Bathroom equipment manufacturer Qualceram Shires yesterday issued a profit warning and announced the closure of one of its three manufacturing plants.
The Arklow, Co Wicklow-based group also disclosed plans to sell and lease back four properties in Britain and Ireland in an effort to trim its debt.
Qualceram has been fighting to restructure its operations amid disappointing sales levels following the acquisition of Shires in 2000. The latest moves will see the closure of its ceramics plant at Hanley in Stoke-on-Trent with the loss of 134 jobs. A further 16 jobs will go elsewhere. Hanley currently accounts for 20 per cent of the group's ceramics requirements but is the least modernised of Qualceram's operations and has the highest cost base.
Chief executive Mr John O'Loughlin, said: "Turnover in Shires UK has still not achieved its potential during 2002 and the shortfall has a direct impact on the bottom line due to the group's fixed cost structure. The closure of Hanley will reduce the fixed cost base. "The fact is that our problems are not demand related, they are internal."
The move comes as the group revealed it would not achieve market expectations on sales or results for the full year. The market had been looking for a 10 per cent rise in sales. Forecasts for Qualceram had already been reduced following interim figures, which showed a 58 per cent fall in pre-tax profit and a 10 per cent fall in sales.
A company spokesman said performance had failed to meet expectations as absenteeism at Hanley, particularly during the World Cup finals, hit unit costs.
"We have to guarantee profit and cash at current levels of sales, even though those are lower than we would want," said Mr O'Loughlin, who said the group was taking a conservative view on turnover for 2003.
He said the latest restructuring amounted to the completion of the integration of Shires, using Shires' assets to pay the cost of the acquisition.
The sale and leaseback deal will have to be approved by an extraordinary general meeting in relation to the British properties. Mr O'Loughlin said the proposal, which will bring in €30 million before costs and tax, would reduce the company's gearing from 128 per cent to less than 60 per cent.
Analyst Mr John Mattimoe, of Merrion Stockbrokers, welcomed the move to pay down its high debt levels, but said this was only one element of the challenge facing the company.
"The company's real potential attraction to investors is in proving that it can get appropriate sales out of a high fixed cost base," said Mr Mattimoe. "The company has had time to do the necessary restructuring and to deal with the challenges it faced. Now it will have to deliver on the sales side and, until then, there will be no significant re-rating."
