Black & Decker Corp. is seeking to cut between $30 million and $50 million in costs within 18 months in its effort to boost profits, the company's chairman said yesterday.
Speaking before the Baltimore Security Analysts Society, Nolan D. Archibald, chairman, president and chief executive of Black & Decker, said the company's goal was to boost its rate of return on equity to about 18 percent -- the rate earned by the top third of the country's 500 largest companies -- from last year's 5.4 percent.
Before it can reach that target, the economy must move out of the doldrums, Mr. Archibald told the analysts. After the speech, he said that economy recovery could be slow.
"I think that it will be a very slow, gradual recovery over 12 to 24 months," Mr. Archibald said.
The planned cost-cutting would be in addition to the $20 million cut in 1991 and the $100 million in savings achieved the two previous years.
Mr. Archibald declined to specify how the company's costs would be cut. Although he did not rule out plant closings, he downplayed the possibility.
Another way Black & Decker is saving money is through a tentative five-year credit agreement with a group of banks headed by Credit Suisse, Chemical Bank and the Bank of Nova Scotia. Under the arrangement, to be completed in the next few weeks, the interest rate on the company's $2.3 billion of debt -- most of which was taken on in the purchase of Emhart Corp. -- would be reduced by one-quarter of a percentage point. The company estimates it would save $10 million in 1993 under the arrangement.
Announced Monday, the credit facility also has less-restrictive covenants than previous agreements, and the loans are unsecured. "It will give us a great deal of latitude and flexibility," Mr. Archibald said.
Yesterday, Standard & Poor's Corp. said it would review the company's and Emhart's combined $450 million in senior unsecured debt, for possible upgrade. The debt now carries a rating of BB-plus. The rating agency said the move stemmed from the announcement about the new credit facility.
When the economy recovers, the company plans to increase its earnings by an annual compound rate of 20 percent a year for five years, he said. But first, the company must reach "normal," non-recession earnings, Mr. Archibald said. He declined to specify what level of earnings would be considered normal.
In addition to cutting costs, he said, the company plans to meet its goal for return on equity by increasing sales through new products and expanding distribution.
One product line that Black & Decker recently introduced is DeWalt power tools, aimed at the professional contractor who buys equipment at retail outlets. This $432 million market is now dominated by Makita, a Japanese tool maker, which had about $230 million of the market, Mr. Archibald said.