October 8, 2019
Elanco advances margin expansion with business restructuring
Since its initial public offering last year, Elanco Animal Health Inc. has continued to evaluate its capabilities to meet its goal of becoming an agile company that is focused exclusively on animal health and delivering on its "Innovation, Portfolio and Productivity" (IPP) strategy, the company said in end-September.
As such, the company has announced its intent to eliminate approximately 250 positions across multiple locations and functions. This includes exiting R&D operations in Prince Edward Island, Canada; ceasing certain operations at the company's Wusi, China site; and streamlining operations at Speke, England.
The proposed actions are another step in Elanco's journey to build a stronger, more competitive animal health company. These efforts build on Elanco's productivity agenda, which has included consolidating suppliers and contract manufacturers, as well as rationalising products.
"Our board and management team continually assess our organisation to identify and execute opportunities to become a fit-for-purpose animal health company," said Todd Young, executive vice president and chief financial officer of Elanco.
"While decisions that affect our team are difficult, today's action will tighten our focus, centralise and strengthen key capabilities, and increase our agility to quickly meet the changing needs of our customers in a dynamic, global market. At the same time, these actions advance our productivity agenda and our margin expansion efforts, driving greater efficiency within our global footprint and allowing Elanco to focus investments in our growth areas."
The cost of this restructuring will be approximately US$50 million with approximately US$30 million relating to non-cash asset write-downs. Elanco expects to realise at least US$12 million of savings in 2020 from this restructuring. An estimated restructuring charge of US$38 million will be incurred in Q3 2019 with the remaining US$12 million to be incurred in 2020.
Elanco continues to make significant progress on its efforts to build new capabilities and systems required to complete its stand up as a fully independent business.