The recent news of Heidelberg's financial figures once again showed that the industry giant is not immune from the depressed state of the commercial printing market. It announced a net financial loss of Euro 138 million, compared with a profit of Euro 201 million the previous year. Overall sales for the year fell by 17.7% compared with the previous year. The company announced it was cutting 1,000 more jobs, and would extend its "efficiency enhancing" program to save Euro 80 million a year.

These measures follow the major announcement of restructuring and a cut of 2,200 jobs in September 2002. Sales were down in all divisions with sheetfed being the most profitable, but the web and digital divisions had the least satisfactory performance. In fact, a recent announcement by Kodak, Heidelberg's partner in its Nexpress digital color printing operation, showed sales of this product have fallen well below expectations.

Heidelberg is not alone in showing the effects of the economic situation around the world, but particularly in North America, is severely affecting financial results. Most companies in the printing industry are showing reduced sales, but few to the same extent as Heidelberg. MAN Roland has announced it too is in cost reduction mode and is making significant job cuts. In the following article, I want to look at the situation facing the Management Board of Heidelberg and the possible options that should be considered to improve their financial situation for the future.

PRESSURE
The Board has already stated they see no grounds for any sustained revival in demand during this fiscal year, and it anticipates sales will decline during this period. The possibility of further closures of Heidelberg production sites worldwide is being examined.

Heidelberg is a public company, and therefore has to endeavor to satisfy its shareholders. However, while it is a public company, it has a majority shareholder in RWE, the German public utility supplier. RWE has already stated that it wishes to divest its stake in Heidelberg, and is waiting for the share price to be suitable for this. This obviously puts additional pressure on the Heidelberg Board.