New ag corporate strategy by Hemisphere GPS
Streamline and Simplify Operations
As part of the company’s initiative to ensure profitable and sustainable growth:
- All production activities currently conducted in Calgary will be transitioned to Hemisphere GPS’ primary outsourced manufacturing partner.
- The Calgary office, which currently supports manufacturing, the Precision Products business and the corporate administration functions, will be closed following the relocation of key functions to Kansas, thereby reducing overhead.
- The two-business-unit and supporting structure will be reduced to a single business, thereby eliminating redundancies, reducing costs and achieving operating efficiencies.
- The company will rationalize products, engineering projects and geographic markets.
These initiatives will simplify the overall business and are expected to reduce manufacturing costs, improve gross margins and reduce operating overhead.
The company will adopt a market responsive product development focus with a customer-driven culture. As such:
- The marketing function will become a core competency of the company. A seasoned agriculture executive has already been hired to lead this initiative as vice president of marketing.
- Increased emphasis will be placed on focused market and customer research driving greater innovation in, and higher returns from, the product development process.
The restructuring will take place largely over the next 12 months, with the bulk of the costs being recorded in the fourth quarter of 2012. Total workforce, including employees and contractors, will be reduced from 273 to about 170. Of the reduction in workforce, approximately 40 employees are associated with Precision Products, and approximately 60 are associated with the outsourcing of manufacturing, closure of the Calgary office and streamlining of the organizational structure. The existing agricultural business will not be interrupted during this process.
Upon completion, the savings from the overall restructuring are estimated to be approximately $7 million per annum through reduced manufacturing costs, improved gross margins and reduced operating overhead.
The cash cost of the restructuring is estimated at $5.5 to $6.5 million. Non-cash costs of the restructuring are expected to be $4 to $5 million. The company believes it has sufficient capital to complete the restructuring without the need for additional capital.