• Sales up 16.6% on previous year
• Sheetfed orders up 10%
• Order backlog below prior-year record, but up on 2010
• Improved pre-tax profit of €12.5m
• Strong cash flow and high liquidity
• Economic environment poses more risks
• Management board reaffirms targets for 2012

Würzburg. Notwithstanding the current economic slowdown, president and CEO of Koenig & Bauer AG (KBA) disclosed in the third quarter report generally positive figures for the world's second-largest press manufacturer. In his letter to the shareholders Claus Bolza-Schünemann says: "We are on target as far as the whole year is concerned." For the first three quarters KBA released an increase in group sales to €916.2m, 16.6% up on the previous year. Beside its core sheetfed and web offset press business, the company is also active in less economy-dependent markets such as packaging, security, digital printing as well as marking and coding. Even though sheetfed orders were up 10% on 2011 thanks to the tradeshow Drupa, order intake of €826m failed to achieve last year's record high of €1,155.7m boosted by several major orders for special presses. At €735.5m order backlog at the end of September saw a €171m increase on the corresponding figure for 2010, but failed to meet last year's figure by €75m (2011: €810.8m).

Substantial increase in earnings
Following a loss of €20.4m the previous year, operating profit stands currently at €20.5m, an improvement of over €40m. Pre-tax earnings (EBT) soared to €12.5m compared to the half-year figure of €7.9m and also the prior-year loss of €26.6m. After tax, the group posted a net profit of €5.9m, which corresponds to earnings per share of €0.36.

Sheetfed orders up thanks to Drupa
In the meantime KBA is also feeling the effects of the economy-related weak demand in key markets that affect the entire engineering industry. Thanks to the industry's leading trade fair Drupa in May sheetfed order intake after nine months at €517.8m exceeded last year's figure by nearly 10%. Sales of sheetfed presses came to €395.4m, close to the figure in 2011. The positive effect of Drupa on sales will be more noticeable in the fourth quarter. High development and launch costs for new press generations in all formats, continuing pricing pressures and below-target sales caused the sheetfed division to post a loss of €21.4m.

Higher web and special press sales
At €308.2m the volume of orders for web and special presses was about 55% below last year's extraordinary high of €683.7m which was boosted by a number of major orders. Web press orders for newspaper and commercial printing were hit by the growing importance of online media which enforced economy-related reluctance to invest. By contrast, in this long-term orientated business segment sales rose by 34.1% to €520.8m driven by numerous deliveries resulting from an earlier wave of orders. Higher contribution margins, the growth in the service business and an advantageous product mix resulted in the web and special press division showing an improved profit of €41.9m (2011: €1.7m).

Export level approaches 90%
A slide in domestic sales compared to 2011 raised the export level to 89.5%. In the first nine months sales to the rest of Europe contributed to only 29.7% of the group total (2011: 36.1%) dampened by the weak economy in the South and other parts of Europe. The volume of group sales attributable to the growth regions Asia and the Pacific was 24.4%, with China playing a major role. The figure for the emerging markets Latin America and Africa soared to an above-average 25.3% (2011: 11.4%). In contrast, sales in North America contributed 10.1% to the total, remaining below the long-term average.

Continued solid finances and balance sheet
The increase in sheetfed sales planned in the fourth quarter has led to a temporary rise in working capital. However, the improvement in earnings and drop in trade receivables increased cash flow from operating activities to €66.1m (2011: €64.6m). The free cash flow climbed from €40.7m to €49.9m and raised funds to €193.4m accordingly. This process is supported by active cash management and objectives linked to financial figures. After deducting reduced bank loans totalling €30.7m, KBA continues to have a very good net financial position of €162.7m. At 37.6% the group's equity ratio was also significantly above the industry average.

High apprenticeship rate of 6.5%
At the end of September there were 6,312 employees on the KBA Group payroll, including some 411 apprentices. Excluding the staff at KBA's newly consolidated Swiss subsidiary, Print Assist AG, this was 149 fewer than twelve months earlier (6,446). Following the conclusion of phased retirement schemes and other measures, the total will fall below 6,000. A new intake of 70 apprentices started at the parent company in autumn, ensuring the next generation of skilled employees for the technically very demanding printing press business.

Positive outlook for 2012
In the third quarter report the management board reaffirmed its targets for 2012. These include the increase in group sales to over €1.2bn and a double-digit pre-tax earnings figure above €12.5m in the first nine months. In view of growing economic and political uncertainty, the management board will publish more details on 2012 and expectations for 2013 in February next year together with the preliminary figures for the current business year.

With a view to sustainably improving profitability in the sheetfed and web offset core business, the management board once again launched a comprehensive scheme in early summer to increase efficiency and trim costs. This programme will run until 2014. President and CEO Claus Bolza-Schünemann says: "The scheme does not include further large-scale changes to the number of employees. We first aim to reduce general and administrative costs further, to divide the workload between the group's locations more efficiently, optimise group purchasing plus the introduction of more flexible employee working times without extra costs."

Having entered the growth market of digital printing with the KBA RotaJET launched at Drupa, diversifying remains on the agenda. Claus Bolza-Schünemann: "Among the many intensively scrutinised options, print-related segments in the broad field of packaging production seem to be interesting and suited to KBA."

The financial statements can be downloaded as a PDF file from :
http://www.kba.com/en/investor-relations/financial-reports/reports-2012/