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The month in news

 

Finding some seasonal cheer to report on in the news section of this Winter issue of OPI has been no easy task. Even as we go to press Steelcase has said that it will lay-off up to 900 employees on top of previously announced cuts and the looming US employment figures look like showing the highest monthly number of job losses for almost 30 years. Meanwhile, analysts are predicting that unemployment in the US and UK could rise to 10 percent by the beginning of 2010.

 

Major retailers Circuit City and Woolworths have gone into administration in the last month. UK stationery wholesaler Magson has gone under. While OfficeMax, Office Depot, ACCO and Herman Miller are just some of those in our industry who have recently announced staff reductions and there is no evidence to suggest that this trend is not going to intensify in the coming months.

 

We know 2009 is going to be a tough year in the OP world but it will undoubtedly be an extremely interesting one too, and 12 months from now we may be looking back on some major changes that will shape our industry in the years to come.

 

In the meantime, my best wishes to all OPI readers over the holiday period and for those of you who don’t know OfficeMax’s elfyourself.com website, spending a few minutes turning yourself and your colleagues into dancing elves can be very therapeutic in these stressful times!
Andy Braithwaite, News Editor, OPI

 

BTS sales drop in Italy

 

Sales of writing instruments in the crucial back-to-school period in Italy fell this year says market research firm GfK.

 

According to GfK, sales of writing instruments in Italy for the period June-September 2008 fell by 1.7 percent in value terms and by 5.4 percent in volume terms compared to the same period in 2007.

 

GfK audited different sectors of the writing instrument market.
The sector showing the most significant decrease was colouring, down by 8 percent in volume and by 5.4 percent in value.

 

The writing market posted a 2.4 percent decline in volume, but in value terms edged up by 0.4 percent.
The remaining two audited sectors, correction and marking, both registered negative growth in terms of value, falling by 3.1 percent and 1.9 percent respectively.

 

As far as distribution channels are concerned, GfK says the mass merchandisers (including supermarkets) came off worst, with sales declining both in terms of volume (-6.9 percent) and value (-2.6 percent), while office equipment retailers and stationers saw volumes fall by 1.7 percent and sales value by 0.8 percent, ahead of the overall market.

 

ACCO confirms temporary shutdowns

 

Following local press reports, ACCO has confirmed to OPI that it will be temporarily closing three of its US facilities in the New Year.

 

The facilities at Booneville (MS), Ogdensburg (NY) and Ontario (CA) will close between 2-9 January as ACCO looks to cut costs as demand for its products slows down.

 

The temporary shutdowns will not affect ACCO’s Canadian facility in Brampton, as incorrectly stated in certain press reports.

 

The New Year closures are expected to affect more than 1,100 employees who, OPI understands, will be placed in a temporary non-work non-pay status, meaning that they will not be able to take paid leave during this period.

 

ACCO’s VP of Corporate Communications, Rich Nelson, told OPI that essential customer service operations would be provided during this period and that customers had been notified of the plans.
The announced manufacturing shutdowns follow 10 days of unpaid time off – or furloughs – that US-based staff have been required to take during the Thanksgiving, Christmas and New Year holiday periods.

 

The unpaid time off actions are expected to generate around $6 million in savings for ACCO in the third quarter.

 

"The unpaid time off initiative is for US-based employees," said Nelson in an email.
"ACCO Brands operations in the rest of the world have developed different temporary cost-reduction plans best suited to their operations and markets."

 

Jobs to go at furniture manufacturers

 

Leading office furniture manufacturers Herman Miller and Steelcase have said that they are to make job cuts as orders begin to slow.

 

Herman Miller has announced a cost reduction plan of $60 million and says it intends to lay off between 400 to 650 employees into early 2009.

 

The actions come in response to a decline in orders and in anticipation of further global economic weakness through calendar 2009.

 

"Herman Miller is not immune to the current global economic slowdown," said CEO Brian Walker.
"We’ve experienced a decline in orders over the past few months as the credit market turmoil and declining corporate and consumer demand have accelerated."

 

Most job cuts will affect workers in Michigan, but they also include other US and international locations.
Meanwhile, Steelcase is considering losing 300 hourly workers as it predicts a slow beginning to 2009.

 

Gigante set to pursue Depot bid

 

Office Depot’s joint venture partner in Mexico, Gigante, says that it has not given up hope of taking full control of the business.

