German pharmaceutical giant Merck KGaA is relocating parts of its accounting and book-keeping team to shared service centers in Poland and the Philippines to cut costs.

 

More than 130 jobs will be moved to Wroc?aw and Manila by 2020, said the company that is not affiliated with U.S.-based Merck & Co. Some of the German job cuts will be offset by the creation of 25 new, more strategic roles in the headquarters in Darmstadt, resulting in a net loss of 110 positions.

 

“In recent years, we have set up two shared service centers in Wroc?aw and Manila,” said Finance Chief Marcus Kuhnert, according to a statement released Monday. “As a next step, we want to concentrate our accounting and book-keeping here to better meet the needs of the business,” Mr. Kuhnert said.

 

This comes after Merck’s earlier decision to set up three legal entities — pharmaceuticals, life science and performance materials — under the umbrella of the parent organization. The firm in May also said it would make changes to its technology infrastructure, introducing three distinct enterprise resource planning systems. These systems tie together a wide range of business processes in a common infrastructure.

 

The company last week reported net income of €421 million ($496.4 million) for the quarter ended June 30, a 35.1% improvement compared to the second quarter of 2016. Net sales grew by 2.3% to €3.9 billion, compared to €3.8 billion in the year-earlier quarter.

 

The company declined to comment on the financial impact of Monday’s move.

 

Lower labor costs in both Poland and the Philippines could save the company several million euros per year, said Wimal Kapadia, an analyst at Sanford C. Bernstein & Co. “Merck is doing a lot of reorganization,” Mr. Kapadia said. “Finance is a low hanging fruit to reduce the cost base,” he added.

 

Still, 80 jobs within the accounting solutions & services unit will remain in Darmstadt, Merck said.

 

Merck is one of several German companies that are seeking to cut costs by moving tasks to shared service centers. Bayer AG, the chemicals company currently in the process of buying U.S.-based Monsanto Co., operates shared service centers in various locations, among them Poland, Manila, China, the U.S. and Singapore, according to its website.

 

These changes often amount to job losses at the headquarters, Mr. Kapadia said.

 

Veon Ltd., a European telecommunications firm, said Friday its decision to move tasks to three shared service centers in Russia, Ukraine and Pakistan will affect around 50 roles in the company’s headquarters in Amsterdam.

 

SOURCE: https://blogs.wsj.com/cfo/2017/08/07/merck-to-move-accounting-book-keeping-to-poland-philippines-to-drive-down-costs/