Quebecor Adjusts Guidance, To Close 7 Plants and Cut 2400 Jobs
Press release from the issuing company
MONTREAL--Oct. 9, 2001--Quebecor World today revised its earnings outlook for the third quarter 2001 based on already weak markets that have been further disrupted by the September 11th terrorist attacks in the United States.
The Company will continue to deliver double-digit operating income margins but is reducing guidance for Q3 earnings per share on a fully diluted basis by approximately 15%. Quebecor World expects Q3 diluted EPS to be in the range of $0.45 to $0.50 compared to $0.58 for the same period last year. For the full year, the Company is reducing guidance to between $1.55 and $1.65 per share.
The revised estimates principally result from the slowing demand for printed products, particularly in the United States and Europe because of an overall economic slowdown and a significant drop in advertising spending. This has been exacerbated by the tragic events in New York and Washington.
"Although printing has historically proven to be recession resistant we are not immune to the economic consequences of these horrific acts, especially when typically 50% of our net income is earned in the last four months of the year,'' said Charles G. Cavell, President and CEO of Quebecor World Inc. "We will aggressively protect our industry leading margins on the work available to us and management will be pro-active in reducing costs and increasing efficiencies in this period of reduced volume.''
As a result of the unprecedented negative market conditions and the poor economic outlook, management is taking this opportunity to set the stage for more extensive and aggressive cost controls and operational improvements across its global platform. The Company is currently analyzing the extent of special restructuring and other charges to be recognized in Q4. The initial estimate is approximately $225 million pre-tax, representing approximately 5% of the consolidated asset base, with a cash component of approximately $100 million. Most of the cash costs relate to plant closures, severance from workforce reduction, real estate and other commitments.
It is anticipated that the restructuring plans to be implemented will result in the closing of 7 facilities out of 160 facilities globally and the elimination of 6% of our workforce. The Company expects these actions, once fully implemented, to represent an annualized pre-tax earnings improvement of approximately $45 million.
"We learned a great deal about the effective use of scale during the process of integrating the Quebecor Printing and World Color printing platforms in America over the past two years,'' said Mr. Cavell. "We will apply those lessons during this exercise to realize even greater efficiencies. The redeployment of assets into larger and more efficient facilities will have the added benefit of reducing fixed costs while retaining production capacity to be available when the economy rebounds.''
"Quebecor World has faced tough times before and come out stronger,'' added Mr. Cavell. "I am confident our product mix, geographic diversification, employee base and strong management team make us uniquely positioned to continue our historic strong compound annual growth rate when demand and market conditions improve. These continuing cost and operational initiatives will better serve our customers and improve returns for our shareholders.''
Quebecor World continues to focus on strengthening its balance sheet in this environment. Management will provide details of its special charge and more detailed guidance for the fourth quarter and preliminary guidance for the year 2002 during its third quarter conference call on October 30, 2001.
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