Turn-around programme beginning to bear fruit --- Solid financial profile with high liquidity once again --- Management stands by sales and earnings targets for 2013 --- Focus on growth markets for packaging and digital printing
Given the current economic uncertainty, global investment restraint in printing presses already visible towards the end of last year continued in the first quarter of 2013. Koenig & Bauer (KBA) disclosed a 15.5% reduction in the group’s new orders to €200m (2012: €236.6m). Group sales of €190.7m were also below last year’s figure of €263.5m due to shipments postponed by customers and more deliveries planned in the second half of the year. On 31 March group order backlog of €657.3m was slightly higher than at the beginning of the quarter, but still 17.7% lower than the prior-year figure of €798.8m.
Improvement in sheetfed earnings
At €132.8m the volume of new orders in our sheetfed offset division failed to reach last year’s €152.9m by 13.1%, which benefited from a very successful pre-Drupa event. Whereas revenue of €98.2m from sheetfed offset presses was roughly level with the previous year (€100.9m), the volume of unfulfilled orders for sheetfed offset presses rose by 3.4% to €207.8m. Weak sales accounted for an operating loss of €5.9m, which due to cost-savings and increased efficiency is nevertheless a significant improvement on last year’s figure (–€13.3m). The same is true of our gross margins.
Volatile demand for web and special presses
New orders for web and special presses came to €67.2m (2012: €83.7m) in the first quarter as awaited contract conclusions were postponed time and again by customers. At €92.5m sales failed to reach last year’s figure of €162.6m by more than 40% affected by usual fluctuations in the project business. At the end of March the volume of unfulfilled orders in this segment which is characterised by large press sizes stood at €449.5m.
Quarterly loss due to a slide in contributions
Lower quarterly sales inevitably strained contribution margins and earnings. In addition, there were fewer special press deliveries with better margins. To sum up we posted an operating loss of €16.9m. Following a modest financial loss of €1.9m we made a pre-tax loss of €18.8m, compared to –€0.4m in 2012. On 31 March group results came to –€18.5m (2012: –€1.3m). This corresponds to earnings per share of –€1.12 (2012: –€0.08).
Export level temporarily sinks to 71.2%
Domestic sales nearly doubled in the first quarter due to a rise in deliveries of web and sheetfed offset presses. Thus at 71.2% KBA’s export ratio was below average (2012: 89.2%). However, it is expected to return to normal, around 80%, in the upcoming quarters. 29.8% of group sales went to the rest of Europe, which was well below average given economic problems in key markets. The growing Asia-Pacific region, including the major market China, contributed 23.2% to group sales and the ratio attributable to North America rose slightly from 8.2% in 2012 to 10.9%. The proportion generated in Latin America and Africa came to 7.3%.
High liquidity and good equity
- Even though inventories have swelled in preparation for upcoming deliveries, cash flows from operating activities improved to –€11.4m compared to 2012 (–€23.1m) resulting from higher customer down payments and a reduction in trade receivables. After deducting cash flows for investing activities the free cash flow came to –€14.8m, also significantly above last year (2012: –€30m). Along with ample credit lines, funds came to €189m at the end of March (End of 2012: €206.3m). Less reduced bank loans of €29.2m, net liquidity was a considerable €159.8m and KBA’s equity ratio was a solid 35.8%.
Group workforce without apprentices already below 6,000
At the end of March the group workforce totalled 6,187 including 340 apprentices and trainees. This was 107 fewer than twelve months earlier. The total will continue to fall in the near future due to approved measures, such as phased retirement schemes.
Management stands by goals for 2013
Despite lower order, sales and earnings figures as well as global economic risks, the KBA management board believes its targets for 2013 remain realistic. These include similar sales to 2012 (€1,294m) and a modest improvement in pre-tax earnings. Management bases its forecast on the raft of deliveries scheduled for the following months and a rise in sheetfed orders expected in May from the world’s second-largest trade fair, China Print, in Beijing. We also expect new contracts in the web and special press division in the second and third quarters, such as the orders for newspaper web presses received in April.
KBA vice-president and CFO Dr Axel Kaufmann says: “The ongoing turn-around programme in place until the end of 2014 in the competitive sheetfed and web offset business should noticeably improve earnings. Along with the continuing realignment of production capacity and amendments to wage agreements effective since the beginning of the year, there are also cost-saving measures in place in group purchasing and administration.”
In the midterm president and CEO Claus Bolza-Schünemann sees growth potential in digital printing and flexible packaging for KBA: “With the digital KBA RotaJET 76 and the expansion of our product range for packaging with own products as well as the planned takeover of Italian manufacturer, Flexotecnica, we aim to compensate for the smaller market for traditional sheetfed and web offset presses with growing print markets. This strategy demands time and appropriate investment which thanks to KBA’s solid financial profile can be realised with our own means. In 2013 the new market segments will only make a limited contribution to group sales and earnings, however this should change in the midterm.”