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Heidelberg Results: Reluctance to Invest Prevails, Negotiations Over Digital and Web Divisions Continue

Press release from the issuing company

- Incoming orders in second quarter 35 percent up on first quarter - Sales for first half-year still low at around Euro 1.5 billion - Operating result: Loss compared to previous quarter almost halved - Uncertain economic climate continues to make forecast for full fiscal year impossible November 12, 2003 -- During the first six months (April 1 to September 30) of fiscal year 2003/2004, Heidelberg recorded sales of around Euro 1.5 billion (previous year: Euro 1.9 billion). Adjusted for currency and consolidation effects, this represents a fall of 15 percent compared with the previous year. Incoming orders during the same period amounted to Euro 1.8 billion (previous year: Euro 2.0 billion). Order levels during the second quarter were better than for the months April to June, particularly in the Sheetfed Division and, under regional aspects, in the countries of Asia and Eastern Europe. "The global reluctance to invest and the economic and structural problems facing our industry have not changed significantly in the first half of the current fiscal year", stated Bernhard Schreier, CEO of Heidelberger Druckmaschinen AG. "The current economic climate does not allow concrete sales and profit forecasts for fiscal year 2003/2004. We must wait and see over the coming weeks and months to what extent the positive development from the second quarter proves to be sustainable." The operating result for the half-year was Euro -93 million (previous year: Euro 36 million). The net result was Euro -129 million (previous year: Euro 13 million). "Despite sales being only slightly up on the first quarter, we were able to virtually halve the operating loss in the second quarter to Euro -34 million (previous quarter: Euro -59 million). The cost-cutting measures introduced are already beginning to bite. Personnel costs in the second quarter, for example, were 7 percent down versus the first quarter", stated Dr. Herbert Meyer, CFO at Heidelberg. "We will continue to drive forward our efficiency-enhancing and cost-cutting measures in order to achieve the planned improvements in results." As of September 30, 2003, the Heidelberg Group had a workforce of some 23,700 worldwide (previous year: 25,000). Overall, Heidelberg is looking to reduce staffing levels worldwide by around 3,200 over the period April 1, 2002 to March 31, 2004, some 400 jobs being cut in the second quarter of the current fiscal year alone. Sheetfed fares much better in second quarter; development in Asia and Eastern Europe very stable: Sales in the Sheetfed Division climbed Euro 70 million from Euro 492 million in the first three months of the fiscal year to Euro 564 million. Incoming orders rose from Euro 551 million in the first quarter to Euro 752 million in the second. The Digital Division's sales, incoming orders and result also improved on the figures for April to June, though levels were still low. Orders received by Web Systems were well up on the first quarter, while Postpress recorded increases in both sales and incoming orders. Only Digital returned figures that improved on the first half of last year. Incoming orders for this Division grew Euro 10 million over the same period last year to Euro 111 million, with the operating result improving to Euro -17 million (previous year: Euro -38 million). The operating result for Sheetfed was Euro -7 million (previous year: Euro 137 million). The Asia and Eastern Europe regions continued to develop well. Despite the difficulties facing the industry, the figures for both regions were on a par with those for the first half of last year. Working time measures extended As a result of the continuing reluctance of commercial printers on many markets to invest, most noticeably on the key markets USA and Germany, Heidelberg will continue to adapt its production capacities in the Sheetfed Division to the order situation by extending job safeguards and short-time working up to and including May 2004. In Germany, the Heidelberg, Wiesloch, Amstetten and Brandenburg sites will be particularly affected by these measures. Heidelberg is continuing to improve its cost structures in all divisions of the Company and is currently in negotiations in this respect with regard to the Digital and Web Divisions.