Recticel announced it intends to close its Dutch Comfort Foam converting unit in Bladel by mid 2012. The decision will affect 51 employees.
The costs of closure which we estimate at about € 1m will be provisioned for in 2011. Recticel commented that the exceptional costs should be compensated for by the expected capital gain on the sale of the building.
Our View:
Recticel has in the recent past already launched a number of initiatives to improve profitability in the flexible foams business. In August 2011, Recticel announced plans to close its Carobel comfort foam converting factory located in North Shields (UK) before the end of the year, involving the lay-off of 52 employees. Back in February 2011, the company announced a restructuring plan for its Spanish Flexible Foams business, involving the closure of the production plant in Legutiano, the closure of Comfort converting operations in the Santa Perpetua de Mogoda plant, the closure of the comfort foam production plant Transfoam and the reduction of a number of central positions, leading in total to about 90 redundancies.
The announcement of the closure of the Dutch site is fairly small news and does not change our view on the investment case. We stick to our Hold rating and € 7.5 target price for now.