Ansell to slow production, cut jobs as demand wanes

RICHMOND, Australia—In part a response to recent headwinds such as low demand and destocking, Ansell Ltd. is focusing on the "next phase of growth." The group said last month that it will implement a restructuring program that relies on short-term production and job cuts as well as long-term investments in both automation and digitization.

In addition to simplifying the organizational structure, Ansell expects the moves to better align customer- and market-oriented growth strategies. It comes in response to recent challenges, including low demand and destocking.

In the near term, Ansell looks to temporarily slow production of finished goods—an effort to normalize inventory. This plan includes a reduction in manufacturing employee numbers.

Further, the group said in its full-year financial report, it is looking to reduce costs through "less duplication of leadership responsibility."

Combined, these efforts should help to offset the "unfavorable impact of slowing production."

Ansell expects the moves to improve cashflow in fiscal 2024, which started in July, but it also temporarily will lower earnings (EBIT) due to reduced manufacturing overhead absorption.

Meanwhile, the group will be investing in improving longer term manufacturing productivity through increasing automation and leveraging new operating systems. This should involved "limited changes" to its manufacturing configuration where optimization opportunities exist.

In parallel to the initiatives, the Richmond-based group will also accelerate its digitization strategy, using cloud-based supply chain planning and manufacturing ERP systems.

Ansell expects the cash cost of the initiatives to be $40 million and $50 million, with the majority to be incurred in fiscal year 2024.

The investments are expected to deliver annualized pre-tax cost savings of $45 million by fiscal 2026.

For the fiscal year ended June 30, Ansell reported a 16 percent year-on-year decline in earnings to $206 million, on 15-percent lower sales of $1.65 billion.

The health care gloves unit, in particular, experienced "significant customer destocking" throughout the fiscal year as channel partners and end users reduced inventory.

Segment sales declined 21 percent as destocking affected all business units.

The decline, however, was more pronounced in surgical and life sciences segments in the second half of the year.

Volumes in the examination gloves segment exceeded the first half with stabilized pricing, Ansell added.

The most significant destocking, the group noted, occurred in life sciences segment, where the "very conservative positions" taken by buyers during COVID translated to "a more prolonged inventory unwind."

The industrial gloves and products segment recorded "good top-line growth," posting an overall year-on-year increase of 4.3 percent in revenue.

The growth reflected increases in both halves of the year, across mechanical and chemical gloves segments.