(Adds analyst comment, share price)
ZURICH, Nov 14 (Reuters) - Switzerland's Sarna Kunststoff Holding AG on Friday announced the restructuring of its car parts division, which will cut costs and about 420 jobs, earning it plaudits from investors for the tough measures.
Sarna, which faces price pressures on the polymer chemicals it makes for the construction and car industries, said it would close sites in Germany and the U.S. in a bid to generate annual savings in excess of 20 million Swiss francs from 2006.
It said the overhaul, building on a restructuring already underway in Germany, would cost about 27 million francs, of which about 22 million would be booked in 2003.
Despite the one-off costs, it expected a profit this year and forecast full-year sales of 850 million francs, down from 966 million in 2002. It predicted profit growth from 2004.
Shares in the mid-cap firm rose as high as 127.25 Swiss francs before paring some of the gains to trade 2.7 percent higher at 126.00 at 1105 GMT in a firmer market.
"It looks like CEO (Matti) Paasila, who joined this year, feels drastic measures are needed," said analyst Martin Huesler a Zuercher Kantonalbank, adding, "Fundamentally, measures to structure Sarna for longer-term success are to be welcomed."
Chief Executive Paasila said: "The reduction of costs with increased capacity use is necessary to counter the price pressure by the OEMs (original equipment manufacturers)."
He said the firm would focus on profitable orders only and drop efforts to seek economies of scale through volume growth.
Like other Swiss car industry suppliers including Rieter and Georg Fischer , Sarna is struggling to overcome cost and margin pressure from consolidating clients faced with limp demand in a weak global economy.
Fischer last month announced a restructuring push, including about 1,000 job cuts to tackle earnings pressure and cut debt.
Sarna said it was streamlining costs and capacities to gear up for planned annual growth of about 10 percent in both the construction and car supplies fields from 2006.
The firm confirmed full-year results would fall short of 2002 levels, forecasting full-year 2003 sales of about 850 million after 966 million in 2002.
First-half net profit had fallen to 3.9 million francs from 20 million a year earlier due to lower U.S. car parts sales and launch problems at its European car division.
It had a 2002 full-year net profit of 32.1 million francs.
The overhaul is to be completed by the end of 2005. Sarna is closing two sites in Germany and one in the U.S., moving labour-intensive operations to lower-wage European countries.