‘We must not rest on our laurels’

GEA revenue growth for 2015 overshadowed by 1,450 job cuts

By Jenny Eagle

- Last updated on GMT

Jürg Oleas, CEO, GEA Group Aktiengesellschaft at the AGM.
Jürg Oleas, CEO, GEA Group Aktiengesellschaft at the AGM.

Related tags Fiscal year

GEA said it expects to achieve a moderate organic growth in revenue and an operating EBITDA of between €580 and €620m in the current fiscal year 2015, but its growth is overshadowed by 1,450 job cuts.

Announcing its first quarter order intake of €1.1bn and its ongoing ‘Fit for 2020’ project, Jürg Oleas, CEO, GEA Group Aktiengesellschaft said the company has finalized its restructure of two Equipment and Solutions Business Areas, a Global Corporate Center and its Shared Service Centers has been given the go-ahead.

Higher level of planned downsizing

GEA Group Aktiengesellschaft HQ in Düsseldorf, Germany.

He said the restructuring of the group has fewer levels of hierarchy and less complexity and will be implemented by the end of 2016, generating minimum savings of €125m per year as of the fiscal year 2017.

This increase in potential savings is mainly due to the higher level of planned downsizing that currently foresees a reduction of around 1,450 full-time employees​,” added Oleas.

Last year’s preliminary estimates had still suggested a net reduction of 1,000 jobs. GEA’s senior management is engaged in a close dialogue with the employee representative bodies. Negotiations on the procedures governing the implementation of the headcount reduction as well as the cushioning of the ensuing social effects are under way​.”

Speaking to FoodProductionDaily, Marc Poenitz, head of corporate communications/corporate press officer, GEA Group, said the company has to prepare itself for the future.

Our current market position is the result of the work performed over the previous years. However, we must not rest on our laurels. Markets, competitors, customers, technologies and national economies are subject to constant change​,” he said.

The program ‘Fit for 2020’ is not just a job-cutting program. It is just the piece concerning our organizational structure inside a comprehensive strategic review, reorganizing the whole company back in 2012​.” 

He said unfortunately the firm could not have made savings in other areas without culling jobs in line with its OneGEA blueprint presented in August 2014.

'We will change our organization still in Q2 2015'

Last year, our initial estimates had suggested a provisional net reduction of 1,000 full-time equivalent employees. After developing our leaner GEA structure with fewer levels of hierarchy and less complexity, we currently envisage a net reduction of approximately 1,450 jobs​,” added Poenitz.

Against this backdrop, the envisaged savings of at least €100m per year by the end of 2017 are expected to climb to a minimum of €125m. One-offs will also go up​.

We are well aware of the fact these job cuts will be painful for our employees. We have carefully weighed the pros and cons of our decisions. Nonetheless, the Executive Board is convinced we need the new group organization with its leaner structures to lead the company into a sustainable, safe and successful future​.

Due to the ongoing negotiations we will change our organization still in Q2 2015​.”

Oleas announced in the AGM first quarter order intake amounted to approximately €1,100m, up circa 8.7% on the previous year. Organic growth totalled around 3%.

He said on the one hand, the company had to cope with a decline in oil and gas as well as the marine industries, while it benefited from an increase in the food and beverage sector.

This was mainly due to currency translation effects, consolidated revenue climbed more than 5% to roughly €1,000m. The ratio of received orders to generated revenue (book-to-bill ratio) attained a level of around 1.1 in the first quarter of the year.

Under the same conditions, its cash flow driver margin is expected to reach between 9.0 and 9.5% not taking into account first savings generated in connection with the reorganization of the Group.

GEA will submit a more detailed outlook on its business progress as well as a detailed overview of expected savings and expenses under the ‘Fit for 2020’ project with its first quarter report on May 11, 2015.

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