German banking systems company Wincor Nixdorf is to lay off 500 staff and shift manufacturing to cheaper Asian markets after reporting a 50% drop in profit for the first half of the year.
The company - which sacked its long-standing banking head Stefan Auerbach in February - has revised its earnings outlook downwards following a "continued and substantial decline" in net sales generated within its banking division, which has been accompanied by significant pressure on margins in the hardware business.
The group attributes the poor performance to subdued investment spending in Western Europe and a failure to tailor its products to meet the particular demands of banks in emerging markets.
Preliminary figures show net sales declining by six per cent in H1 and operating profit down by 49% at EUR45 million, compared to EUR88 million in the previous year. Profit for the first six months of the fiscal year declined to EUR27 million, contracting by 53% year on year (previous year: EUR58 million).
In response, Wincor Nixdorf has initiated an extensive downsizing programme that will lead to the departure of 500 staff in Western Europe over the next 18 months, with Germany bearing the brunt of the cuts, accounting for around half of this figure. The company will also look to consolidate management and support functions across Europe into larger centralised units and "sharpen" managerial responsibility for the global banking and retail divisions.
In parallel, Wincor Nixdorf says it will scale back its operations in Western Europe and relocate to the Asia/Pacific region key capacities required for future growth in the emerging markets. Alongside this, production capacities in Germany and Singapore are to be downsized, with more manufacturing work shipped over to China.
The restructuring will incur a charge of EUR40 million this year. Ooperating profit for the full fiscal year is expected to contract significantly to around EUR100 million (FY 2011: EUR162 million), including the EUR40 million charge.