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Kvaerner to restructure
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April 13, 1999: 11:28 a.m. ET
U.K.-Norway engineering firm plans to sell Sea Launch, shipbuilding units
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LONDON (CNNfn) - Kvaerner, the diversified U.K.-Norwegian engineering group, announced plans Tuesday to float its satellite and major shipbuilding assets as part of a massive restructuring plan.
The group plans to slash half its 50,000 workforce and pull out of all money-losing sectors, including shipbuilding.
Kvaerner has placed its stake in Sea Launch, the satellite platform system, up for sale and also may float its four largest shipyards, including the U.S. naval dockyard at Philadelphia.
Kvaerner builds the floating platforms for Sea Launch, which it owns in partnership with Boeing Co., Russia's RSC-Energia and Ukraine's KB Yuzhnoye.
Sea Launch made its first successful launch last month from a platform built by Kvaerner and has firm orders to place 16 satellites in orbit.
Market strategists praised the Kvaerner plan, which could generate earnings growth of 10 percent a year from the smaller company following an upturn in the Asian economies where it is strong.
The group aims to generate annual cost savings of one billion Norwegian crowns and raise 3.5 billion crowns ($452 million) from asset sales. Kvaerner will cut 25,000 jobs from its 55,400 workforce and take a first-quarter provision of one billion crowns.
The main focus of the plan involves pulling out of the shipbuilding sector, where it employs 10,600 at yards in Scandinavia, the U.K., Singapore and the U.S.
The company will seek to float the largest yards, dispose of them individually or secure a joint venture partner for future disposal.
Kvaerner has focused on special vessels including cruise ships, container ships and ice breakers. It has suffered from global overcapacity and the fallout on sea trade from Asian economic turmoil and industry consolidation among shippers.
The restructuring plan is the first move by chief executive Kjell Almskog, who took over last December after profit tumbled. He launched a comprehensive operational review.
Almskog has been praised by market strategists for his commitment to focusing the group on engineering, contracting and construction. "He is definitely the right man for the job," said Jon-Olof Jonasson at Handelsbanken Securities.
He said the sale of the shipbuilding business lifted uncertainty about what the group plans to retain.
Kvaerner stock suffered in the wake of the Asian crisis, plunging from a peak of 410 euros in 1997 to hit bottom at 70 euros. The shares dropped in early trading Tuesday but closed down just 2 percent at 133 euros.
The restructuring will be put to Kvaerner's shareholders May 6, together with plans for a two billion crown rights issue.
Steel, engineering and construction activities also will be "radically down scaled," though no details on individual job losses have been revealed.
Jonasson said the restructuring provisions probably will be scaled down to about 2.9 billion crowns from the projected 4 billion crowns. 
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