Indo Internacional has decided to dismiss 294 employees out of its total staff of nearly 1,000 people as part of a major reorganization that will involve its disengagement from the retail sector and from the production and sale of sunglasses and prescription frames.
The Spanish company has also decided to shut down its remaining sales subsidiaries in France, Italy and China, while outsourcing any non-strategic activities. The French unit was liquidated at the end of November. The Italian unit, which suffered from the loss of an important client, should follow next month.
Antoni Olivella, the longtime chief executive of Indo, is going to leave the company, while Juan Casaponsa, the experienced Spanish executive who was named executive chairman in 2008, will stay on board. Olivella is widely known in the industry as a former president of the European Sunglass Association and, subsequently until last July, of Eurom 1, the European ophthalmic industry federation.
According to rumors that could not be confirmed at the time of going to press, Olivella and other officials of the company are planning to set up their own operations to take over the production of frames and some of the retail stores. Both businesses have been losing money in the last few years, due in part to insufficient economies of scale, limited outsourcing and a very tough market environment in Spain.
The frames and sunglass unit, which currently represents around one-fourth of the Indo group's total turnover, consists essentially of various licensed brands ? Paco Rabanne, Carolina Herrera, Chupa Chups, Purificacion Garcia and the more recent McLaren and Custo Barcelona lines ? and the distribution in Spain of the Levi's and Seiko spectacles of Grasset. The assets in this department include a joint venture factory in China to which Indo has been transferring rather slowly the manufacturing activities it performed in Spain and the Mediterranean Basin.
Grasset is one of the creditors of Indo, but it is partly protected from its insolvency due to the fact that it markets its Carolina Herrera line in France. Indo also had a cross-distribution agreement with Viva International, but it is not sure whether it is still in place. None of Viva's brands is features on Indo's website.
Indo's retail operations consisted until recently of 24 optical retail stores that have been running in Spain under the Novolent banner. Many of them were acquired in 2009. Reportedly, they have been suffering a sales decline of more than 15 percent in recent months and suppliers have been delivering products to them against cash because of Indo's financial problems. Indo announced the voluntary bankruptcy of its two retail subsidiaries, Novolent and Eurooptica, last September. A few days ago, it announced the conclusion of the sale of 10 of these stores to the growing MasVision group, which is controlled by Hal Trust through GrandVision (see the following article).
Indo has described the divestitures as part of a ?viability plan? that is intended to focus the company on lenses and equipment, which have higher added value, backing up its activities in these two areas with outstanding customer service. The plan is meant to ensure the continuity of Indo and to pull it out of the voluntary bankruptcy proceedings that started last June in a context of credit restrictions and decreased consumption levels.
Indo's latest income statement shows that its total sales declined by 6.1 percent to €67.3 million in the first nine months of 2010. The company attributes the decline to lower consumption levels in Spain and other European countries.
A big decline in the gross margin was caused by the fact that Indo's results were boosted by €15 million in the same period a year ago by the sale of technology to Hoya as part of a strategic alliance in the lens sector. That deal enabled Indo to renegotiate its debt of €35 million in the summer of 2009, while obtaining a new loan of €8 million.
The company managed to reduce its operating costs by €6.1 million in the nine months ended last Sept. 30, but could not avoid an operating loss of €10.4 million before amortization (Ebitda), compared with a profit of €3.8 million.
Indo ended up with a net loss of €19.9 million for the first 10 months of this year, compared with a loss of €2.0 million, due also to restructuring charges of €4.9 million linked to the reorganization of its sales structure and the shutdown of a lens laboratory in Madrid and a lens factory at Vilafant, near Girona.