Zeiss weighs job cuts as geopolitics puts strain on business

Zeiss has reported half-yearly sales of €5.84 billion for the six months ending March 31, up only 1 per cent on the same period last year - and will now look to cut costs amid ongoing macroeconomic challenges.

While the overall sales figure was also hit by negative currency effects, Zeiss CEO Andreas Pecher pointed to the conflict in the Middle East as one of the primary reasons for what the company described as a “major strain” on markets and reinforced trade barriers impacting the Germany-headquartered business.

"In light of this, Zeiss faces two fundamental challenges,” Pecher said. “First, declining momentum over several years in the direct-to-market segments and the resulting strong dependency on the Semiconductor Manufacturing Technology (SMT) business; and second, the structures built up during the years of strong growth that are no longer efficient in all areas.”

Company CFO Stefan Müller added: “After years of strong growth, it is especially important now to optimize cost structures so that we continue to generate the funds for future investments.”

Ongoing uncertainty

Zeiss’ more detailed sales figures show that the firm’s SMT unit was the only one to register significant growth in the latest reporting period, with revenues of €2.61 billion up 6 per cent on this time last year.

But with the other units growing much more slowly in recent years, Zeiss has become more reliant on the SMT business, which now accounts for around 45 per cent of company sales.

At €1.19 billion, the Medical Technology unit’s sales revenues were down 7 per cent year-on-year, with Industrial Quality & Research dropping 3 per cent to €1.13 billion.

Zeiss’ medical business has planned measures aimed at saving some €200 million per year by fiscal year 2028-9, including supply chain optimization, eliminating less profitable products within the portfolio, and moving some research and development activities to cheaper locations alongside some job cuts.

Looking ahead, Zeiss said it does not anticipate that the economic conditions will improve in the second half of the current fiscal year, with Pecher saying:

“In particular, the ongoing uncertainty in the business environment is likely to persist and put further strain on our segments to different degrees. As a consequence, we must prepare for further revenue decline in the direct-to-market segments and mitigate risks.”

Job cuts expected

As a result, the company will embark on a comprehensive program aimed at strengthening its competitiveness. “The goal is to create the conditions for a return to sustainable and profitable growth,” it announced. “On the one hand, this means that Zeiss will continue its above-average investments in innovation and markets - and thus in its future viability.

“On the other hand, targeted adjustments to the cost structure will be made in the segments as well as in the corporate administrative areas and the country organizations.”

The outcome should be annual savings in the region of several hundred million euros over the next three years.

While the precise nature of the measures taken will depend on dialog with employee representatives, Zeiss said that job reductions are expected. 

“We are acting from a position of strength before the circumstances force us to act,” Pecher said. “As a foundation-owned company, we are responsible for the long-term success of Zeiss, for this and for future generations.”