Ericsson to close telecom cable operation, sells power cable unit to nkt cables
Citing overcapacity in the market and more activity in Asia, Sweden's Ericsson announced that it is ending its telecom cable operation within its Networks business unit in Europe, a decision that primarily impacts its operations in Hudiksvall and Stockholm in Sweden.
A press release said that Ericsson, which earlier in May announced the sale of its power cable manufacturing operations to nkt cables, plans to reduce Hudiksvall by 318 positions. It said that it plans to reduce the Stockholm workforce by 36 positions. It noted that union negotiations have been initiated and are expected to be completed during the third quarter 2013.
"As the market for copper cable has declined and the market for fiber cable has grown over the last years, the production has shifted towards Asia, where the majority of the business volumes for fiber cable are found," the release said. It noted that in Europe there is more production than demand for both copper and fiber cables.
"It is a tough message to bring to our colleagues in the telecom cable operations in Hudiksvall and Stockholm," said Tomas Qvist, head of Special Products in business unit Networks, and head of Human Resources for Ericsson in Sweden. "The decision is based on the fact that Ericsson's production of telecom cables is small from a global perspective, and that we also have a small market share. There is overproduction on the cable market in Europe. Unfortunately, our production has not been operating at full capacity for a long time and has struggled with profitability."
Net sales for telecom cables operations in 2012 amounted to approximately US$173 million, the release said. The current best estimate is that restructuring charges will be about of about US$26 million, the release said. The news, it said, does not impact the process for the divestment of the power cables operations to nkt cables, which earlier this month announced that it had agreed to buy Ericsson's power cable operations for approximately US$38 million, a move that it said would strengthen the company's position in the market for medium- and low-voltage cables in the Nordic region.
A press release said that nkt cables will gain approximately 320 employees and a factory in Falun, Sweden, which contains production facilities, and a development department as well as sales and administration. The factory's location and product portfolio will be complementary to nkt cables' factory in Asnæs, Denmark, thereby creating a cost-efficient production and logistics set-up for servicing the Nordic market, it said.
Ericsson's Energy Business had 2012 revenues of approximately US$225 million, the release said. It noted that the company is a leading supplier of medium-voltage products to the Nordic utility groups. Ericsson's energy business, it said, "is an important supplier of low-voltage products to the wholesalers and installers in Sweden, and a significant portion of revenue also comes from innovative specialty power cables."
The release said that the acquisition is a central element in the growth strategy for nkt cables' Products business unit. "It will add a number of unique products to nkt cables' portfolio, strengthen development competences for new and innovative power solutions, and improve scope for servicing Nordic customers," it said.