Posted May 8, 2020

DNOW embarks on ‘structural transformation'

by Rich Vurva

As part of a three-part structural transformation strategy to position the company for the future, NOW Inc. plans to reduce headcount by 1,250 people by the end of the year. The company currently employs 3,150 people.

The Houston-based company, which operates under the DistributionNOW and DNOW brands, is one of the largest distributors to the energy and industrial markets and has been hard hit by recent oil price volatility and the coronavirus pandemic. NOW Inc. reported that sales declined 23 percent in the first quarter to $604 million, resulting in a loss of $331 million.

In addition to the headcount reduction, interim CEO Dick Alario said in a conference call yesterday that DNOW is making organizational and system infrastructure changes, plus deploying technology to further reduce costs.

The plan includes closing and consolidating facilities, removing layers of management in North America and renegotiating prices with suppliers. In the first quarter, the company sold or closed 25 locations, two-thirds related to the sale of a business in January.

“Make no mistake, we're making tough decisions and DNOW will emerge from this downturn a much leaner transformed company and it will be positioned to take advantage of the next market upswing based on a much lower cost structure, able to scale quickly to meet market demands,” Alario said.

In April, DNOW completed a migration from its SAP backend database to Suite on HANA. In addition, an upgrade to its order management system later this year is expected to lower response time to customer inquiries, improve customer service and increase productivity. The company introduced its DigitalNOW brand last quarter and plans an increased focus on using digital tools to interact with customers.

“Although market conditions are tough and will cause our entire industry a lot of pain, we're absolutely going to fund our initiatives around building on our digital platform. While other companies, given their debt burden or lack of cash might be reducing spending in this critical area, we're fully committed. We will continue to pursue our disruptive strategy in terms of technology and will not be reducing funding,” Alario said.

NOW Inc. ended the quarter with about $594 million in available liquidity and cash on hand.

The recent market disruptions have slowed the board’s search for a new CEO, but Alario said he plans to remain as interim CEO until a new CEO is in position.