Heidelberg Sets Basis for Long-Term Profitability
Friday, June 15, 2012
Press release from the issuing company
Against the backdrop of economic uncertainty during financial year 2011/2012 (April 1, 2011 to March 31, 2012), Heidelberger Druckmaschinen AG (Heidelberg) has set the basis for long-term profitability with new products, a new organization, and stable financing. It aims to continue building on the company's leading position in a restructured market environment within the print media industry and to successfully market its development, production, and service expertise outside the industry as well. The company is well on track to achieving this goal through the FOCUS 2012 efficiency program, which includes measures to cut costs and capacities and to restructure the organization. What's more, Heidelberg has reassigned the Board members' responsibilities with effect from June 1, 2012 with a particular focus on optimizing global sales and strengthening activities in the growth regions, which are expected to produce around 40 percent of the global sheetfed offset print volume in the future. The positive start to financial year 2012/2013, with the launch of numerous innovations at drupa and high order volumes, confirms that the company is on the right track with the direction it is taking.
Stable business development in 2011/2012 amid economic uncertainty: Figures in line with preliminary calculations
“The second half of financial year 2011/2012 in particular was shaped by great uncertainty. However, the positive results of the leading trade show drupa showed that confidence within the industry is returning and that the reticence to invest is slowly abating,” said company CEO Bernhard Schreier. “At drupa, Heidelberg presented itself impressively as market leader, innovator, and integrator of new technologies. We have developed the right solutions in response to global trends within the industry and have integrated suitable applications from strategic partners — we could thus set us apart from the competition in a clearly positive way.”
At a total of EUR 2.555 billion, incoming orders were down 7 percent on the previous year's figures (EUR 2.757 billion), which had been boosted by the trade show successes at ExpoPrint in Brazil and IPEX in the UK. In the first half of the year under review, the order volume of EUR 1.333 billion slightly exceeded the level of the preceding half year. However, the second half of the year was hit by a worsening of the underlying economic conditions and restrained investment activity in the fourth quarter in anticipation of drupa, resulting in orders of EUR 1.222 billion.
After adjustment for exchange rate movements, total sales in the year under review reached EUR 2.596 billion, roughly on a par with the previous year (EUR 2.629 billion). While sales declined in the industrialized nations, they rose once again in the emerging markets, thus increasing their overall share slightly from 45 percent in the previous year to 46 percent. This was largely due to the stable developments in China, Brazil, and Russia.
At EUR 3 million, the operating result excluding special items remained on a par with the previous year (EUR 4 million) despite non-recurring expenditure. A higher provision for risks made necessary as a result of the Eastman Kodak Company being subject to insolvency proceedings under U.S. insolvency law (“Chapter 11”) had a negative impact on results in the low two-digit million euro range. Special items in the financial year just closed totaled EUR 142 million due primarily to the FOCUS 2012 efficiency program, which resulted in an operating result after special items of EUR -139 million (previous year: EUR 6 million).
The financial result improved as expected in the year under review by EUR 59 million to EUR -90 million (previous year: EUR -149 million). This was mainly caused by the improvement in the capital structure due to the previous year’s successful capital increase and the significant reduction in tied-up capital as a result of active asset management. Tax of EUR 1 million contributed to an annual loss of EUR -230 million (previous year: EUR -129 million). A proposal will therefore be put to the Annual General Meeting not to pay a dividend for the year under review.
At EUR 10 million, the free cash flow was much better than expected. Successful management of net working capital and a reduction in the volume of receivables from sales financing both played a part in this improvement. Due to the annual loss, our equity ratio dropped from around 33 percent to just under 23 percent. Thanks to systematic asset management, the company's net financial debt was kept to a low level at EUR 243 million (previous year: EUR 247 million).
