Shares in Acco soared by 17% earlier this month following the release of its second quarter results.
During an investor conference call earlier this month, analysts were quick to congratulate the company on its performance, validated by a 17% increase in the share price (before the sub-prime related market falls).
During the webcast, CEO David Campbell and CFO Neal Fenwick outlined the key elements of Acco's strategy. Here's a summary of the main points.
The main thrust of the webcast was that June 2007 represented the halfway point in Acco's 3-year merger transformation plan, and that this plan was on track to achieve the desired improvements in Acco's business and operating model. So far, Acco has closed 22 facilities, reduced headcount by 1100 and eliminated $60 million of low margin sales. By the end of 2008, a total of 39 facilities will have closed, job reductions will have reached 2500 and a further $50 million of low margin sales will have been eliminated.
A number of the plan's initiatives were outlined:
Business Focus
A global objective is to refocus Acco into a business focused on 4 clearly-defined consumer needs - Office Products, Document Finishing, Computer Products, Commercial Laminating - and to position themselves as the number 1 brand in each of the segments.
Product Development
There will be a focus on a strong stream of new product development, "something that ACCO Brands has lacked in the past". It was confirmed that a proportion of the merger savings is being re-invested into innovation, for example with the establishment of product development centres of excellence.
SKU Reduction
One target is to become a low-cost supplier in each of the product categories. Currently, the project management office is running 94 cost reduction initiatives. Some cost reduction initiatives include streamlining product assortments. For example, a more pan-European approach to the product assortment is being developed. Therefore over 2000 SKU's will be eliminated in the EU in the second half of 2007. This will consist of SKU's that can generally be substituted. New products will be suitable for global markets.
Production Outsourcing
The company is striving to achieve a more cost-effective infrastructure. In terms of product manufacturing, this means moving to a 30 - 70 in-house/outsourced production ratio, with 10 out of 34 factories having ceased production so far, and more closures to follow.
Shared Services Infrastructure
Internal departments such as HR, Finance, IT & Supply Chain are being collapsed into global shared services units. This is expected to have a 2% savings impact on SG&A expenses in 2008. For example, in IT, the US and Canada group operations have moved onto a single Oracle IT system. The EU currently has 14 separate IT systems, the goal being to consolidate these into 7 by 2008 and into just 1 by 2010.
Supply Chain Improvements
Another goal is to optimise the global supply chain. In terms of distribution, the Booneville (Mississippi) primary distribution centre will be operational by the first quarter 2008, and in the EU multiple DC's are being collapsed into 1 main site in Börn, The Netherlands. Worldwide, 11 small DC's have already closed and 7 more are scheduled to close over the next 18 months. However, to date there have been no bottom line improvements from the supply chain changes. In fact, it was described as a "drag" and the company admitted that is was "suboptimally" shipping at the moment while the DC changes took place.