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"There's been a dramatic drop-off in sales volume and orders, so it's not completely surprising that Gardner Denver would decide to accelerate some of the restructuring things that they were planning," Next Generation Equity Research analyst Ned Borland said.
The company, which initiated cost-reduction activities in the third quarter to counter the slowing economy, said it will also close a plant in the United Kingdom as it integrates CompAir Holdings Ltd, a UK-based compressor maker it acquired in October.
"There could be more (job cuts) when the company delves deeper into the integration process," Borland said.
As of October, Gardner Denver had about 8,000 employees, including salaried and hourly workers, a company spokeswoman said.
Gardner Denver would also freeze hiring and take strict controls on discretionary spending as a result of the continued deterioration in its end market conditions.
"Orders for our products serving industrial end market segments, in particular in the U.S. and Europe, have slowed significantly faster than was originally expected," said Barry Pennypacker, Gardner Denver's chief executive.
Gardner expects a charge of about $5 million in the fourth quarter related to severance expenses, reducing earnings per share by about 7 cents.
These initiatives are expected to reduce costs by about $7 million in 2009, Gardner Denver said.
The company expects to issue its initial full-year 2009 earnings forecast when it announces results for the fourth quarter of 2008 on or about Feb. 12, 2009.
Analyst Borland, who rates the stock "buy," said it would be a challenging start for the company next year. "When they do (issue outlook), you are probably looking at an EPS that's likely to be below this year's forecast."
The company's shares fell to a low of $21.52 but pared some losses to trade down more than 5 percent at $22.49 Friday afternoon on the New York Stock Exchange. The stock has shed 63 percent since June when it had touched a high of $57.87.
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(Editing by Gopakumar Warrier and Deepak Kannan) Keywords: GARDNERDENVER/ (mary.meyase@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: mary.meyase.reuters.com@reuters.net)
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