Krones AG is eliminating 500 jobs in 2020 as part of several measures intended to improve the company's profitability.
As part of the strategy, Krones said it will cut 300 jobs in Germany and 200 additional jobs worldwide. The cuts will mainly impact administrative positions.
All locations — throughout Germany and at the international subsidiaries — will be affected by the job cuts, according to Krones spokeswoman Ingrid Reuschl. The job cuts will be done in a "socially responsible manner," she said in an email to Plastics News.
The company has already been reducing jobs this year and implemented a hiring freeze in the spring, she explained.
"Due to the natural fluctuation and some voluntary termination contracts, around 200 jobs were saved [at] the five German locations," Reuschl said. "In return, around 110 trainees were taken over who completed their apprenticeship at Krones in 2019."
By slashing those personnel costs, the company said it will lead to provisions of approximately 30 million euros ($33.3 million). Additionally, for 2020-21, Krones said it is expecting a positive earnings before taxes (EBT) effect amounting to approximately 150 million euros ($166.7 million) from reducing personnel costs, optimizing its portfolio and other efforts.
Additional portfolio optimization measures will be announced in March 2020, the company said.
"2019 is and will remain a very challenging year for Krones. Regarding the development of orders and sales we are already back on the right track," Krones CEO Christoph Klenk said in a statement.
"Nevertheless, we need to further improve our cost structures and optimize our portfolio," he added. "While these measures will have an impact on our EBT margin of the current fiscal year, we are convinced that the positive effects will already offset the costs in two years from now."
Krones, based in Neutraubling, Germany, makes PET blow molding machines as well as turnkey filling and packaging lines. Globally, the company has more than 17,000 employees.
In July, Krones said increased costs and an unfavorable product mix were burdening its profitability, prompting its executive board to initiate efforts to increase earnings and strengthen the long-term profitability of the company.
In addition, the company cited uncertainty from several macroeconomic issues, including the unsolved trade war between the United States and China, a looming Brexit, and discussions on the sustainability of PET packaging that is adversely affecting customers' decisions to invest.
But despite the headwinds, sales were up 7.3 percent, totaling 2.8 billion euros ($3.2 billion) in the first three quarters of 2019 compared with the same period a year ago. Order intake for the three quarters totaled 2.9 billion euros ($3.2 billion) — up just 0.6 percent compared with the year-ago period.
For the full year, ending Dec. 31, Krones is expecting a sales growth of 3-5 percent, depending on any macroeconomic and key market developments.