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UPDATE 2-Covidien to shutter South Carolina plant, lay off 595
September 13, 2012 / 2:46 PM / 5 years ago

UPDATE 2-Covidien to shutter South Carolina plant, lay off 595

* Says closure will take 3 years to complete

* Expects net sales to grow 3 to 6 pct in 2013

By Zeba Siddiqui

Sept 13 (Reuters) - Medical device maker Covidien Plc said it would close a South Carolina facility where it manufactures vascular products, laying off about 595 full-time employees as it looks to improve efficiency across its global operations.

Medical device makers in the United States have been closing or consolidating manufacturing facilities as they look to cut costs to cope with lower reimbursements and pricing pressures.

Hologic Inc said in August that it plans to close its Boone County operations in Indiana and lay off 200 people, while larger medical device maker Stryker Corp plans to close two New York manufacturing plants by year-end.

A Covidien spokesman said the decision to close the plant, located in Seneca, was in response to the current "challenging healthcare environment where companies face pricing pressures and reimbursement issues."

Later in the day, the company said it expects net sales to grow 3 to 6 percent in 2013, helped by a 4 to 7 percent rise in sales in its majority medical devices segment.

"We will move the operations from Seneca to Alajuela, Costa Rica, where we have a facility," the spokesman said, adding that the closure is expected to be completed in about three years.

The Seneca plant has not been a growth driver for Covidien for years as it belongs to the company's legacy business, said RBC Capital Markets analyst Glenn Novarro.

"If you go back a few years, Covidien bought EV3 and VNUS Medical Technologies. So, these are the current drivers of (the company's) vascular business and they are doing fantastic," Novarro said.

Covidien, which employs about 41,000 people worldwide, said it would provide full severance to the affected employees and assist them with applying to jobs at its other plants.

The company's spokesman declined to comment on charges related to the plant closure or any other financial impact.

Covidien shares closed up about 2 percent at $57.78 on Thursday on the New York Stock Exchange.

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