KBA Reports Loss, But Outlook Good For 2006 After Slow Start
Tuesday, May 16, 2006
May 16, 2006 -- German printing press manufacturer Koenig & Bauer AG (KBA) won contracts worth €340.6m in the first quarter, 10.9% below the record figure of €382.4m for the corresponding period in 2005. While new bookings for web and special presses jumped 21.2% to €167.9m following a string of orders for commercial and security presses and big newspaper presses, soft demand in January and February slowed the inflow of new orders for sheetfed presses to €172.7m, 29.2% down on 2005 (which, however, was 40% up on 2004). Far from signalling a downturn, the dip in sheetfed contracts proved to be a temporary blip that allowed the sheetfed offset division to consolidate strong prior-year growth before returning to business as usual in March. Shipping schedules resulted in group sales of €309.4m, roughly on a par with the previous year (€311.3m) but a long way off course for meeting the annual target. However, an order backlog of €1,072.1m, 11.2% up on the high prior-year figure of €964.1m, will keep KBA’s production plants busy until well into the second half of the year. Lagging sales also impacted on earnings, leading to an operating loss of €6.5m (2005: –€6.2m) and a net loss of €5.3m (2005: –€6.8m). The proportional loss per share was 33 cents (2005: loss of 42 cents). However, cash flows from operating activities improved to €57m (2005: €35.8m). A larger volume of customer down payments and a reduction in trade receivables more than compensated for a loss of liquidity caused by a pre-production increase in inventories. The free cash flow swelled to €51.6m (2005: €32.2m). The group payroll on 31 March totalled 7,951 (2005: 7,334). The increase was largely due to the addition of 515 staff following the consolidation of subsidiaries KBA-Grafitec in the Czech Republic, KBA (UK) and KBA-France. Export business remains brisk Although domestic demand remained firm, shipping schedules raised the export level in the first quarter to 83.7% (2005: 81.7%). Once again KBA’s biggest market was the rest of Europe, with 53.5% of group sales, followed by Asia and the Pacific with 19.3%. Seasonal fluctuations in shipments of web presses pushed down sales in the USA and Canada to 7.4% of the total, while Africa and Latin America accounted for 3.5%. Positive outlook for 2006 Despite a weak start to the year, KBA stands by its end-of-quarter prognosis for 2006 of a single-digit increase in sales and a substantial improvement in pre-tax earnings compared to 2005 (€25.8m). Notwithstanding the detrimental consequences of recent tariff agreements in the German metalworking and electrical industries, fierce competition in international markets and spiralling prices for raw materials and energy, management is confident that higher margins for work in progress and new contracts, and the substantial reductions achieved in manufacturing costs and overheads, will work through to the bottom line in the course of the year. However, since it is difficult to calculate the impact on the global economy of the current political climate in Iran and the Middle East, and of changes in the relative values of the euro, US dollar and yen, KBA president Albrecht Bolza-Schünemann is unwilling to quote any concrete figures for sales and earnings in 2006.