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New CEO announces large-scale redundancies at J. Lauritzen

The persistently challenging market conditions have forced J. Lauritzen's newly appointed CEO, Mads Zacho, to implement a significant reduction in the number of employees at the Danish carrier. "Necessary," Zacho tells ShippingWatch.

After J. Lauritzen being spared huge lay-offs for years despite several massive deficits, the approximately 200 employees at the carrier's headquarters near Copenhagen were Tuesday informed of a planned and considerable reduction in the number of onshore employees.

The carrier's relatively new CEO, Mads Zacho, has already informed some 30 people – corresponding to 15 percent of the employees – that their positions will be terminated. The large organizational change was subsequently presented to all the employees. The jobs set to disappear are somewhat evenly distributed among dry bulk, gas, and administrative staff, though like with a majority of the jobs disappearing from the latter category.

Mads Zacho confirms the decision to ShippingWatch, explaining that he regrets the move in terms of the impacted employees, though he also describes it as a necessary step in terms of getting the company's finances back on track.

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"We've analyzed our cost base and compared it to our competitors', and we've assessed the scope of our costs in relation to our business volume. This showed a need to adjust the organization, as I've informed all employees of today. At the same it's of course also important to ensure that we have the competencies necessary to take the business forward. As such, we've looked closely at the various divisions, as there's a big difference between dry bulk, which is highly focused on forwarding, and the gas division, where we run the entire supply chain internally," he explains.

According to Zacho – who took over as chief executive in September last year, switching from a position as CFO at Torm – it obviously came as a shock to the affected employees that J. Lauritzen is now, like many other carriers, forced to lay off staff.

"It's a very emotional thing to have to say goodbye to skilled employees. But it was necessary in light of current market developments. A smaller organization will enable us to speed up the efforts to once again become a profitable carrier, though I can't list specific numbers illustrating the effect. The decisive thing in this regard is how the dry bulk market develops," says Mads Zacho.

He had only served as CEO for less than two months before the carrier once again published negative results, which even saw the otherwise profitable gas carrier take a hit.

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The third quarter operating deficit came to USD 12.9 million, a slight decline from an operating deficit of USD 12.2 million in the same period the previous year. For the first three quarters of 2016, J. Lauritzen suffered a negative operating result of USD 43.1 million, a deterioration from 2015 when the first nine months of the year produced a deficit of USD 30 million. The carrier also downgraded its projected full-year result for 2016.

"In Q3 we reduced our exposure in continued challenging market conditions in dry bulk as well as tank and our newbuilding commitments have been reduced to one part-owned bulk carrier. Due to the sustained weak dry cargo markets we have lowered our EBITDA estimate for the full year," noted Zacho in the interim report.

In his first interview after taking over as CEO, Zacho told ShippingWatch in October that his top priority is to secure a credit deal with the four banks backing J. Lauritzen, namely Danske Bank, Nordea, Enskilda, and Danish Ship Finance.

"The top priority is to create financial flexibility. I've started on this process with the four banks, and I'm putting time and energy into it. I hope it will be settled in the first quarter of 2017," he said.

The new chief executive at that time already expected that the carrier would be struggling with a weak dry bulk market for a long time to come.

"In broad strokes, 2017 will be another difficult year. We probably have to look to 2018 before things turn around. Today, it's a fact that in dry bulk, nobody's making money," said Zacho.

Employees on the carrier's vessels will not be affected by the redundancies, which are expected fully realized by the end of 2017.

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