Sheetfed sales down at KBA, nearly 400 jobs cut
Friday, May 01, 2009
Press release from the issuing companyWürzburg. German press manufacturer Koenig & Bauer AG (KBA) published its 2008 financial statements on 30 April following preliminary disclosures on 26 March.
The global economic downturn had a disproportionately severe impact on the inflow of orders for batch-produced sheetfed presses, which plunged 22.6% to €598.5m (2007: €773.5m). The web and special press division, where multi-unit installations with lengthy production times dominate the schedule, exerted a stabilising influence, with new orders totalling €643m (16.9% below the prior-year figure of €773.4m). Group orders therefore shrank 19.7% to €1,241.5m (2007: €1,546.9m). Weak demand resulted in a 16.7% drop in sheetfed sales to €714.2m (2007: €856.9m), and their contribution to group sales consequently fell from 50.3% to 46.6%. With sales of web and special presses relatively steady at €817.7m (2007: €846.8m), group sales sank 10.1% to €1,531.9m (2007: €1,703.7m). The drop in the volume of orders on hand was much greater, from €791.9m to just €501.5m at year's end.
Provisions top €90m
The impact on profits of a €170m slide in sales was exacerbated by provisions and write-downs totalling €93.3m, primarily relating to the approved restructuring and consolidation of sheetfed facilities. This gave rise to an operating loss of €79.9m, as opposed to an operating profit of €65.7m in 2007.
A higher service turnover and solid earnings in niche markets less affected by the recession pushed up the profit generated by the web and special press division from a healthy €63.1m in 2007 to €108.5m. This contrasted with a heavy loss of €188.4m (2007: €2.6m profit) in the sheetfed division due to capacity underutilisation and substantial one-off expenses in preparation for the proposed realignment. The outcome was a financial loss of €7.2m, pre-tax earnings of -€87.1m (2007: €63.2m profit) and a group loss of €101m (2007: €49m profit). Net earnings per share came to -€6.18 (2007: €3.00). At the AGM on 18 June the management and supervisory boards will therefore table a motion to dispense with a dividend.
Export ratio dips to 84.6%
The slide in domestic sales - by 6.3% from €251.4m to €235.5m - was less marked than in other parts of the world, largely thanks to buoyant sales of sheetfed presses. Deliveries to the rest of Europe accounted for 51.4% (2007: 52.2%) of total group sales, while the shipment of several large newspaper press lines to India boosted the proportion of group sales generated in Asia and the Pacific from 14.7% to 17.7%. However, US printers' continued reluctance to invest in new kit reduced the volume of North American sales to 9.4%. Latin America and Africa together contributed 6.1% of the group total.
Around 400 employees fewer than in previous year
Capacity adjustments to diminished global demand trimmed the group payroll by 398 to 7,838 (2007: 8,236), with more cuts to come. The training ratio of 5.8% was slightly higher, reflecting KBA's continuing focus on staff competence and skills. A large proportion of the €49.8m invested in property, plant and equipment (2007: €48.4m) related to rationalisation measures.
Higher cash flow, solid finances
Cash flows from operating activities swelled from €21.3m to €34.6m, primarily due to higher provisions and a reduction in receivables and inventories. The KBA group's cash flow is materially influenced by the customer prepayments commonly made in the heavy plant sector, which despite softer sales in the second half-year came to €140.5m (2007: €199.3m). The free cash flow improved from -€17.1m in 2007 to -€9.9m. At the end of December liquid assets stood at €85.8m (31.12.2007: €123.2m). With bank loans down €20.3m at €63.2m, the group's net financial position remained strong at €22.6m. Additional credit lines totalling €160m have been extended by domestic banks. Although the net loss reduced total equity from €515.1m to €411.1m, an equity ratio of 34.8% (2007: 37.7%) reveals a solid capital base.
Prospects for 2009
In view of weak global demand, unfavourable economic indicators in the ad-dependent printing industry and a drop of more than 36% in the group order backlog, KBA expects sales to be some 20% lower than in 2008. Management is hopeful that the timely implementation of the restructuring measures, which will mainly focus on sheetfed activities, will rapidly bring capacities and costs in line with the smaller global market anticipated in the medium term. The group payroll will be reduced to around 7,000 by the end of the year.
Since provision was made in last year's accounts for the necessary personnel cuts, write-downs and other remedial action, KBA is targeting a balanced pre-tax result (EBT) for 2009, provided global demand does not deteriorate any further. Given the present economic turbulence, tighter credit in the real economy and investors' loss of confidence, management sees little sense in attempting more detailed projections at this moment in time.
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