“Despite weak development in the industry and non-recurring costs, our operating result held stable compared to the previous year. Systematic implementation of the measures in our FOCUS 2012 efficiency program means we are on track to reach our medium-term profitability targets. As we have reduced our working capital through successful asset management in the year under review, we have been able to cut our financing requirements accordingly,” said Dirk Kaliebe, CFO at Heidelberg. “Our financing structure exhibits appropriate diversification in terms of both financing sources and the maturity profile. In the medium- to long-term, Heidelberg therefore has a stable liquidity framework providing sufficient leeway.”
Results in the Equipment, Services, and Financial Services divisions
In the Heidelberg Services division, incoming orders dropped by 3 percent to EUR 1.064 billion. Due to negative effects the division's sales fell by 4 percent to EUR 1.058 billion. Sales of remarketed equipment dropped more sharply, while sales of consumables increased as expected. The division's operating result excluding special items was EUR 72 million (previous year: EUR 84 million).
Sales in the Heidelberg Financial Services division held stable compared to the previous year at EUR 15 million (previous year: EUR 16 million). Once again, customers' financing requirements were largely met by external financing partners. The smaller portfolio of direct financing meant interest income was down and resulted in an operating result excluding special items of EUR 14 million (previous year: EUR 18 million).
FOCUS 2012 – implementation of measures on track
Restructuring of Board members’ responsibilities with a focus on growth and efficiency in sales
By implementing measures from FOCUS 2012, introducing organizational changes to strengthen the growth regions, and completely revising its product portfolio with around 60 innovations launched at drupa, Heidelberg has further expanded its foundation for successful business development as the industry’s clear number one.
Outlook – drupa trade show gets financial year 2012/2013 off to a positive start
For the current financial year, Heidelberg expects to achieve a clearly positive operating result before special items, but this will be burdened by the cost of drupa and product launch costs in the first half of the year in particular. The trade show will also lead to a clear shift in sales into the second half of the financial year, with better profit margins.
Some of the savings from the FOCUS 2012 efficiency program will begin to take effect in the current financial year. Up to a third of the planned annual savings of EUR 180 million are to be realized in the current financial year. However, the expenditure required for this will have a negative impact on the financial result. Due to the forecast financial result, the pre-tax result is expected to be negative. In financial year 2012/2013, the proportion of payments relating to FOCUS 2012 will have a significant negative impact on free cash flow, leading temporarily to higher net financial debt. The forecast will be firmed up as soon as there is a clearer picture of the course of developments and post-trade show business.
Heidelberg expects the market recovery to continue in financial year 2013/2014. If, contrary to expectations, the economy fails to improve or the investment rate recovers more slowly than anticipated, this could lead to a slight fall in sales set against the current financial year. The company assumes that, even in this case, the operating result excluding special items will continue to improve, because the cost-cutting measures from the FOCUS 2012 efficiency program will take full effect. In financial year 2013/2014, the company is therefore striving to achieve an operating result excluding special items of around EUR 150 million and a net profit.
“Through our new products, improved cost base, new organization, and stable financing, we have created a solid foundation for a successful future,” said Bernhard Schreier. “drupa provided us with the perfect platform to demonstrate our leading market position. Now it is imperative to take advantage of the improved mood in the industry and of the opportunities in the market as well as to continue with the systematic implementation of the cost-cutting measures and thus returning to profitability in 2014.”
Work underway to tackle long-term targets: Profitability and growth in a changed competitive environment
Heidelberg intends to remain the undisputed number one for professional print service providers. Achieving this aim in future will increasingly require innovative products for packaging, advertising, and business material in short runs, technically attractive special applications, productivity and efficiency in standard print products, greater integration with the Internet, and networking of all print production processes. At drupa, Heidelberg was the only manufacturer to offer successful solutions for all these challenges.
Additional details on the company can be found at www.heidelberg.com.
The 2011/2012 Annual Report can be accessed at 7.00 a.m. on June 14, 2012 at www.heidelberg.com.
For further information, please contact:
Heidelberger Druckmaschinen AG
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