Delta Galil Industries Ltd. (Nasdaq: DELT; TASE: DELT), controlled by chairman Dov Lautman, is launching a new restructuring plan, which will begin during the second quarter. As “Globes” reported in early March, Delta Galil will make an additional write-off of $10-12 million. The restructuring will include lay-offs, structural changes and the closing of factories “in order to improve the company’s competitiveness and performance” as the company put it.
Delta Galil said the restructuring plan will include the closing production facilities in Israel and Jordan, and transferring some production to cheaper sites. The company will also revamp its offices in the UK and US and financial units, which it says will save costs and boost synergy. The company will expand operations in Egypt. The company plans to fire 600 employees in Israel over the coming year, after already firing 500 employees in the last wave of lay-offs 18 months ago.
The company said that it would report the restructuring expense in its financial report for the first quarter of 2007. It will report an expense of $5 million for compensation for laid-off employees, and $5-7 million for the drop in value of assets on the closing and downsizing of manufacturing operations.
A year ago, Delta Galil underwent a complex restructuring, after it failed to spot the rapid changes in the global textiles market caused by cheap Chinese goods flooding the West. This eroded Delta Galil’s profit margins, forcing it to change its business model and focus on brand-name goods and technology-centered production, rather than on manufacturing.
Although that restructuring put Delta Galil back into the black during the second half of 2006, it seems that further market changes caused by intensifying competition led the company’s customers to press for lower prices. As a result, the company is launching a new restructuring plan aimed at adjusting its cost structure so it can survive in the present market climate.
Published by Globes [online], Israel business news - www.globes.co.il - on March 29, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007