Würzburg. The half-year figures issued by the Koenig & Bauer group (KBA) largely confirm the prognoses given at the AGM in late June. The volume of new orders jumped 34.7% to €731.6m (2003: €543.3m), boosted by the Drupa international print media trade fair in May. Strong growth in the demand for sheetfed and web presses alike indicates that the print media industry is finally emerging from the recession that has dogged it for the past three years.
Shortfall in sales weighs on cash flow and earnings
The rescheduling of shipments impacted on group sales, which at €534.9m were 6.7% above the corresponding figure for the previous year, but below the target for 2004. As a result the KBA group posted a loss before taxes (EBT) of €18.5m. Even so, and despite a high extraordinary expense for Drupa, the pre-tax loss was one-third smaller than in 2003 (-€26.6m). With liquidity temporarily tied up in inventories, the cash flow from operating activities shrank to -€8.1m. However, a substantial increase in third- and fourth-quarter sales is expected to remedy this.
Downsizing almost complete
On 30 June there were 7,287 employees on the group payroll, including the 300 gained with the acquisition of Metronic at the beginning of the year. Stripping out this additional 300 reveals a groupwide reduction of 308. Since the level of plant utilisation at the group’s web press facilities has improved significantly there are no plans for further cuts beyond the closure of the Berlin operation (KBA-Berlin GmbH) at year’s end. However, according to management, fierce competition in the web press market means that the number of non-productive staff will have to be reduced by 80.
Revival in demand
KBA’s short-cycle sheetfed offset operation, which sailed through the recession, booked an exceptionally large number of orders throughout the Drupa season. The inflow of orders to 30 June swelled 38.5% to €426.7m. The volume of new bookings for web presses rose by 29.6% to €304.9m, largely due to contracts for several newspaper presses and a revival in the demand for commercial web offset and publication rotogravure presses.
Due to the rescheduling of certain shipments, sheetfed offset sales were just 7.7% above the figure for last year (€271.3m), at €292.1m, but will increase substantially in the second half. Shipments of web presses rose 5.6% to €242.8m.
Although domestic sales climbed 27% to €76.6m, a high export level of 85.7% reflects persistently weak demand in the German market. In fact, for the first time, sales to Asia-Pacific markets overtook domestic sales: driven largely by strong growth in China they jumped to €110.8m and accounted for 20.7% of the group total.
After two challenging years, the group order level climbed above the billion euro threshold to hit €1,053.6m. The backlog of unfilled orders for sheetfed offset presses stood at €394.2, a 55.1% improvement on the prior year. This is the highest level in KBA Radebeul’s history and guarantees production until the end of the year. The order backlog for web presses stood at €659.4m and will keep production running for the rest of the year, especially since some major contracts were not included in the half-year figures because details had not been clarified.
Innovation versus pricing pressures
In its quarterly report management emphasised the unsatisfactory pricing levels in the global printing press market, which it is aiming to address by driving innovation and by introducing more flexible working hours. In addition to higher labour costs German press manufacturers are also having to contend with rising prices for steel and energy, and the strong euro which is sapping competitiveness and impacting heavily on exports.
Annual target: new sales record and return to profit
Despite this challenging market environment, KBA holds by its annual group sales target of around €1.4bn – the highest in its history – and a pre-tax profit.
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