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KBA Announces Q3 Results: Sheetfed Bucks Trend, Web Orders Down

Press release from the issuing company

Würzburg. The Koenig & Bauer group (KBA), the world’s no. 3 manufacturer of printing presses and peripherals, defied the industry trend to post higher growth in the nine months to 30 September. Group turnover from web and sheetfed presses lifted to _993.8m, 1.3% up on the same period in 2001. This was largely due to brisk sales of sheetfed offset presses and the completion of web contracts received before the beginning of the year. The volume of incoming orders was 9% down on the previous year’s figure at _773.7m, with rising sheetfed offset sales unable to offset a slide in demand for newspaper and commercial web presses. The order backlog of _882.1m on 30 September was 18% lower than 12 months earlier. Net income stood at _20.5m (2001: _35.2m), pushing earnings per share down to _1.28 from _2.20 last year. Pre-tax earnings (ebt) for the first nine months totalled _35.6m, against _55.4m in 2001 (which, however, was a record year for KBA). "This brings us much nearer our annual group target of _50m and is a respectable per-formance compared to other industry players," declared KBA president Reinhart Siewert. The group payroll on 30 September fell by 99 to 7,475, despite an additional 124 staff acquired with the merger of Karat Digital Press. Year on year, by the end of the quarter the number of employees at KBA’s web press production plants worldwide had been cut by more than 500, including some 400 loan workers. Short-time work, in the form of a four-day week, was introduced in some departments and is scheduled to continue until the end of February 2003. Business Divisions In the third quarter KBA aligned its business divisions with internal reporting structures, in accordance with IAS 14.31. This has created a web and special press division (newspaper and commercial web presses plus publication rotogravure, directory and security presses) and a sheetfed offset division. The performance of KBA’s sheetfed offset operation in Radebeul, which has achieved dynamic growth over the past eight years, will thus become more transparent. In the web and special press division, the completion of some major contracts pushed turnover up 1% to _545.6m. However, the volume of incoming orders was disappointing and, at _347.7m, was 30% down on the previous year’s figure (_490.9m). Despite the fact that a number of contracts were awarded in Europe, the USA and the Far East, the current level of demand, especially for newspaper and commercial web presses, leaves a lot to be desired. The drop in new orders reduced the order backlog by 25% to _643.8m The sheetfed offset division followed up its strong per-formance of previous months with a steady stream of sales. Order intake to the end of September totalled _426m, 17% up on the corresponding figure for 2001. Sales in Europe held up well and were brisk in the USA and the Far East. Shipments rose 1.9% to _448.2m, the backlog of orders climbed 9% to _238.3m. Outlook Hopes of an economic upswing in 2003 faded in the third quarter. Demand for web presses in major foreign mar-kets like the USA and the rest of Europe looks set to sta-bilise at the present low level. In view of this, KBA, which exports more than 80% of its output, anticipates a drop in group turnover of somewhere below 10% in the coming year. The weakness of the economy makes it impossible at present to predict group earnings in 2003 with any de-gree of accuracy. Based on the current backlog of orders for web presses and the outlook for sheetfed presses KBA is targeting group sales of around _1.25bn (2001: _1.29bn) and a net operating income of 4% for the current year. A reduction in capacity, together with cost-cutting measures initiated earlier in the year, will boost earnings in the fourth quarter.