SHERBROOKE, Que.–Furniture producer Shermag Inc., whose majority stockholder is activist investor George Armoyan, says a crisis in Canadian manufacturing has forced it to close half of its plants and lay off 320 employees.
Closing down are the Dudswell and Cookshire-Eaton plants in Quebec and the Edmundston and Saint-Francois-de-Madawaska plants in New Brunswick.
The moves come after a review of Shermag’s operations by the board of directors aimed at returning the struggling company to profitability and ensuring its long-term viability.
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“It is with the utmost regret that the company is forced to take such measures,” chairman Claude Pichette said in a statement.
“The effect of factors such as the continued strengthening of the Canadian dollar, the crisis of the mortgage loans in the United States and its effect on furniture sales, as well as Asian competition, force Shermag to take strict measures such as the plant closures to return to profitability as quickly as possible.”
Shermag(TSX:SMG)recently reported that second-quarter losses more than tripled to $3.7 million and revenue fell 40 per cent to $27.2 million.
Armoyan has pledged to turn Shermag around, saying the company faces a “perfect storm” of troubles.
Shermag created a board committee to analyze the situation on Nov. 20, the same day that Jeffrey Casselman resigned at president and CEO. Under his leadership, Shermag closed a series of plants, laid off workers and transferred some of the company’s manufacturing to China in a bid to cut costs.
Casselman had suggested he was working on a plan to reduce costs further.
In February, Shermag announced plans to permanently close two Quebec factories already on temporary layoff and significantly reduced staffing at almost every plant. The moves, effective in April, affected 283 workers in Disraeli and St-Etienne-de-Lauzon, Que., and caused the company to write down $3.5 million on long-term assets.
On the TSX, company shares climbed from their all-time low by gaining 5 cents or 7.69 per cent in Monday morning trading to 70 cents.
In 2003, Shermag shares reached nearly $16. Over the last year, the peak has been $2.68.
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