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Heidelberg Says 2002/2003 shaped by weak economy, Outlook uncertain

Monday, July 07, 2003

Press release from the issuing company

July 3, 2003 -- The Management Board of Heidelberg presented its 2002/2003 Annual Report at today’s Annual Press Conference and also confirmed respectively released more details relating to the preliminary figures for the last fiscal year (April 1, 2002 to March 31, 2003) published in April this year. 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). “Heidelberg's business was also affected by the ongoing economic downturn. The Digital and Web Systems Divisions were particularly affected, and the Sheetfed Division also suffered as a result of weak markets, especially in the USA and Germany”, stated Bernhard Schreier, CEO of Heidelberger Druckmaschinen AG, and added: “We were able to compensate only partially for the downturns in the key markets through positive developments in other regions.” The operating profit for the period under review was Euro 102 million (previous year: Euro 356 million). The net result was Euro ?138 million (previous year: Euro 201 million). This includes non-recurring expenditures of Euro 210 million before taxes for the efficiency-enhancing program begun in the year under review. The profit before taxes excluding the one-off effect was Euro 46 million. Because of the loss, the Management Board and the Supervisory Board will propose at the Annual General Meeting on September 12, 2003 that no dividend be paid for the year under review. Comprehensive efficiency-enhancing program approved in 2002 The earnings power of the Heidelberg Group will be restored in the short- and medium-term through sustainable improvements in the cost structure. To this end, the Management Board last year agreed an efficiency-enhancing program which, once all measures have been concluded, will deliver annual savings of around Euro 280 million. “Heidelberg has made substantial progress in implementing the program. We are already seeing the first improvements in all key cost components. By the end of the fiscal year we will have achieved our goals to reduce structural costs”, stated Dr. Herbert Meyer, CFO at Heidelberg. As a result of the measures, the company will have reduced staffing levels worldwide by the end of the current fiscal year by a total of 3,200. Reduction in capacity already begun By the end of March 2003, Heidelberg had already reduced its staffing levels by around 1,700 employees. In the Web Systems Division, some 700 jobs have been cut at the three overseas sites. At the Sheetfed sites in Wiesloch, Amstetten and Brandenburg, short-time work and an agreement to safeguard jobs have been introduced in the production and production-related sectors. This will reduce the working week to 31.5 hours. This agreement will be valid until the end of October 2003. Other cuts in Germany include losses at the Heidelberg site, where around 100 jobs will be cut in administration and around 190 jobs will be affected in marketing by optimizing sales structures. Site relocations on schedule – workflows are being optimized In the USA, the operations in Dayton have been relocated in their entirety to Durham. Heidelberg expects that this will deliver synergies in the Web Systems and Postpress Divisions. The projects in Germany are in the implementation phase. These include the closure of Mühlhausen, the relocation of NexPress production operations from Kiel to Rochester, USA, and the relocation of platesetters to Wiesloch. “We are currently unable to rule out other site consolidations and closures in Heidelberg’s global production network. Heidelberg is currently streamlining and optimizing workflows in the administrative sections, divisions and sales units worldwide,” stated Bernhard Schreier. Start to fiscal 2003/2004 restrained The continuing reticence to invest among industrial printers in virtually all markets, but in particular in the key markets USA and Germany, does not suggest that any sustained revival in demand can be expected over the current fiscal year. Heidelberg believes that demand is more likely to weaken further in the key markets. This is borne out by the first two months (April and May) of the new fiscal year. Preliminary sales by the Heidelberg Group for this period were around Euro 426 million (previous year: Euro 541 million). Incoming orders were Euro 486 million (previous year: Euro 767 million). The comparative figure for the previous year was, however, boosted by the IPEX trade show in Birmingham, UK, in April 2002. Heidelberg’s goal during the current fiscal year – in which it will have an improved cost structure – is to achieve break-even, even if sales decline further by up to 10%. Notwithstanding possibly weaker overall demand, the company aims to move the loss-generating areas visibly closer towards a break-even level. Our goal is for both the Digital and Web Systems Division as well as Postpress to attain a break-even or favorable result in fiscal year 2004/2005. The current economic climate does not allow concrete sales and profit forecasts for the current fiscal year. “The measures we have implemented to improve our cost structure have created a basis for us to return to our usual high levels of profit, even if markets are unstable,” stated Bernhard Schreier.




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