Baxter International, a maker of diagnostic, critical care and kidney care devices, said it will expand a cost-cutting program that includes reducing its workforce by less than 5%, or about 3,000 staff, after supply chain issues helped drive a decline in fourth-quarter profit.
“We plan to begin implementing our new operating model early in the second quarter,” Baxter CEO José Almeida said on a conference call with investors on Thursday. “We expect to continue navigating a challenging operational environment, hand-in-hand with our transformation effort.”
Baxter employed about 60,000 people worldwide and approximately 19,000 employees in the U.S. as of Dec. 31, 2022, according to a company filing.
Baxter shared details of aspects of its strategy at the start of the year, when it disclosed plans to spin off its renal care and acute therapies businesses to create an independent, publicly traded company in the next 12 to 18 months. The changes announced this week are expected to generate savings of $100 million, adding to the $200 million in spending reductions from actions including Hillrom synergies.
Shares of Baxter rose 2.7%, or $1.11, to $41.25 in late-morning trading on Friday.
Outlook for 2023
Baxter forecasts sales to fall 3% on a reported basis in the first quarter and warned investors to expect a “challenging first half of the year due to increased cost of sales resulting from elevated costs of inventory produced in the second half of 2022, reflecting the significant inflationary pressures.” The company expects those pressures to ease later in 2023.
Almeida said on the call that Baxter has “been taking a hard look” at its models and processes as it reflects on its performance last year “and the lessons learned in an era of unprecedented macroeconomic challenges.”
Baxter excluded potential U.S. sales of the Novum IQ large-volume infusion pump from its forecasts. While management plans to submit final responses to the Food and Drug Administration this quarter and aims to launch the pump in 2023, the company cut $100 million related to sales of the product from its guidance.
Clarification: This article has been updated to reflect that Baxter is laying off less than 5% of its global workforce.