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Heidelberg Presents Q1 Figures: Dr. Joe comments on Share buy back

Press release from the issuing company

August 1, 2006 -- (See Dr. Joe's comments below) -- Heidelberg increased its sales and earnings in the first quarter of financial year 2006/2007 compared with the previous year. At 719 million Euro, sales by the Heidelberg Group in the first three months (April 1 to June 30) were around nine percent up on the previous year (660 million Euro). Incoming orders in the first quarter increased by around 21 percent to 1.076 billion Euro (previous year: 886 million Euro). At 1.346 billion Euro, the order backlog at the end of the first quarter was up on the figure at March 31, 2006 (1.017 billion Euro) thanks to the good levels of incoming orders. "The positive trend in the print media industry continued in the first three months of the new financial year," said Bernhard Schreier, Heidelberg's CEO. "The success of the Ipex trade show at the start of the financial year gave us considerable momentum. Our expectations for 2006/2007 are confirmed." The Heidelberg Group recorded an operating result of 16 million Euro in the period under review (previous year: seven million Euro). The net profit in the first quarter was five million Euro (previous year: minus one million Euro) and was positive again for the first time in four years. "The high volume of incoming orders in the first quarter proves that investment confidence in the print media industry has strengthened further," said Dr. Herbert Meyer, Heidelberg's CFO. "There was a considerable upturn in business, particularly in Europe and North America. The Asia/Pacific region remained at the high level of the previous year, if one deducts the good volume of incoming orders generated at the China Print trade show in May 2005." As of June 30, 2006, the Heidelberg Group had a workforce of 18,876 worldwide (previous year: 18,583). Increased sales and incoming orders in the Press and Postpress divisions In the Press division (offset printing), sales rose to 620 million Euro in the first three months (previous year: 567 million Euro). Incoming orders in the period under review amounted to 954 million Euro (previous year: 788 million Euro). The operating result in the first quarter stood at four million Euro (previous year: seven million Euro) and included the costs of the Ipex trade show in Birmingham, UK. In the Postpress division (finishing), quarterly sales were 89 million Euro (previous year: 80 million Euro). Incoming orders totaled 112 million Euro (previous year: 85 million Euro). The operating result in the period under review reached break-even (previous year: minus four million Euro). In the EMEA, North America and Eastern Europe regions, sales in the first quarter were much higher than the comparable figures of the previous year. Sales in the Asia/Pacific region increased 0.4 percent after adjustments for currency fluctuations. Outlook for financial year 2006/2007 unchanged For financial year 2006/2007, the Company expects growth in sales of around five percent on financial year 2005/2006. Heidelberg plans to boost the result of operating activities to around ten percent of sales in the current financial year. Share buyback program concluded Heidelberger Druckmaschinen AG concluded last week the share buyback program begun on November 9, 2005. On the basis of the authorization issued by the Annual General Meeting of July 20, 2005, a total of 4,295,424 shares or five percent of capital stock had been bought back up to July 26, 2006 at an average price of 35.00 Euro. This amounts to a total figure of 150,349,212.29 Euro. Dr. Joe Webb comments on Share buy back program (Edited from Dr. Joe's blog - www.drjoesblog.com - also look for Dr. Joe every Friday at WhatTheyThink.com) I understand that companies do stock buybacks, sometimes when their stock is cheap and they're trying to save it (after the stock market crash of 1987, for example). I also know that sometimes companies throw off so much cash they don't know what to do with it (Microsoft comes to mind). As a shareholder, I like buybacks... until you really think about it. Companies are supposed to be invested in because they are able to create more value than buying rather passive financial instruments like bonds or money funds. But why is Heidelberg doing a share buyback? They just bought back $190 million ($150 million euros) of their stock. Does this mean that they have no clue where they could use $150 million to improve their operations with smart investment and throw off more earnings in the long run? Is this a company out of ideas about how to invest in their graphic arts businesses? How about investing in Asia, where markets are growing more than Old Europe and North America? This is a very strange decision, and it implies that their operations either are running so well and have all the capital investment they need, and more, and they can't find a single reason to invest in them any more. Are they just admitting that it's time to milk the operations and grab the cash while the getting is good? Gosh, for $150 million they could have bought a supplier that has a cool idea they could use in their business. They could hire more people and expand their operations. They could give workers bonuses. They could fund employee pension plans. There are many choices for them to use this money. The fact that their choice for investment was not their own operations may be very telling. And they may not even realize that.

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