GRAND RAPIDS, MI – Steelcase Inc. (NYSE:SCS) reported net income of $21.0 million on sales of $723.1 million for its first quarter ended May 30 representing increases of 59.1 percent and 8.4 percent respectively compared to the same period last year.
First quarter earnings, however, failed to meet the company’s expectations due to less than expected sales growth in the Americas and higher than anticipated sales and operating costs.
Steelcase said its revenues and profits were buoyed by $4.4 million of favorable currency translation effects. Year over year organic revenue growth in the Americas, which accounts for three-quarters of Steelcase’s total revenues, was 6 percent. The office furniture company’s Europe, the Middle East and Africa (EMEA) segment posted organic revenue growth of 10 percent. The Other category, which includes Asia, posted organic revenue growth of 14 percent.
"We believe our revenue growth in the U.S. continued to outpace the overall industry, and we were pleased to see improved project business in various markets across EMEA and Asia Pacific," said Jim Keane, Steelcase president and CEO. "Earnings were lower than our expectations due to less than expected growth in the Americas and higher costs associated with product warranties, freight and distribution, some of which are expected to continue to impact our results through the second quarter.
"Taking into consideration a strong project pipeline and our award-winning new product introductions, we expect to continue our growth in the Americas in the second quarter, which would mark the 18th consecutive quarter of organic revenue growth," Keane said. "And we remain optimistic about the longer-term potential across EMEA and Asia Pacific as we continue to improve our competitiveness.”
Steelcase to Close Plant in France
Steelcase also announced that it will close a metal office storage plant near Strasbourg, France that employs more than 250 workers by the end of the year. The plant’s production will be moved to Steelcase facilities in Spain and Czech Republic.
Steelcase said it will attempt to sell the plant. Closing it will save the company about $10 million a year. The company estimates that it will incur between $30 million and $50 million in costs to close and fully transfer the plant’s operations.
|Recent Steelcase News
"The action announced today represents another step of our multi-year strategy to restore profitability in this region and safeguard our global competitiveness," said Dave Sylvester, senior vice president and CFO of Steelcase. "Together with our plan to exit a manufacturing facility in Germany (announced in the third quarter of fiscal 2014), these actions are expected to reduce our adjusted operating losses by approximately $20 million on an annualized basis when fully implemented."
Last month Steelcase announced that it would shut down its furniture plant in High Point, NC, over the next two years. The closing will result in the layoff of 230 workers.
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