German injection molder Balda AG said it could take a sizable hit, up to 10 percent of sales, as a result of losing business of an eyewear manufacturer at its U.S. factories, which operate as Balda C. Brewer Inc.
Bad Oeynhausen-based Balda declined to identify the customer, other than saying it was a leading sunglasses manufacturer, but it said in a June 12 announcement that the client decided to bring the business in-house.
“Balda AGs main customer in the eyewear sector has informed the company today that due to an internal strategic decision they will be manufacturing their products by themselves in the future, which are now in substantial parts being produced by Balda's U.S. company Balda C. Brewer, Inc.,” the company said.
Industry sources speculated that the customer is Italian fashion eyewear maker Luxottica Group SpA, which owns high-end sunglass maker Oakley Inc., which is based in Foothill Ranch, Calif.
Oakley has sunglass manufacturing in Foothill Ranch and Luxottica has been expanding its in-house manufacturing worldwide in plastics and metals, according to the company's website.
It's the latest in a series of setbacks for Balda's U.S. operations. The German parent announced in January that it had relieved CEO Chuck Brewer III and Chief Operating Officer Michael Brewer of their duties at the Balda C. Brewer subsidiaries, which have several locations in California.
That came shortly after Balda, which is listed on the Frankfurt Stock Exchange, said that former owners of C. Brewer had submitted arbitration claims against it, in an apparent $5 million dispute over bonus payments stemming from Balda's 2013 acquisition of C. Brewer.
Balda said the loss of the eyewear business could lead to higher sales initially but that will largely come to an end in mid-2016.
It also said it is expecting charges related to impairment of assets in connection with the C. Brewer purchase and one-time expenses connected to restructuring in its current fiscal year, which ends June 30, but it said the exact amount was still being determined.
It said the eyewear customer now accounts for about 10 percent of Balda's global sales, and said the effect will be felt primarily beginning in the 2016-2017 fiscal year and “will slow down the growth of the group.”
Balda said in May it expected sales of between 80 million and 82 million euros ($90.1 million-$92.3 million) in the current fiscal year on what it termed at the time a “solid growth course.”
But it also warned then that it may not make earnings targets because of one-time costs “primarily attributable to known legal disputes. They arose in particular from provisions for ongoing management costs in the USA and an increase in the risk provision for litigation costs.”