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Heidelberg Increases Cost-Cutting Measures

Friday, March 27, 2009

Press release from the issuing company

Faced with the continuing poor demand resulting from the global economic and financial crisis, the Management Board of Heidelberger Druckmaschinen AG (Heidelberg) has decided to take further measures to ensure the company’s competitiveness and efficiency. By financial year 2010/2011, these measures by the world market leader for printing presses - including the existing initiatives - are intended to result in total savings in the order of 400 million Euro (previous target 200 million Euro) compared to financial year 2007/2008. As a result, the company will be much better equipped to face future challenges and will also be well placed when the crisis is over.

2009 has seen a continuation of the reluctance to invest that has been in evidence since the fall of 2008. This is due primarily to print shops' low capacity utilization and the difficulty being experienced by the press manufacturer's customers in securing bank loans. Heidelberg must reckon on incoming orders for the fourth quarter of 2008/2009 being below 500 million Euro and thus lower than the figure for the previous quarter, which was itself already weak (Q3: 560 million Euro). No improvement is expected in the short term, which means that a further downturn in sales can be expected in financial year 2009/2010 as a whole. The company is therefore planning to reduce capacities and structural costs still further to provide a decisive response to the fall in orders.

Determined response to the crisis from Heidelberg
"The global financial and economic crisis has continued to hit the mechanical engineering sector hard over recent months," said Chief Executive Officer Bernhard Schreier. "We introduced a cost-cutting program last year in response to this crisis. The difficult economic situation has meant a further slump in demand and there are no signs of any improvement in the short term. In this situation, it is up to the management team to maintain the company’s competitiveness and efficiency. We have made the necessary structural adjustments to optimize our company’s earnings on a sustainable basis and ensure it is primed for the upturn when it comes," he added.

Cost-cutting measures
Planned measures include a further reduction of personnel and non-personnel costs in research and development (R&D), production, administration, and sales. Investments will be scaled down and the production of packaging products will be concentrated at the main plant in Wiesloch-Walldorf. Most of the savings will be made in financial year 2009/2010.

In order to achieve these savings, it is planned to roughly double the 2,500 job cuts that were originally intended. The company estimates that 170-190 million Euro will be required to implement the entire cost-cutting program.

Termination of the agreement on safeguarding the company’s future
In order to be able to make the necessary personnel adjustments - among other things through compulsory redundancies - Heidelberg is terminating the collective agreement on safeguarding the company’s future that was last extended in October 2007. This will take effect from June 30, 2009. The company intends to negotiate the additional personnel adjustments with employee representatives and the union.

"When we extended the agreement on safeguarding the company’s future two years ago, there was no way of predicting that the global economy would take such a dramatic downturn. Given the worldwide financial market crisis, we regret that we are left with no alternative but to terminate the agreement. This is the only way, we can ensure our competitiveness and efficiency, something that is also in our workforce’s interests," said Bernhard Schreier.




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