Black & Decker earnings jump 35% 1,100 jobs to be cut, most of them in European divisions

April 18, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

Black & Decker Corp. reported sharply higher profits yesterday and revealed plans for some American-style downsizing in its lagging European divisions: the elimination of jobs.

The company said it will cut 1,100 jobs from its European tool business and "targeted restructuring programs in certain other units.,"

A spokeswoman declined to be more specific, saying the moves are still being planned. But most of the shrinking will happen in Europe, she said.

By cutting 4 percent of its global work force, Black & Decker will become the latest corporation to wipe out jobs even as its profits float upward.

The Towson-based tool maker earned $34.6 million in the first quarter of 1996, it reported yesterday. That's a 35 percent increase from the same period in 1995 and more than half of what Black & Decker earned during all of 1993.

Black & Decker officials and Wall Street analysts downplayed the chances that big job cuts will spread to the company's U.S. operations. Black & Decker employs about 3,000 people in Maryland and 29,300 worldwide.

"The North American power tool business is in extremely good shape," said spokeswoman Barbara Lucas.

Of large job cuts, she said, "this is a European issue."

Mrs. Lucas was unable to say how many people Black & Decker employs in Europe; one financial analyst estimated that it's between 8,800 and 10,000.

Black & Decker stock rose by 25 cents per share yesterday to $36.875.

Financial analysts credited its higher profits in part to booming U.S. sales of new gadgets: Black & Decker's SnakeLight flexible flashlight, its VersaPak cordless power tools and its DeWalt line of power tools for professionals.

U.S. unit sales of the company's consumer items jumped by 12 percent for the January-March quarter.

But unit sales of consumer products in Europe, which make up about a fourth of Black & Decker's total business, dropped by 3 percent for the quarter. Profits there have been soft, too, analysts said, partially because of the sluggish European economy.

Through cost cutting, Black & Decker thinks its European results can improve even if the economy there doesn't. Like many multinational corporations, Black & Decker once organized its European units nation by nation, granting relative independence each.

"A lot of the same functions were performed within each country: advertising, planning, new-product development," said Susan Gallagher, who follows Black & Decker for NatWest Securities Corp. Now, she said, the company is "viewing Europe as one market" and trimming intercontinental duplication.

Black & Decker already had closed factories in Germany and Switzerland and transferred their duties to its two major remaining European power tool plants in Italy and England.

"Obviously, they're making their European operations leaner, which should lead to stronger profits in Europe," said Michael Mead, who follows Black & Decker for Baltimore investment house Legg Mason. "They have certain return goals. Rather than wait and see if the economy improves, they decided to move toward their goals by taking out some costs."

To pay for the changes, Black & Decker set aside $67 million from from its first-quarter profit. It also recorded a one-time gain of $70.4 million for the quarter from the sale of its defense-related PRC Inc. unit.

In private discussions with analysts yesterday, Black & Decker officials also hinted that they won't be selling more businesses anytime soon.

The PRC sale was driven largely by the company's desire to raise cash to pay off debt. Some analysts wondered whether it might not shed other businesses, such as its True Temper Sports unit or a division that sells glass-bottle-making machines.

Yesterday, company officials told analysts "that their new goal is to get debt to less than 50 percent of their capital structure within three years, and they don't need to sell any more businesses to achieve that," Mr. Mead said.

The company's $34.6 million first-quarter net profit amounted to 35 cents per share, up from $25.7 million, or 27 cents a share, a year ago. Wall Street had expected per-share profit of about 34 cents.

Pub Date: 4/18/96

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