KBA group: balanced result despite continuing weak demand
Monday, February 08, 2010
Press release from the issuing company
Market conditions for export-oriented German press manufacturers show little sign of easing. Hit by the economic recession and a slump in advertising, global demand in 2009 was over 40% below the level for 2007. Even Koenig & Bauer AG (KBA), one of the world's leading suppliers of printing equipment, was badly affected by a widespread moratorium on new investment in the print media industry. Although incoming orders of web and special presses picked up slightly in the fourth quarter of 2009, group orders for the year came to just under €890m, a drop of 29% on the 2008 figure of €1,241.5m. With demand for web presses even weaker than expected, Group sales came to €1.06bn, 31% below the prior-year figure of €1.53bn.
Despite the decline in sales KBA succeeded in moving from a pre-tax loss of €87.1m in 2008 to a balanced result in 2009, and even anticipates a modest post-tax profit for the year. Following quarterly losses in the first six months, in the third quarter there were signs that the group's successful turnaround was working through to the bottom line, boosted by savings of more than €100m in personnel and material costs. All the obligations anticipated for outstanding restructuring measures were included in the 2009 balance sheet and adequate provision made for other risks.
In 2009 the KBA group payroll was trimmed from around 8,000 to fewer than 7,000, largely due to capacity cuts in the sheetfed division, and this year it will be reduced even further, to approximately 6,300. Downsizing in line with market prospects has helped deliver permanent gains in terms of cost savings and breakeven thresholds.
The cost-intensive restructuring process was funded by KBA with no state aid or new debt. The group's equity ratio of 34%-plus is well above the industry average, its net financial position remains positive. It has not had to draw on pre-arranged credit lines.
In view of the efforts KBA has made, management is deeply concerned that other companies appear to be using state aid to preserve excess capacities by building for inventory and selling off stock at deep discounts. This has seriously undermined the price of both new and second-hand equipment, making it difficult for competitors to win contracts at an economically viable price, and counteracting the benefits of consolidation. Such behaviour harms the entire industry and demonstrates once again that state for individual companies can distort competition for the rest of the field. Jobs secured at the tax-payer's expense are ultimately lost elsewhere.
KBA will issue its final figures for 2009 on 26 March along with a preliminary outlook for 2010.