Zimmer Biomet is undertaking a global restructuring program with the goal of saving the company about $100 million annually during the next two years.
The effort—which began in late 2023 and was announced during the company’s fourth-quarter earnings release this week—will include layoffs affecting about 3% of the company’s current international head count of more than 18,000. In addition to other inventory reduction initiatives, the moves are expected to cost between $125 million and $150 million through the end of 2025.
The Indiana-based, orthopedics-focused company posted $7.39 billion in net sales across 2023, for a 6.5% gain over the previous year’s total, or 7.5% when adjusting for changes in foreign currencies.
That includes about $3 billion in revenue from knee-related products, for a 9.4% reported gain in the sector, and just under $2 billion from hip replacement systems, which were up 3.8%. Offerings in sports medicine, trauma and other areas grew 3.3%, bringing in another $1.75 billion.
“You will see that Zimmer Biomet has truly entered our growth-stage era,” President and CEO Ivan Tornos said on a call with investors, as the company forecast between 4.5% and 5.5% sales growth through 2024. “We’re no longer in a turnaround mode.”
“It is tough to restructure a company,” said Tornos, who was named CEO last year after previous chief Bryan Hanson left to lead 3M’s healthcare spinout. “It’s certainly something that we don’t take lightly. … We needed to make operational changes to simplify our structure, deliver greater efficiency and ensure that we are enhancing investments in the right areas of the business.”
Tornos said on the call that the cuts would be focused on “the back office,” with virtually all reductions being “non-customer facing,” and that more details on the company’s long-range plan would be available during its investor day scheduled in May. Zimmer Biomet also announced in its release this week that it completed a $500 million share buyback program in January of this year.
“We’re ready to deliver by being laser-focused on the three strategic imperatives that I highlighted during my very first earnings call as CEO back in November—three strategic imperatives that I continue to repeat over and over at every Zimmer Biomet meeting,” Tornos said. “No. 1, people and culture; No. 2, operational excellence; and No. 3, innovation and diversification.”
For 2024, Zimmer Biomet plans to fully roll out its Identity shoulder replacement system, including robotics for assisting in anatomic and reverse surgical procedures. The company also plans to bolster its cementless knee products this year.
“Diversification of Zimmer Biomet’s end markets will happen not just by internal innovation, but through smart M&A, which will remain the number one category when it comes to capital allocation,” Tornos said.