ZURICH Swiss dental implant maker Straumann (STMN.S) said it would axe roughly 150 jobs to boost margins as it grapples with sluggish demand in Europe, its biggest market.
The euro zone debt crisis has battered sales of dental implants made by Straumann and its Swiss rival Nobel Biocare (NOBN.S) as cash-strapped Europeans, worried about the downturn, cut back on non-essential dental treatment.
Chief Executive Beat Spalinger said the company had decided to slash 150 jobs by the start of 2013 - roughly 6 percent of its global workforce - after operating margins fell below 15 percent in the first half of the year, a level he deemed "unacceptable".
The axe will fall on jobs at Straumann's headquarters in Basel as well as sales subsidiaries around the world while manufacturing will be spared, Spalinger said.
Third-quarter sales rose 4 percent to 156.8 million Swiss francs ($167.41 million), compared with an average estimate in a Reuters poll of 158 million.
The company said the cost cuts would improve annual operating profit by 35-40 million francs by 2014. It plans to book an exceptional charge of 15-20 million francs in 2012.
Sarasin analyst David Kaegi said investors would welcome the bigger-than-expected cost cuts, but cautioned there appeared no end in sight to the current slump in the dental market.
By 0811 GMT, Straumann's shares, which have shed almost 28 percent so far this year, were trading up 6.1 percent at 124.10 francs, outperforming a flat European healthcare sector index .SXDP.
Straumann, which makes more than half of its revenue in Europe, said sales in the region fell 2.5 percent in the third quarter to 82.3 million francs, hampered by austerity measures that weakened consumer confidence further.
In the worst affected markets of Spain and Italy, Spalinger said he did not expect any improvement in the near future.
The European sales decline was partly offset by North America and Asia Pacific where sales leapt 19 percent and 6 percent respectively buoyed by favourable currency effects.
Straumann also said it would increase its stake in Dental Wings, a maker of dental software and scanners, to 45 percent from 30 percent for an undisclosed sum. The move is part of a trend towards digital dentistry to optimise production.
The company confirmed its outlook for full-year sales to be at least in line with 2011 and for growth in the global tooth replacement market to remain flat at best over the full year.
($1=0.9366 Swiss francs)
(Editing by Mike Nesbit and David Cowell)