Heidelberg Results: Market conditions worsened considerably
Thursday, May 08, 2008
Press release from the issuing companyMay 7, 2008 -- Market conditions worsened considerably for Heidelberg in financial year 2007/2008 (April 1, 2007 to March 31, 2008), with sales, operating result and net profit all down on the previous year's levels. "Poorer economic prospects have taken their toll over the past financial year, in particular during the second six months," stated Heidelberg CEO Bernhard Schreier. "This has led to a reluctance to invest in a number of regions," he added.
There is no market improvement on the horizon for the current financial year 2008/2009. With drupa - the hugely important trade show running from May 29 to June 11, 2008 - still to come, it is difficult to predict how sales for financial year 2008/2009 will develop. Consequently, Heidelberg will be publishing its sales forecast for the current financial year at the beginning of August with its figures for the first quarter.
However, it is already predictable that the sales for the first quarter of financial year 2008/2009 will be down on the previous year's figure, and that the operating result (EBIT) will be negative. Like the first quarter 2008/2009, the entire fiscal year will be affected by non-recurring expenditures for drupa, the start-up of series production for a number of new products and the strong Euro. For these reasons, the operating result for the entire fiscal year 2008/2009 will be down on previous fiscal year's figure.
"After drupa but before the Annual General Meeting on July 18, we will announce appropriate measures to secure our leading market position and financial performance in the long term," stated Schreier. "Our aim is to improve our cost structures and lessen the effect of exchange rates in the medium term by internationalizing purchasing and production. We will also be stepping up our service and consumables operations to further reduce our dependency on economic cycles," he added.
Preliminary figures for financial year 2007/2008
Preliminary sales by the Heidelberg Group for the year as a whole totaled 3.670 billion Euro, 3.5 percent down on the previous year's figure (previous year: 3.803 billion Euro). Business slowed in the fourth quarter in particular due to the effects on the world economy of the financial crisis in the U.S. and customers' reluctance to make investments in the run-up to the all-important drupa trade show.
Preliminary incoming orders in the financial year just closed amounted to 3.649 billion Euro, around five percent down on the previous year's figure (previous year: 3.853 billion Euro). Whereas the high volume of orders achieved in the previous year was exceeded in Germany, fears of a recession and further effects of the credit crunch made U.S. customers less ready to invest. Business was also less than satisfactory in the United Kingdom and Japan. On a more positive note, orders were boosted by the recovery in the Chinese market.
The preliminary order backlog at March 31, 2008 was 874 million Euro (previous year: 1.018 billion Euro).
In the period under review, the Heidelberg Group recorded an operating result of 268 million Euro (previous year, adjusted for positive one-time effects: 302 million Euro). This represents an operating return on sales of 7.3 percent (adjusted value for the previous year: 7.9 percent). The previous year's figure was boosted by the sale of Linotype GmbH and the R&D Center in Heidelberg ("sale and lease back").
The preliminary net profit amounted to 142 million Euro (previous year, adjusted for positive one-time effects: 144 million Euro). At 215 million Euro, the free cash flow remains at a high level (previous year: 229 million Euro). Based on sales, Heidelberg was able to reduce the working capital by 1.1 percentage points to 32.5 percent.
"We have once again achieved a good free cash flow in a difficult economic situation. Based on the preliminary figures of financial year 2007/2008 the Management Board intends to propose the Supervisory Board and subsequently the Annual General Meeting a dividend of 0.95 Euro, which matches last year's dividend," said Heidelberg CFO Dirk Kaliebe.
Performance in the divisions and regions
In the Press Division (offset printing), preliminary sales were slightly down on the previous year at 3.213 billion Euro (previous year: 3.321 billion Euro). Preliminary incoming orders fell by five percent to 3.2 billion Euro (previous year: 3.367 billion Euro). At 239 million Euro, the preliminary operating result for this division was below the previous year's adjusted figure of 254 million Euro.
The Postpress Division (finishing) failed to meet the targets set. Exchange rate movements and the reluctance of U.S. printshops to invest were the main reasons for the division's preliminary sales, incoming orders and operating result falling below the previous year's level. Preliminary sales amounted to 427 million Euro (previous year: 445 million Euro), preliminary incoming orders were 419 million Euro (previous year: 449 million Euro), and the preliminary operating result minus seven million Euro (previous year: seven million Euro).
In the EMEA, North America, Latin America, and Asia/Pacific regions, sales and incoming orders either matched the previous year's level or fell below it. Sales and incoming orders only climbed significantly in the Eastern Europe region. Growth was particularly strong in Russia in the year under review. It was a different story for the Asia/Pacific region where, despite the recovery in the Chinese market, the figures fell below the previous year due to the extremely unfavorable currency situation for European suppliers in Japan. Incoming orders slackened off in the North America region, in particular in the second half of the year.
At March 31, 2008, the Heidelberg Group had a workforce of 19,596 worldwide (previous year: 19,171). Most of the new appointments were in the field of production and global sales.
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