Source: Sioux Falls Business Journal
Raven Industries Inc. has laid off 115 employees, including 75 in the Sioux Falls area, in response to a persistently weak agriculture market.
"It's a tough market, and we expect it to be difficult for a while," president and CEO Dan Rykhus said. "It's about protecting the core (of the business) and making sure we take actions early enough that will allow us to be competitive and the proper size."
Employees learned of the job losses in early March and were given severance packages. It's part of a larger cost reduction plan estimated to save $13 million annually. Raven has not had layoffs of this scale in Sioux Falls since 2009, executives said.
"They're all across the board, from production and administrative and sales," said Jan Matthiesen, vice president of human resources.
The Sioux Falls-based manufacturer has reported decreasing earnings throughout its fiscal year, which ended Jan. 31. Net income for the year dropped 26% to $31.7 million, or $0.86 per share, compared with $42.9 million, or $1.17 per share for fiscal 2014. While the company's Aerostar and engineered films divisions grew operating income for the year, it wasn't enough to compensate for a $22.4 million decline in operating profit from the applied technology division.
Raven thought that spring — traditionally a busy season — would cause order volume to pick up. That didn't happen, Rykhus said.
"It's just going to be a year where those orders aren't coming," he said. "Our customer relationship health is sound, very strong, and to a customer they tell us we're not losing market share. The orders just aren't there. Farmers don't have money to spend on equipment. They've done fine the last two or three years, but there's a lot of anxiety."
The job cuts affect Raven's applied technology division and corporate services staff and also include some employees in Missouri and Texas. Earlier this year, Raven had about 1,180 employees, including 113 acquired when the company bought Madison-based Integra Plastics. Some vacancies since then have gone unfilled, and the company will have about 1,000 employees by the time the restructuring is over.
"We are one of the larger employers in Sioux Falls, but we're by no means such a large company that we don't know our employees on a personal level," said Stephanie Herseth Sandlin, Raven's general counsel and vice president of corporate development. "No company wants to do this, but it's appropriate and necessary for the long-term future of the company."
Others in the sector also have cut jobs in recent months. Illinois-based Deere & Co., the maker of John Deere equipment, has announced three rounds of layoffs in 5 months including more than 800 plant workers in Iowa.
"A number of our customers and competitors in the ag sector are experiencing the same headwinds," Herseth Sandlin said. "The farmer opens his shed and says, 'We're good here,' and at the same time he's penciling out how to stem his losses for the year with commodity prices being low and the other input costs being stubbornly high."
Raven "made every effort to cut discretionary spending before team members' positions were affected," she added. At its peak, the applied technology division accounted for 65% of Raven's net income. That caused more exposure when the agriculture market turned. Rykhus said in restructuring, he hopes to achieve more balance among the divisions.
The plan is to invest in engineered films and Aerostar, which Rykhus said have shown strong growth profiles and could benefit from additional acquisitions. Those also are the divisions benefiting from the company's relationship with Google Inc. Raven continues to design and manufacture high-altitude balloons for the tech giant, which is trying to bring Internet service to remote areas of the world.
Making tough decisions to invest in growth opportunity and exit businesses that aren't working is part of the formula that has sustained Raven since 1956, Rykhus added.
"We've gone through this many times," he said. "I've been here 24 years. I've been through it several times myself. I've seen the Raven formula and the willingness to look further out and allocate our capital and attention toward markets that will give us long-term growth. Days like this are where it's hard. Days like this are where the rubber meets the road."