Heidelberg Reports Fiscal Year Results: Profits Decline, To Cut 1000 Jobs
Wednesday, April 23, 2003
April 22, 2003 -- The sales figures recorded by Heidelberg for the 2002/2003 fiscal year ended March 31, 2003, were in line with expectations. Preliminary sales by the Heidelberg Group were around Euro 4.1 billion (previous year: Euro 5 billion). Incoming orders in the last fiscal year were about Euro 4 billion (previous year: almost Euro 4.6 billion). "We still find ourselves in a difficult economic climate", stated Bernhard Schreier, CEO of Heidelberger Druckmaschinen AG. "Throughout the print media industry worldwide investors remain very resistant." The preliminary operating profit for the period under review was Euro 102 million (previous year: Euro 356 million). "The package of efficiency-enhancing measures approved in October 2002 has already been successful to a certain degree in absorbing the decline in profits resulting from the slump in sales", stated Heidelberg's CFO, Dr. Herbert Meyer. "Also, efforts to optimize capital expenditures, assets and receivables have delivered a positive free cash flow." The preliminary net result was Euro 138 million (previous year: Euro 201 million). This includes non-recurring expenditures of Euro 210 million before tax for the extended efficiency-enhancing program. The profit before tax excluding the one-off effect was Euro 46 million. As of March 31, 2003, the Heidelberg Group had a workforce of 24,181 worldwide. This figure includes the some 550 employees from the companies of the Gallus Group and IDAB WAMAC International AB which were consolidated for the first time. Adjusted for this effect, this represents a reduction of around 1,500 employees compared to the previous year. Development in the regions and divisions Sales in North America, South America, Europe and the Middle East were affected very considerably by the continuing economic uncertainty and the resulting reticence to invest. Business developments in Eastern Europe were pleasing, with sales climbing almost 17 percent to just under Euro 350 million. In the Asia/Pacific region sales remained high at almost Euro 900 million. China in particular continues to be an important growth market for Heidelberg. During the fourth quarter, sales by the Digital and Web Divisions reached break-even level. Over the fiscal year as a whole, however, business in both Divisions was less than satisfactory. The measures introduced in the Web Division showed signs of beginning to take effect. Towards the end of the fiscal year in particular, the Sheetfed Division felt the impact of increasingly tough competition in the USA and Germany, caused in part by currency exchange rates. The growth strategy pursued by the Postpress Division was furthered by the integration of the newly acquired companies IDAB WAMAC International AB and divisions of Jagenberg. Dreary prospects for the 2003/2004 fiscal year The continuing reticence of customers in the key markets USA and Germany to invest gives no grounds to expect any sustained revival in demand during the current fiscal year. Heidelberg's Management Board therefore anticipates that sales will decline during this period. Given the considerable uncertainties about the economic development over the next time, it is not possible at this early stage of the fiscal year to make a more specific forecast about sales and results. Efficiency-enhancing program extended Growth in the earnings power of the Heidelberg Group is to be achieved primarily through sustainable improvements in the cost structure. In this regard, the Management Board has extended the efficiency-enhancing program initiated in the fall of 2002 by a further savings potential of Euro 80 million per year. All in all, the planned measures to cut costs will affect some additional 1,000 jobs worldwide. Details are currently being worked out and every effort will be made to keep the social impact as small as possible. Discussions with the relevant bodies concerning these measures are in preparation. The possibility of further closures of Heidelberg production sites worldwide is hereby also being examined.