KBA to extend cuts, while looking to China and possible acquisitions
Wednesday, December 09, 2009
Press release from the issuing company
Koenig & Bauer AG, the world's third- largest printing-press maker, plans to cut an additional 300 million euros ($452 million) in costs by 2013 to counter falling sales and accelerate a return to profit.
Koenig & Bauer is now seeking 580 million euros in savings through 2012, a step up from an original three-year target of 280 million euros, Chief Executive Officer Helge Hansen said in an interview. By mid-2010, the workforce will drop to about 6,200, with 300 extra posts to be eliminated, he said.
"We must cut capacity," Hansen said yesterday at the company's headquarters in Wuerzburg, Germany. "It's a tough business."
Hansen said he's ahead of schedule with this year's purge on costs, with savings of 108 million euros running 17 percent above budget. Printing-press sales are falling as Internet publications squeeze western demand for newspapers and magazines. The Asian market is still growing and Koenig & Bauer is in "very concrete" talks over ventures with Chinese partners, Hansen said.
The chief executive said reaching a target of near break even on a pretax basis this year is now "almost a certainty." That should be followed by "modest" earnings in 2010, before the full effects of cost cuts kick in, boosting results from thereon, Hansen predicted. Koenig & Bauer reported an 87.1 million-euro loss in 2008.
Global sales of presses will fall by more than one-half to 3.9 billion euros this year compared with a recent industry average of 9 billion euros, Koenig & Bauer has said.
"There's no going back to the old levels," as the printing industry consolidates, reducing the number of presses in operation, Hansen said. A rebound to 8 billion euros is possible, the company has said.
Koenig & Bauer forecasts a 35 percent sales drop this year alone, compared with 2007 levels. The slump forced market leader Heidelberger Druckmaschinen AG to seek state aid. Even where markets are growing, such as Asia, the U.S. dollar's decline and price-cutting among rivals is hurting margins, the CEO said.
"China and the other emerging countries bring in volume, but not necessarily profit," Hansen said. "They help retain jobs, but they don't help in terms of a positive balance."
The press-maker is in talks over partnerships with "several" Chinese companies. If the market shows enough promise, Koenig & Bauer may follow up with a production site of its own in China, Hansen said.
"There are talks, and they are intensive," the CEO said.
Unlike Heidelberger Druck and Manroland AG, which have held merger talks, Koenig & Bauer is untroubled by debt, he added. Liquidity for acquisitions is available and the group has unused credit lines and cash, so takeovers are an option to gain a toehold in new markets. Packaging and digital printing machines -- along with thermal solar energy and water treatment -- are the most promising areas, he said.