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Home > Expertise > Case Study: Cosmetics Manufacturer

Case Study: Cosmetics Manufacturer

Crisis Management, Turnaround Management, Operational Restructuring

Company: $100 million cosmetics manufacturer

Situation /Tasks Performed: A rapid decline in sales combined with a cost structure geared toward sales growth resulted in losses at the EBITDA level and an inability to service debt. Slow payments to suppliers resulted in poor relationships and subsequent reductions in accounts payable placed a further burden on the Company's cash. TRG was engaged in a crisis management role to assist management in the preparation and execution of an operational restructuring plan that would bring the Company back to profitability. The turnaround plan consisted of direct labor and overhead cost reductions, rationalization of product lines, and the sale of excess inventory. Outside the context of the restructuring plan, TRG assisted in negotiating a plan to reinstate payments to the Bank and to trade creditors.

Results: TRG has helped to reduce overhead by more than $4 million annually. Sales required to break even at an EBITDA level have been reduced from $8 million per month to $6.0 million per month. After several years of negative EBITDA performance, the Company has had positive EBITDA for 16 months. EBITDA for year end 2000 was negative $4 million and EBITDA for year end 2001 was positive $8 million, an improvement of $12 million. Measurement systems have been implemented to target improvements in production and labor efficiencies. Additionally, improvements have been made to product packaging to reduce working capital requirements and to increase production flexibility. The Company has completed the turnaround, and the Board of Directors is now in the process of making the decision to either sell the Company to outside investors or to hire a permanent CEO to take the Company to the next level.

Nature of Assignment:
Primary: Crisis Management
Secondary: Turnaround Management
Tertiary: Operational Restructuring

Industry: Consumer Products

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