Ciba slashes 2,500 jobs

Armin Meyer, Ciba's chief executive, announces the colour of the half-year figures Keystone

Ciba Specialty Chemicals has announced that it plans to make 2,500 job cuts in the next three to four years, 350 of them in Switzerland.

The unveiling of the job losses – the group’s fourth cost-cutting exercise in five years – comes as the Swiss chemicals giant reported a first-half drop in net profit to SFr95 million ($77.32 million).

Most of the job cuts are expected to occur through natural attrition, although there will be a number of redundancies, the Basel-based group said on Thursday.

The majority of posts will go in Europe and the Americas, affecting one-sixth of the group’s 15,000 workforce after the sale of its textile effects unit to United States company Huntsman. The restructuring programme is intended to save up to SFr500 million by 2009.

According to Alexandre Pasini, an analyst from Lombard Odier bank, these latest cost-saving measures are necessary, although he was surprised by the extent of the job cuts.

“It’s part of a continual process. There are strong structural pressures in the specialty chemical industry; companies’ power relative to suppliers or customers is limited and they have to cut costs to remain competitive,” he told swissinfo.

“The cost-cutting is geared towards improving the company operationally. The question mark hangs over how much money they can actually save and retain given these pressures.”

On Thursday Ciba, the world’s largest maker of colours for plastics, reported that in the first half sales rose nine per cent to SFr3.29 billion, while operating profit excluding restructuring costs increased by five per cent to SFr259 million.

Disposal costs

However, in the second quarter it made a loss of SFr239 million, linked to the costs of the disposal of its textile dyes unit.

Ciba said it had budgeted for SFr250-300 million in restructuring costs for the 2006-2009 period.

Ciba’s chief executive Armin Meyer said raw materials and energy costs had peaked.

“We don’t see more pressure on the raw materials side,” he said. “We will continue to raise prices, particularly for the new products which we launched.”

Nina Baker, an analyst at bank ZKB, told Reuters that the result was positive overall given higher raw materials prices and the loss on the sale of its textile unit.

Ciba reported it expects to improve full-year earnings helped by increasing focus on its core business and continuing cost-cutting measures.

Criticism

Swiss unions have criticised the announced job cuts.

For Switzerland’s largest trade union, Unia, employees are again paying the price for company mismanagement.

“There is no faith in the management, which should accept its mistakes and quit,” it said. The union Syna echoed this decision, stating that Armin Meyer, Ciba’s chief executive, should resign.

According to the Swiss employees’ association for the engineering, chemical and pharmaceutical industries, this fourth cost-cutting exercise in five years shows that Ciba’s business strategy is a failure.

“Each restructuring eats up resources that would be better used in research, marketing or sales. Axing jobs to improve profit margins is not the way forward,” it said.

swissinfo with agencies

In brief

Ciba Specialty Chemicals is one of three companies created by the merger of Ciba-Geigy and Sandoz in 1996, along with Novartis and Syngenta.

The group supplies dyes and pigments to textile, car, cosmetic, plastics, paper and construction industries.

Basel-based Ciba SC employs around 15,000 people on 69 sites in 22 different countries.