(Adds details, analysts comments)
By Mary Meyase
BANGALORE, Dec 17 (Reuters) - Diversified manufacturer Teleflex Inc (TFX.N) said it would cut about 150 net positions and take related charges, as it tries to address an expected continued weakness in the marine and industrial markets.
The company expects related charges of $10 million to $12 million before income taxes by the end of 2009, of which about 50 percent would be non-cash. It sees a charge of about $2 million for the fourth quarter.
The restructuring actions, which would also consolidate manufacturing and distribution and end certain product lines in the commercial segment, are expected to generate annualized pre-tax savings of $4 million to $5 million beginning in 2010, the company said.
“This is a tactical adjustment to an economic downturn, not a strategic shift that would impact our bullish thesis on the stock,” analyst Christopher Warren of Caris and Co said.
The commercial segment, which accounts for about 16 percent of the company’s revenue, designs, manufactures and distributes products to the global marine, truck and rail, and rigging services markets.
“This (commercial segment) is the most economically sensitive part of Teleflex’s portfolio,” analyst James Lucas of Janney Montgomery Scott said.
Within the commercial portfolio, marine — which accounts for roughly 50 percent of commercial segment revenue — is highly cyclical, while the heavy lift and power units, with each accounting for about 25 percent of the commercial segment’s revenue, are somewhat cyclical.
“The good news is that it’s the smallest piece of the portfolio,” Lucas, who has a “buy” rating on the company, said.
Warren expects the cost cutting efforts to lead to higher operating margins once the economy recovers. Overall, this action impacts roughly 4 percent of the commercial segment revenue, and less than 1 percent of total corporate revenue, he said.
Teleflex, which operates through its medical, aerospace, and commercial segments, expects special charges for 2008 of between 53 cents to 56 cents a share. Including these charges, the company expects 2008 earnings of $3.34 to $3.47 a share.
Beginning 2010, Warren expects related cost reductions to add about 7 cents to 9 cents to earnings.
“In the next 2-4 years, we would expect further commercial business divestutures as these segments recover with the broader economy,” Warren said.
Shares of the company were trading at $46.92 Wednesday on the New York Stock Exchange. (Editing by Jarshad Kakkrakandy)