TriMas Corporation (TRS - Free Report) , a manufacturer and distributor of engineered and applied products has initiated facility consolidation actions to more efficiently utilize existing locations and better serve its customers.
The actions are incremental to certain facility closure and consolidation efforts completed over the past year as part of TriMas’ Financial Improvement Plan (FIP). The actions constitute the company’s continuous improvement initiatives which will impact each segment.
In its Aerospace segment, production of the Paris, AR facility will be consolidated into the Ottawa, KS facility. In the Engineered Components unit, activities at two Tulsa, OK facilities will be consolidated into another existing location in the state.
Additionally, production in the Packaging segment in Mexico City will be consolidated with a recently launched facility in San Miguel de Allende. Finally, within the Energy segment, TriMas is exploring options to improve the performance of its Wolverhampton, U.K. facility.
Details of FIP
During the third quarter of 2015, given the uncertain economic environment and the impact on net sales and profitability of lower oil prices, a stronger U.S. dollar and slowing industrial production, TriMas announced a FIP to improve profitability, cash flow conversion and operational efficiency. The FIP consisted of headcount reduction, manufacturing and administrative cost reduction and facility consolidations.
As part of the FIP, the company targeted cost actions to yield $15 million of annual savings, accelerating an additional $5 million of savings initiatives in the Energy business, with the remaining $10 million of savings expected to be spread relatively evenly across the remainder of its business.
Benefits of Consolidation
TriMas’ consolidation actions signify positive steps toward streamlining its infrastructure to drive performance. Moreover, by implementing the FIP, the company aims to lower the cost structure, which will allow it to improve profitability.
Certain activities at the impacted facilities may continue through the end of the year and into early 2017 before the consolidation efforts are finalized. TriMas will provide more information related to these consolidation activities, expected one-time costs to achieve and estimated future savings, on its third-quarter earnings call.
TriMas continues to restructure its energy business to improve cost structure, including consolidating certain facilities, starting up a lower cost manufacturing facility in Reynosa, Mexico, and adding experienced resources to the leadership team.
The mining behemoth, Caterpillar Inc. (CAT - Free Report) , which belongs to the same sector as TriMas, also boosted its restructuring actions. The company has effectively reduced $1.1 billion in costs over the past one year and has a target of over $2 billion for the full year. The stock has delivered a strong one-year return of over 39%.
Another industrial products sector stock, Century Aluminum Co. (CENX - Free Report) is implementing a number of actions to reduce costs and preserve cash amid a weak pricing environment. The company expects to achieve annualized savings of $40−$65 million through these measures that includes operating expense cuts and headcount reduction. The company has witnessed a one-year return of over 50%
Another player in the same sector, Avery Dennison Corporation (AVY - Free Report) pursued aggressive restructuring activities and productivity actions that will help achieve its long-term financial goals. The company is reducing fixed costs, localizing material sourcing and responding more quickly to changes in customer needs by decentralizing decision making. The stock has witnessed a one-year return of over 42%
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