Ekornes, the largest furniture producer in Norway and owner of the brand names Ekornes®, Stressless®, Svane® and IMG, has shared an operational update that sees it rightsizing operations in Norway, restructuring activities in Asia, and implementing further measures to manage cost and margin development.
The company said that while demand for home furniture increased significantly during the Covid-19 pandemic from 2020 and into 2022, this is now returning to pre-pandemic levels. Combined with a general slowdown in the global economy, this has a negative impact on Ekornes’ sales and order development. At the same time, cost inflation puts pressure on margins, particularly within raw materials and transportation, negatively affecting group earnings in the fourth quarter of 2022 and moving into 2023.
Fredrik Ødegård Nilsen, interim CEO, said: “The market environment is changing and Ekornes must adapt production capacity and protect profitability in order to stay competitive. Our leading products and brands are sold across the world, and we need to be cost-efficient and flexible to take good care of our customers, partners and employees.”
Ekornes is rightsizing production capacity throughout the group and plans workforce reductions bringing the organisation back to pre-pandemic levels.
Operations in Norway will be downsized by up to 150 full time equivalents (FTEs). This comes in addition to a reduction in operational capacity of 80 FTEs implemented from September last year. Moreover, support functions and headquarters will be downsized by up to 40 jobs.
In the Asia Pacific region, Ekornes will concentrate operations in Thailand, discontinue activities in Vietnam, and reduce the workforce by approximately 700 staff. Ekornes has made substantial investments in the production facility in Thailand to enable the concentration of all Asian operations at one location. This process will be completed during the first quarter of 2023.
Ekornes added that it is implementing further price increases to mitigate the effects of increased costs, while reducing capital expenditures and indirect costs, in addition to optimising the product portfolio, to protect profitability and financial robustness.
The effects of rightsizing operations in Norway, reorganising activities in Asia and the other initiatives are expected to materialise from the second half of 2023.
“The ability to deliver relevant products with short delivery times is core to Ekornes and has been crucial for the performance of the group, supported by a comprehensive distribution network and a favourable diversification of raw material souring and market presence.
“Efficient production, strong brands and innovative product development are at the core of the group’s competitiveness and necessary to maintain our strong market positions and attractiveness towards our customers and end-users,” Ødegård Nilsen concludes.