Avon extends restructuring to cut costs

By Simon Pitman

- Last updated on GMT

Related tags Cost

Avon says it is extending its restructuring plan into a $900m savings program that will focus on efficiencies within the global supply chain.

Announced by the company’s chief finance and strategy officer, Charles Cramb, the extension to the existing restructuring program, which was first announced in 2005, is predicted to cost $300m - $400m and should bring annual savings of around $200m.

“Over the last three years we have been dramatically transforming our cost structure and exceeding our original restructuring program to deliver total savings of approximately $430m by 2011 – 2012,”​ Cramb said.

Savings of $450m in 2010

“We also expect to realize annualized benefits from our product line simplification and strategic sourcing initiatives in excess of $200m and $250m, respectively, in 2010,” he added.

The company says that the success of the restructuring program led them to look more carefully at its global supply chain structure and to identify areas where efficiencies can be increased.

Key areas that the company will be considering include realigning specific local business support functions on a more regional basis, as well as streamlining transaction-related services, including selective outsourcing.

The company says that more specific information on the new restructuring plan will be announced once its study has been completed and the initiatives to be taken have been finalized.

The move will also serve to enhance the company’s aims to manage its costs more carefully, especially as the challenges thrown up by the current economic downturn means that any efforts to increase margins can provide valuable breathing space.

Restructuring has already saved the day

The company's recent fourth quarter results showed that its performance was hampered by a strong dollar and weakened consumer spend, particularly in the more developed markets of North America and Europe.

Although sales during the quarter slipped 9 percent aggressive restructuring helped to boost profits by 80 percent.

The company reported that sales fell to $2.8bn, compared to $3bn in the corresponding quarter ending 31 December, 2007, while net income increased to $232.4m, up from $128.9m in the same period last year.

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