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Global Graphics Revises Outlook, To Delay/Cancel Projects, Includes 10% Staff Cut

Tuesday, July 03, 2001

Press release from the issuing company

Pompey, France June 28, 2001 Global Graphics SA (NASDAQ Europe: GLGR, Euronext: GLOG) today announced that it is revising guidance for the fiscal year 2001. The company anticipates full year 2001 sales to be in the range of Euro 96 million to Euro 100 million, versus Euro 93.3 million in 2000. Current earnings per share, before goodwill and other intangibles amortization expenses (net of any deferred tax effect on these) and before one-time charges, is expected to be in the range of Euro 1.1 to 1.3, close to 2000 current earnings per share of Euro 1.29, and generated almost entirely by the Software division. The company attributes the shortfall versus previous guidance to a severe slowdown in equipment and software purchases by its traditional OEM customers which started in the second quarter of 2001. The slowdown is occurring in all geographic regions except for Japan. In order to align its Hardware division's manufacturing capacity to market conditions, a personnel reduction of at least 10 percent is planned, in addition to the 10 percent manpower reductions which have already been accomplished since January 1, 2001. Manpower levels and hiring programs in the Software division and Xanalys are not affected. Several hardware product lines will be discontinued and certain hardware R & D programs will be cancelled or delayed until the market conditions improve. The company will record one-time charges in the second and third quarters of 2001 for severance payments and asset write-offs, the amounts of which are currently under assessment but could be up to several million euros. By division, the outlook is as follows: 1. Hardware. After an excellent Quarter 1, 2001, orders for equipment in both litho and flexo declined significantly during April. As a result, Hardware sales are expected to be around Euro 13 million in both quarters 2 and 3, improving by around 20 to 30 % in Quarter 4, but still below Quarter 1 levels. The Hardware division is expected to be just above break-even in 2001 on an Ebita level, posting an Ebita loss in quarters 2 and 3, with full year 2001 sales slightly below 2000 sales. 2. Software. Software revenues decline significantly in the high-end graphic arts segment, but the shortfall is compensated by market share increase. Revenues for quarters 2 and 3 are expected to be between Euro 6 and 7 million, and to increase by 30 to 40 percent in Quarter 4. Revenues for the full year are expected to be in the Euro 29 to31 million range and Ebita margins in the 42 to 46 percent range. 3. Xanalys Xanalys should generate a slight Ebita and current net income loss in Quarter 2 but should be break even over the second half of the current year. We expect a current net loss for the year 2001 which should however be significantly lower than the one made last year. Johan Volckaerts, Chairman and CEO, made the following comments: " We started the year 2001 with a very strong Hardware orderbook, which has now severely declined. This drop is general across our entire OEM customer base except for Japan. Our visibility is still very limited and we do not anticipate a significant improvement in market conditions until 2002. Printing Software revenues are still expected to grow in 2001 by 20 to 30 percent versus 2000, thanks to our diversification beyond the high-end graphic arts segment, which will compensate for the 10 to 20 percent revenue decline we experience with our traditional OEM customer base. Although current market conditions are the worst we experienced in more than a decade, Global Graphics is expected to post results close to 2000 levels and generate cash because of our cost control and asset reduction programs."




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