Macclesfield-based engineering and thermal processing giant Bodycote announced on March 12 a restructuring that will reduce its exposure to the internal combustion engine.
The news came in its 2019 results that showed pretax profit fell 6.3% to £123.9 million on revenue that slipped 1.2% to £719.7 million.
Bodycote said: “The macroeconomic uncertainties that held back some of our market sectors in 2019 still persist as we enter 2020.
“Moreover, while it is clear that we are at a weaker point in the business cycle, it has become evident that there are also some long term structural changes underway in the car & light truck markets.
“This is particularly the case in Western Europe.
“We believe that it is unlikely that the Western European car & light truck supply chains will recover to the same position and profile as before.
“The combination of the macroeconomic uncertainties and longer-term structural shifts will require some consolidation of Bodycote’s facilities.
“As a result, we will be implementing a restructuring plan through 2020.
“The principal focus of the plan is on our Classical Heat Treatment activities in Western Europe, with particular emphasis on reducing exposure to the internal combustion engine.
“At the same time, we will continue to increase our exposure to the new car and light truck supply chains that are being set up in the Emerging Markets with a focus on supporting electric vehicle production.
“We anticipate a P&L charge for this restructuring of c.£30m, approximately half which will be cash cost.
“The payback on the cash cost is expected to be c.2.5 years.”
Bodycote CEO Stephen Harris said: “Bodycote delivered a robust performance in 2019, achieving a resilient operating margin despite challenging market conditions.
“2020 has started with a number of challenges, notably Covid-19, and ongoing international trade tensions.
“The potential impact of the Covid-19 health crisis is difficult to assess at this time.
“However, Bodycotehas a proven track record of margin enhancement through cost management and improving the mix of business and we will continue to manage the cost base in response to market conditions whilst investing in our strategic growth areas of Aerospace, Specialist Technologies and Emerging Markets.”