Heidelberg annouces Q1 results, 3% sales increase on the year
Wednesday, August 11, 2010
Press release from the issuing company
Heidelberger Druckmaschinen AG (Heidelberg) is publishing its results for the first quarter of financial year 2010/11 (April 1 to June 30, 2010). The overall improvement in the underlying economic conditions has had a positive impact on business. Heidelberg customers showed greater readiness to invest in the period under review, thus continuing the previous quarters' upward trend in incoming orders.
At EUR 786 million, incoming orders in the first quarter of financial year 2010/11 were 43 percent up on the previous year's figure (EUR 550 million) and 16 percent higher than the previous quarter (EUR 678 million). Contributory factors included positive exchange rate movements equivalent to around EUR 45 million, the high level of orders placed at the IPEX trade show in May 2010, and encouraging business developments - especially in China and Brazil.
As a result of the healthy incoming order situation, the Heidelberg Group's order backlog improved significantly to EUR 810 million at the end of the first quarter. This is the highest level for six quarters.
In the first three months of the current financial year, Heidelberg recorded sales of EUR 563 million, around EUR 36 million of which are linked to exchange rate movements. After adjusting for these movements, sales were 3 percent up on the previous year's figure of EUR 514 million.
"The market recovery continued in the first quarter, thus helping to maintain the upward trend in incoming orders and sales," said Heidelberg CEO Bernhard Schreier. "Together with the cost-cutting measures initiated, this has substantially reduced our operating loss," he added.
The operating result excluding special items improved considerably from the previous year's figure of EUR -63 million to EUR -35 million. Key factors in this improvement were slightly higher sales, the savings achieved by the cost-cutting program, and the greater efficiency resulting from the reorganization. Following the agreement reached between the company and employee representatives, parts of the provisions formed in the previous year to improve efficiency could be released. As a result, the income from special items was EUR 15 million. This produced an operating result, including special items, of EUR -20 million. Higher financing costs led to a financial result of EUR -35 million (previous year: EUR -22 million). The profit before taxes for the first quarter improved to EUR -56 million (previous year: EUR -86 million), while net loss in the period under review was EUR -52 million (previous year: EUR -69 million).
Heidelberg recorded a positive free cash flow of EUR 62 million in the first quarter, a significant improvement on the figure of EUR -29 million for the same quarter the previous year. Key factors in this positive development are the further improvement in net working capital and tight asset management.
"The further improvement in our operating result and the increase in our free cash flow prove that we are on the right track to ensure a stable and profitable future for Heidelberg," said the company's CFO Dirk Kaliebe. "Due to the capital increase approved by the Annual General Meeting at the end of July, Heidelberg can expand its scope with regard to other refinancing measures, and can thus boost its flexibility. Shareholders, customers, and employees will all benefit equally from this," he added.
Headcount fell by a further 278 in the first quarter of financial year 2010/11. As at June 30, 2010, the Heidelberg Group thus had a workforce of 16,218 worldwide.
Business results in the divisions
In the period under review, the Heidelberg Equipment division benefited in particular from the company's success at the IPEX industry trade show. After adjustment for exchange rate movements, incoming orders for the quarter increased by 57 percent on the same quarter of the previous year to EUR 501 million (previous year: EUR 301 million). Sales were 7 percent up on the previous year (1 percent after adjustment for exchange rate movements) at EUR 297 million. The operating result excluding special items for the first quarter was still negative at EUR -48 million (previous year: EUR -53 million), but the savings resulting from the program of cost-cutting measures and the reorganization had a positive impact.
The Heidelberg Services division is less closely tied to economic cycles than the Heidelberg Equipment division and has therefore been less affected when orders have fallen off. Even so, this division recorded higher incoming orders and sales than in the same quarter the previous year. Incoming orders were 15 percent up (8 percent after adjustment for exchange rate movements) at EUR 280 million, while sales were 13 percent higher (5 percent after adjustment for exchange rate movements) at EUR 261 million. At EUR 10 million, the operating result excluding special items was much better than the previous year's figure of EUR -11 million. This was the result of a more favorable sales mix, the increase in sales, and a lower cost base.
The Heidelberg Financial Services division is still responsible for all the company's sales financing activities. In the quarter under review, the division once again recorded a positive operating result of EUR 3 million, an improvement on the figure for the same quarter the previous year (EUR 1 million).
Further increases in Asia and Latin America
At EUR 316 million, incoming orders in the Europe, Middle East and Africa region were 39 percent up on the previous year's figure of EUR 227 million. They actually doubled in the U.K. thanks to the company's successful showing at IPEX. German customers also rediscovered their willingness to invest. At EUR 84 million, incoming orders in the Eastern Europe region were up 59 percent on the previous year's figure of EUR 53 million. In the Latin America region, they more than doubled to EUR 44 million (previous year: EUR 19 million). This is a result of the positive development on the Brazilian market, which received a further boost from the orders placed at ExpoPrint Latin America 2010 in Sao Paulo. After adjustment for exchange rate movements, incoming orders in the North America region were merely up 7 percent at EUR 80 million (previous year: EUR 66 million). Especially high was the increase in the Asia/Pacific region. Incoming orders here totaled EUR 262 million, the highest level for five years and 42 percent up on the previous year's figure of EUR 185 million. The continued positive development in China played a key role in this, but significant increases were also recorded on many smaller markets such as India.
"The Chinese economy is still booming, with double-digit growth rates in some areas. China and Brazil are very attractive growth markets for us and we intend to further increase our share of sales there in the coming years," said Bernhard Schreier.
For the current financial year 2010/11, Heidelberg is projecting a modest growth in sales. The result of operating activities will benefit from the increasing profit contributions as well as from the already achieved cost-reduction measures. Assuming stable economic developments, the company is still striving for a break-even operating result for the current financial year. The company's forecast of economic developments reflected in its financial year planning takes into account the respective product mix prevalent in the single markets. Nevertheless, the enormous growth in financing costs will place a heavy burden on the financial result. During the current financial year, Heidelberg therefore anticipates a marked net loss again.
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