UPDATE 2-Sandvik says to cut costs, jobs after demand fall
(adds analyst, company comment, background, updates share)
By Victoria Klesty
STOCKHOLM, Nov 20 (Reuters) - Specialty steel and tool maker Sandvik (SAND.ST) said on Thursday demand for its products had fallen sharply in recent weeks, forcing it to cut production and thousands of jobs and sending its shares down about 5 percent.
Sandvik, which makes tools for metalworking and machinery for rock-excavation as well as stainless and high-alloy steels, said the global market was "very weak", especially in the automotive and engineering industries.
"The decline described in conjunction with the report for the third quarter has deteriorated significantly in several segments," the company said in a statement.
The Sweden's manufacturing industry has been hit hard by a sharp slowdown in demand as the global financial crisis has pushed major export markets into recession and strangled access to credit for purchases of products ranging from cars to specialty metals.
Ford-owned (F.N) Volvo Cars and unrelated company truck maker Volvo (VOLVb.ST) have said they will be cutting thousands of jobs, while mining companies across the world are slashing output as prices fall.
Other Swedish companies exposed to the vehicles sector, such as bearings maker SKF (SKFb.ST), have also warned of cuts to production and staff, and specialty steel maker SSAB (SSABa.ST) said on Wednesday it had seen a sudden erosion in demand.
Sandvik said it will cut staff by about 1,500 its Materials Technology unit, but all business units are affected.
"I had thought they would be able to keep up a little better. But it is not surprising considering the signals coming from the auto industry", Evli analyst Magnus Axen said.
Sandvik has also ended some 600 temporary contracts at its Mining and Construction unit, and there are possible temporary layoffs of 200 employed in Finland.
Production will be moved from the division's drilling rigs unit in Perth, Australia, to other locations, a measure that will affect 50 employees.
Sandvik's Tooling unit will end temporary contracts for nearly 300 staff.
"These measures have been deemed necessary, while we cannot rule out the need for additional measures at a later stage," Sandvik Chief Executive Lars Pettersson said in the statement
DECEMBER DIRE
The measures were hinted at in the company's third-quarter report on Oct. 30, but negative signals from large customer segments such as the auto and mining industries are increasingly worrying, Sandvik spokesman Jan Lissaker told Reuters.
"December could be a real dire month, where we will not be able to get our products out in many segments," Lissaker said.
Lissaker did not wish to disclose any details on costs associated with the announced job cuts, but said they were not big enough to call for Sandvik to take a charge.
"They have said earlier that they would cut staff so that was not that surprising. What draws attention is they are saying about markets having weakened further since the third-quarter report, and that is only a few weeks ago," Cheuvreux analyst Johan Eliason said.
By 1045 GMT, Sandvik's shares had recovered some of an initial fall to be trading 4.6 percent lower at 41.40 crowns, up from an earlier low of 39.30 crowns.
The bearish sentiment rubbed off on other stocks in the sector with Swedish rival Atlas Copco (ATCOa.ST) down 4.7 percent, compared with a 2.7 percent fall in the Stockholm bourse's blue-chip index .OMXS30. (Additional reporting by Oskar von Bahr, Johan Ahlander; Editing by Andrew Macdonald)
