ISELIN, N.J.—Ansell Ltd. has launched a major global restructuring program—which includes the eventual closure of its U.S. Hawkeye military glove operation along with a factory in Malaysia—aimed at creating a more efficient and profitable business.
Included in the plan is relocation of its condom headquarters from Australia to Brussels; closure of its Shah Alam, Malaysia, medical goods production plant and moving capacity to lower-cost facilities in Sri Lanka and southern Malaysia; and trimming 30 brands, 100 products and 20 legal entities.
That will lead to the elimination of 250 manufacturing jobs and 50 middle and senior supervisory positions in the next 12 months.
Ansell's decision to exit the Hawkeye military glove manufacturing business is in the works because of decreased demand in the U.S. for the specialty gloves produced at the company's facility in Eupora, Miss., a spokesman said.
He said the pullback of U.S. troops from Afghanistan and Iraq was a prime reason for the drop in demand.
Timing of the exit wasn't disclosed because the firm is evaluating its options with its partners, according to the spokesman. Details on the exit are expected to be finalized by the first half of fiscal 2015.
“There is additional complexity in that we have responsibilities to implement the current military contracts we have in place, which will certainly happen,” he said.
Ansell's factory in Eupora continues to be operational as the firm reviews its options, the spokesman noted. “At a certain point, once the final decision is made in the future, a determination will be made on the Hawkeye facility. Until then, it is business as usual.”
Ansell supplies military organizations in other countries from factories it operates in Southeast Asia.
While the company is eliminating the military unit in the U.S., it has expanded its North American business with the purchase earlier this year of glove maker Lake Forest, Ill.-based BarrierSafe Solutions International, for $615 million, which plays a big role in reshaping Ansell's North American operation.
Like the decision eventually to end U.S. military glove manufacturing, closure of the Shah Alam production plant, and consolidation of that production at factories in Sri Lanka and southern Malaysia, is aimed at creating a more efficient production structure, the company said.
The Shah Alam shutdown and production transfer are expected to be complete by the end of fiscal 2015.
Those moves, along with a plan to cut the firm's administrative and commercial staff globally, will bring about costs cuts, improved profitability, a reduction in inventory levels and better returns on capital employed, Ansell said.
Operational benefits, once fully realized, are expected to pay back any cash outlay within two years, the company said.
Spurring other restructuring initiatives is the integration of BarrierSafe, which the company acquired from Odyssey Investment Partners L.L.C. in January, into a revised Global Business Unit structure, consisting of Medical, Single Use, Industrial and Sexual Wellness. The firm's Specialty Markets unit has been replaced by the Single Use business.
BarrierSafe, with about $300 million in annual sales, produces gloves for the industrial, auto aftermarket, emergency medical services, dental and life sciences industries. It also makes a range of injection molded protective footwear, clothing and related products.
The acquired firm's sales and customer service operations will be merged into the North American region under the leadership of Mike Mattos, former president of BarrierSafe. Ansell said that would increase the scope and scale of the region by about 80 percent
BarrierSafe's non-medical gloves, along with single-use goods made by Ansell, will become part of the Single Use business, which accounts for about 19 percent of Ansell's current revenues. Joe Kubicek, formerly chief operating officer of BSSI, will lead the Single Use operation.
Its medical glove, laboratory, EMS, dental and related medical offerings will be absorbed by the Medical GBU, joining its existing primary surgical portfolio. Medical's share is about 26 percent of the company's pie. Tony Lopez will remain head of the expanded Medical GBU.
The Industrial segment will absorb BarrierSafe's boot and clothing portfolio that was previously part of Specialty Markets. Industrial has a 42-percent share of Ansell's revenues. It will continue under the leadership of Scott Corriveau.
Ansell will relocate its Sexual Wellness headquarters out of Australia to a location in Brussels, which it said is located closer to core international growth markets. Sexual Wellness accounts for 13 percent of the overall business. Otherwise, with the exception of a leadership change in the next few months, it will remain unchanged.
Its changes “mark the beginning of the next phase of our growth journey,” Magnus Nicolin, managing director and CEO of the company, said in announcing the restructuring plan June 30.
“Our global organization structure and our strategic focus, in place for the last four years, have delivered excellent results, with sales increasing 55 percent and EBIT 60 percent, while creating strong returns to shareholders.”
He said the firm is pleased with the value Ansell has realized from its recent acquisitions, including BarrierSafe.
“Our sharpened focus on prioritized verticals, which are pivotal to our future growth, reflects our continued commitment to identifying and developing innovative solutions to meet our customers' very specific and often different needs and achieving attractive organic growth rates in our focus markets,” according to Nicolin.
BarrierSafe's Microflex brand is now an Ansell core brand, but after a review of its existing brand portfolio, the company decided to rebrand existing products and discontinue the use of about 30 older, non-core brands.
Ansell said that its success over several years in strengthening brand equity in core offerings such as Hyflex and Gammex was considered strong enough to expand its market presence without the need for the older brands.
Axing the brands will result is a $69.3 million pre-tax, non-cash write-off but the company said it expects no negative impact on sales or EBIT. Discontinuing use of the brands, it said, simplifies its portfolio and allows for supply-chain efficiencies and more effective marketing to support a smaller number of brands.
In addition, the firm said, its legal structure will be simplified, and about 20 entities worldwide will be eliminated over the next 12 months.