Martek to start layoffs as part of restructuring

By Clarisse Douaud

- Last updated on GMT

Related tags: Martek, Docosahexaenoic acid

Martek Biosciences Corporation has announced plans to restructure
its plant operations, including the layoff of 15 percent of its
workforce, following a review of the company's current production
and cost structure.

The microalgae DHA ingredient manufacturer says it will be improving manufacturing efficiency and reducing the workforce at its Winchester, Kentucky site. The restructuring, to be implemented immediately, is expected to reduce manufacturing costs and operating expenses starting in the first quarter of the 2007 fiscal year and will be realized in full by the second quarter.

The restructuring announcement does not appear to be a lifesaving attempt for the company, as it has been well afloat in recent quarters.

"These actions, while difficult, are essential to Martek becoming a more efficient and stronger company, and should enable the company to better serve its customers and capitalize on growth opportunities for years to come,"​ said Martek CEO Steve Dubin. "In part, this restructuring was made as a result of improvements in Martek's production processes over the last three years that have resulted in meaningful productivity improvements."

Martek has been in a strong financial position and recent developments have included securing a license and supply agreement with General Mills and branding its DHA ingredient as life'sDHA. In the past it has claimed to dominate over 80 percent of the North American fortified DHA infant formula market.

This week it announced a long-term supply agreement with Mission Pharmacal, under which Mission will use only Martek's life's DHA in its prescription maternal and infant products for the next five years.

Studies have shown the omega-3 fatty acid DHA (docosahexaenoic acid) supports the mental and visual development of infants.

The company's Winchester production workforce will be reduced by approximately 100 people and a large portion of production will be transferred to its Kingstree, South Carolina, site.

Martek said the restructuring is expected to result in a gross profit margin improvement of approximately 300 basis points, due in large part to the elimination of idle facility charges.

As a result of the restructuring plan, Martek announced it expects to incur charges of approximately $6mn, of which approximately $5.4mn will be recorded in the fourth quarter of the 2006 fiscal year 2006 and the remainder in the first quarter of 2007.

Martek will assist the displaced employees by providing a transition period for compensation and benefits, severance payments, and professional outplacement services.

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