 

According to reports in the Mexican press, Gigante has secured the backing of Citigroup to finance an improved offer and fund the growth of the operations.

 

The reports suggest that Gigante has relaunched its bid following Depot’s recent Q3 results and believes that a cash offer in the region of $480 million – over 90 percent of Depot’s entire market capitalisation – would be too good to turn down.

 

During Depot’s third quarter conference call, the company’s President International, Charlie Brown, said that a stumbling block was the 40 percent tax charge that Depot would have to pay on a sale of its Mexican operations, a figure seen as an "exaggeration" in Mexico.

 

Depot says that it is comfortable with its liquidity position following the renegotiation of a $1.25 billion asset-backed credit facility, and there are currently rumours that an announcement on store closures to ease working capital requirements will be made before the end of the fourth quarter.

 

Given Depot’s depressed share price ($1.82 at time of writing), the greatest potential value to shareholders on a sale of the Mexican business could be the repurchase of the company’s shares.

 

However, under the terms of its new credit agreement, Depot is currently prohibited from buying its own shares, so this avenue is closed.

 

For the time being, it may prefer to hold on to a business that is expected to bring in between $35-40 million in net profit this year.

 

A decision to sell now could be viewed as an admission that Depot’s cash position is not as strong it had made out before.

 

DS Smith warns of cuts

 

Spicers’ parent company DS Smith says that it will be implementing cost-cutting measures across all areas of its business in the next few months. The news came as DS Smith released half-year results that showed profits down at Spicers and warned of a tough year ahead in the OP wholesaling sector.
Group Chief Executive Tony Thorne refused to be drawn into specifics during the results conference call, but said that a new action plan was currently being finalised with a view to reducing the group’s structural cost base by around £15 million ($23 million) a year.

 

In particular, the company said it was "reviewing further steps for improving the competitiveness of our UK network of distribution centres". As far as Spicers is concerned, Thorne revealed that cuts would be made in its ‘established’ businesses, which include the UK, France and Benelux. Only last year Spicers closed its London distribution centre.

 

Turning to the wholesaler’s performance in the six months to the end of October, the top line looks healthy with reported sales up by 16.5 percent to £350.7 million.

 

However, half of this growth was due to currency translation with the pound falling sharply against the euro over the last few months, whle the rest of the growth was attributed to sales in the EOS category.
At the same time, sales in higher margin general office supplies decreased and Spicers’ operating profit slid downwards by 19.1 percent to £5.5 million, meaning that operating margin came in at a measly 1.6 percent of sales.

 

German vendors look to France

 

German OP vendors Sigel and Maul have signed a cooperation agreement for the French market.
The agreement sees Sigel representing Maul in France, initially in three product groups from the Maul catalogue – cash boxes, weighing products and key cabinets. Maul says that the aim of this partnership – which covers all OP distribution channels – is to raise awareness of its brand name in France.
As part of the Standort Deutschland manufacturers’ initative the companies have already worked together over the last couple of years.

 

Mergers and acquisitions

 

Kyocera Mita is strengthening its distribution in Europe after announcing that it is to take a majority stake in German document management firm Triumph-Adler. Kyocera already holds almost 30 percent of TA’s shares, but has made an offer that will see its stake rise to between 60-75 percent. TA will remain as a listed company in Germany and the existing management team is expected to continue to run the company. Kyocera says that it plans to significantly expand the cooperation between both companies and wants to apply TA’s direct sales model across the whole of Europe, while TA says that the deal will help it to break into new markets such as the UK and Spain.
Nuremberg, Germany
French compatibles manufacturer Armor is in the hands of new owners after a buyout by an investment firm and the company’s management team.
Lyon-based investment firm Orfite has acquired 90 percent of Armor’s share capital with the remaining 10 percent now held by seven of the company’s management team, headed by CEO Hubert de Boisredon. The deal ends a search for a buyer for Armor following the decision by the previous majority shareholder, the Rufenacht family, to divest its holding. De Boisredon said that the new owners are will complete existing projects and that Orfite is looking for a long-term partnership.
Amor says that it expects its 2008 results to be similar to those of 2007, when it achieved a net profit of v4.4 million ($5.7 million) on sales of around v150 million.
Nantes, France