD said it has aligned the organization around the following key priorities:
- First, and most importantly, ensuring the health and safety of our employees and supply chain partners
- Maintaining business continuity and financial strength and stability
- Serving our customers as they provide essential products and services to the world
- Doing our part to help mitigate the impact of the virus across the globe
Wednesday’s news comes only five months after SBD already announced a plan to reduce headcount and its production footprint amid slowing demand. On Oct. 24, 2019, the company outlined cost reduction measures that included headcount reductions across the company and “executing some footprint rationalization opportunities.” Those measures were expected to deliver $200 million in annual cost savings.
SBD reported its 2019 full-year financial results on Jan. 28. Total sales of $14.4 billion grew 3.3 percent, while operating profit of $1.36 billion jumped 10.5 percent and total profit of $956 million surged 58.0 percent. In Q4 2019, total sales of $3.71 billion jumped 28.1 percent and total profit of $199.1 million compared with a net loss of $106.8 million a year earlier.
On Jan. 29 of this year, SBD announced its acquisition of CAM Aerospace — a manufacturer of specialty fasteners and components — for a price of up to $1.5 billion.