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Elcoteq to cut 5,000 jobs worldwide
Electronic components contract manufacturer Elcoteq, which has struggled for some time now with spiralling debts, has announced that it will cut 5,000 jobs worldwide in 2009.
The company will close its factories in Romania, the United States, and St. Petersburg, Russia.
In China the Shenzhen factory will be incorporated in the Beijing production plant.
With the staff cutbacks, Elcoteq is trying to prepare itself for the lowered demand brought about by the economic downturn.
Worldwide the company employs around 21,000 people. In Finland, fewer than 200 workers remain on the company’s payroll. The announced layoffs do not apply to them.
At the beginning of December the company announced 50 redundancies in prospect in Finland.
Elcoteq has wrestled with economic difficulties for quite some time now.
The primary reason for the hardships is the considerable decline in commissions from Nokia. Elcoteq has not been able to respond to the requirements that Nokia has set to its subcontractors.
The central issue has been the inadequacy in the range of services. Nokia’s competitor RIM is now Elcoteq’s largest client.
In its Thursday announcement the company estimated that in October-December its net sales shrank by 16 per cent or EUR 889 million compared with the last quarter of 2007. These preliminary figures are in line with the estimates given during Q3 of last year.
In July-September of last year the result before taxes and appropriations was EUR 7 million on the negative side, while operating profit measured against net sales was a round zero.
The solvency ratio was 15.9 per cent, which means that the company is up to its armpits in debt. To strengthen its balance sheet the company plans to increase its share capital by the end of March.
“The firm’s own capital will be strengthened, but not through borrowing. A capital loan is not a primary option for us”, says Elcoteq President and CEO Jouni Hartikainen.
In that case the remaining likeliest alternative is an issue of shares directed either to new or old investors.