Danish toy brick maker Lego is planning to move production to low-cost manufacturing sites, despite announcing a return to profitability yesterday.
The group turned in a pre-tax profit of DKr702m (E64m) in 2005, a major improvement compared with last year’s loss of DKr1,688m – though the latter result did include huge impairment and restructuring charges. Sales climbed 12% to DKr7,050m (E646m) in the same period.
Chief executive Jørgen Vig Knudstorp said the results were satisfactory given the difficult market conditions, but predicted 2006 would be “another difficult year for the Lego Group”.
“In the coming years, we will first concentrate on improving the group’s profitability. This will be done through streamlining and cost savings. Not until satisfactory profitability has been ensured will we turn to sales growth,” he said.
The company said “streamlining” meant transferring production – in whole or in part – to low-pay countries. Lego currently operates moulding facilities in Denmark and the Czech Republic.
Asked if production from Denmark will move, a spokeswoman said: “We have still not finished with analysis on that. It’s still a possibility that it will be moved, but we will not be able to say until later this year.”
Lego has sold its toolmaking plant in Switzerland and is winding down its moulding operations (PRW.com 1 September 2005). The firm has already outsourced production of Duplo bricks to Flextronics in Hungary, and there is some moulding carried out in China.
