Slump in mining, oil and gas markets prompts latest Fenner restructuring

PITTSBURGH—Fenner P.L.C.'s restructuring program, introduced in 2015, is apparently a work in progress.

Fenner's latest major move, the third in the last year, is the refocusing and restructuring of Engineered Conveyor Solutions Americas' conveyor belt production plants in North America in an effort to overcome a long slump in the mining and oil and gas industries.

ECS Americas, which is headquartered in Pittsburgh and is a major part of the conveyor belt arm of Fenner Dunlop P.L.C., will cut its work force by about 20 percent and close a large portion of its 285,000-sq.-ft. belt manufacturing plant in Port Clinton, Ohio.

There are two sections to the Port Clinton facility, one with much older and less efficient machinery used to manufacture conveyor belts, according to Scott Frenz, vice president of marketing for Fenner Dunlop Americas. That is the part being closed.

“The portion of the plant with newer, more modern and efficient equipment remains in operation ... with appropriate production staffing to operate the facility effectively,” he said.

Franz said the Port Clinton factory will continue to produce heavy duty fabric and steel cord rubber conveyor belting.

ECS Americas' work force currently stands at a little more than 800. Most of the firm's layoffs will occur by the end of January. In terms of the sites impacted by the staff reductions, a spokesman said Fenner was not disclosing locations other than Port Clinton.

Frenz said that the largest staff cuts are occurring at the Port Clinton facility, which primarily makes conveyor belts for the coal and other mining sectors. It is one of two large production plants operated by the business in North America.

London-based Fenner specifically cited the slowdown of the coal industry, especially in the U.S., as the prime reason for its latest reductions.

In addition to the Americas operation, the company's ECS business is being downsized in South America to reflect changing conditions in the copper mining industry.

Fenner intends to reduce costs associated with support functions, overhead and administration, along with a reduction in service operations associated with the South American operation.

Its latest cutbacks follow reductions Fenner made in its ECS Americas operations in August, including an 11 percent slice of the work force. The cost base of the business was trimmed by more than $9.8 million, or 10 percent, at the time, the company said.

Fenner also consolidated its belting business in early October when it combined its global operations into two divisions, the Northern Hemisphere and Southern Hemisphere/Asia-Pacific, from the previous three, with one director—Cassandra Pan—bowing out.

On Oct. 5, Pan, who served as president of the North American unit and head of ECS Americas, said she was taking early retirement after 17 years with the company.

Edwin Have, who previously headed up ECS-EMEA (Europe, Middle East and Africa), took over for Pan with added responsibilities. He now serves as executive director of the Northern Hemisphere, comprised of the Americas, Europe, Africa, Middle East and India.

David Landgren, who had been responsible for Fenner's worldwide belting operations, took over as executive director of the Southern Hemisphere/Asia-Pacific.

Other belt-tightening and consolidation initiatives were put in place at around the same time.

Fenner's current realignment program for ECS Americas calls for added focus on its industrial belt markets with improvement in customer service and manufacturing efficiency, coupled with development of new, industry specific products.

Other principal elements of the plan include a change in focus within the coal sector toward “customers able to handle the challenges in their markets” and what the firm termed “specific measures to address underperforming non-belt manufacturing activities.”

Those measures, along with greater business efficiency, will be introduced progressively over the remainder of the company's financial year, Fenner said.

The annual cost savings gained from the restructuring was estimated at about $10.8 million, beginning in the second half of fiscal 2016, offsetting the impact of volume declines, according to the firm.

It will cost the company about the same amount to restructure the Americas operation, but it likely won't exceed that figure, the company said. However, it said other non-cash asset impairment charges are expected to arise.

Fenner's restructuring is expected to be complete at the end of its current fiscal year. The company expects the financial returns of ECS Americas to return to more stable levels in fiscal 2017, despite revenues being less than half of those recorded during peak times.