Benzinga | Jan 27, 2021 08:15AM EST

Coty Announces Consolidation Of Fragrance Manufacturing Operations With Intended Closure Of Site In Cologne, Germany; Co. Sees ~$80M Of Savings In Q1

Coty Inc. (NYSE:COTY), one of the world's leading beauty companies today announced the planned closure of its manufacturing site in Cologne, Germany. The move comes as Coty consolidates global fragrance operations.

The Cologne site currently employs approximately 300 people and produces a range of fragrance products. The closure, which will occur in stages, will be preceded by the completion of all appropriate legal processes and is expected to be completed by Summer 2022.

Richard Jones, Chief Global Supply Chain and R&D Officer at Coty, said:

"We have taken this difficult decision to consolidate our fragrance manufacturing capacity in order to increase the efficiency of our operations. Coty is the world's leader in fragrance, but our network has been operating over-capacity in recent years and the considerable impact of COVID-19 has accelerated the need to take action. This move will address the imbalance to increase our competitiveness and ensure we fully leverage our scale and remaining manufacturing sites. This is a hard but necessary part of the transformation of Coty: building a stronger, leaner and more focused business that's well-positioned for the long-term."

Wolfgang Reissner, Coty VP Operations EMEA & General Manager HFC Prestige Manufacturing Cologne Germany GmbH, added: "We appreciate that this will be a very challenging time for our affected employees in Cologne. Our priority now is to work closely with employee representatives on a detailed timeline and process for the employees and the site closure."

Coty will adapt its other fragrance manufacturing sites as part of its evolving operational approach. In addition to addressing overcapacity, the changes are expected to deliver annual net savings for the company.

Last year, Coty announced a wide-ranging strategy to return the company to profitable growth, reduce net debt, streamline operations and address long-term financial challenges. This approach includes targeting a net reduction in costs of $600 million by the end of FY2023 and delivering more cost-effective and integrated operations. With supply chain optimization across manufacturing, distribution and demand planning expected to contribute over 20% of the targeted $600 million cost savings, today's announcement presents a necessary step in reaching the company's goals.

Coty reported strong progress towards the cost reduction targets during its Q1 earnings: delivering approximately $80 million of savings in the first quarter against a target of over $200 million by end of FY2021.