Dentsply Sirona (Nasdaq:XRAY) announced a cost-saving restructuring plan that includes layoffs of up to 10% of its employees.
Charlotte, North Carolina-based Dentsply plans to reduce its global workforce by 8% to 10% as part of its plan. The dental equipment maker’s most recent headcount had 15,000 employees, meaning the cuts could affect as many as 1,500 workers.
The plan aims to improve operational performance and drive shareholder value creation.
Dentsply said in a news release that it expects the effort to achieve at least $200 million in annual cost savings over the next 18 months. It features a new operating model to streamline the organization, enhance efficiency and drive future growth.
“The actions we are planning follow our comprehensive review of the business and will enable Dentsply Sirona to improve its execution, build a winning portfolio, return to growth, and generate consistent returns,” said Simon Campion, Dentsply CEO. “We are acting with urgency to implement this operating model, which we believe will drive overdue organizational integration and improve organizational accountability and efficiency.
“While actions that impact our team are difficult, I am confident that this plan, along with anticipated outcomes from other workstreams, will set Dentsply Sirona on a trajectory to achieve stronger, more predictable results and add significant value for all stakeholders.”
Shares of XRAY sat practically unmoved in midday trading at $35.81 apiece today.
About the new Dentsply Sirona operating model
In addition to the workforce reduction, Dentsply announced a number of planned measures in its restructuring plan.
The company plans to implement five global business units to drive enterprise integration and align its product portfolio with its growth strategy. This structure aligns with Dentsply’s commercial structures to improve transparency and communication.
Dentsply also commenced “central functions and infrastructure optimization” to support overall efficiency. It created the role of SVP of quality and regulatory to elevate this function within its management team. The company said it simplified its management structure to get in line with industry best practices, too.
In connection with the plan, Dentsply expects to incur up to $165 million in non-recurring charges. It plans to expense the majority of those changes in 2023.
Dentsply said it also plans to undertake a review of its product offerings. This review could inform decisive actions toward streamlining the portfolio and delivering higher returns. It expects simplifications such as plant and network efficiency improvements.
The company said it expects to deliver meaningful earnings improvement through this plan by the end of 2025. It projects adjusted earnings per share of $3 in 2026. Management says it expects a “transition year” in 2023 as it puts the plan into place in a “challenging external environment.”
Restructuring effort follows a challenging year for Dentsply
In November, Dentsply announced the results of an internal investigation into actions of its former CEO and CFO. The company’s board’s audit committee found no evidence of intentional wrongdoing or fraud on the part of its former CEO or CFO.
Dentsply disclosed to the SEC that it was investigating the use of incentives to sell products to distributors during the third and fourth quarters of 2021. Even though the company board’s internal inquiry is over, the SEC continues to look into matters at the company.
The company fired former CEO Don Casey in April. Previous CFO Jorge Gomez soon left his new job at Moderna. Former BD executive Simon Campion is now CEO, with former Integra Lifesciences COO Glenn Coleman joining as CFO in September.
Later that month, Dentsply reported underperforming third-quarter financial results. However, Campion claimed at the time that good times were ahead — perhaps hinting at the coming restructuring.
“We are not satisfied with third-quarter results,” he said. “However, this quarter marks an important turning point as we enter our company’s next chapter. We have initiated a comprehensive review of our entire business in order to improve our execution, build a winning portfolio, and return the company to growth.”