The Print Wire
Aug 12, 2009
Heidelberg's first quarter sales down, but show signs of stabilizing
Incoming orders for first quarter stabilize at previous quarters' low level and total EUR 550 million - 52 percent down on previous year's figure boosted by drupa
Sales 22 percent down on previous year at EUR 514 million
Operating result falls to EUR -63 million
Free cash flow improves to EUR -29 million
Heidelberger Druckmaschinen AG (Heidelberg) is publishing its results for the first quarter of financial year 2009/2010 (April 1 to June 30, 2009). The persisting unfavorable macro-economic climate and customers' continued reluctance to invest have collectively had a significant impact on business during the reporting period.
In the period under review, incoming orders were up on the previous quarter's figure of EUR 474 million at EUR 550 million and thus appear to be stabilizing at a low level. They were 52 percent down on the figure for the same quarter the previous year, which was boosted by the drupa trade show (previous year: EUR 1.151 billion).
As a result of the global slump in demand in the industry, the Heidelberg Group's order backlog as at June 30, 2009 was 53 percent below the previous year's value of EUR 1.298 billion at EUR 616 million.
"Incoming orders stabilized slightly in the first quarter compared with recent months, providing an initial indication that the downturn is leveling out. However, we still need to wait and see how things develop," stated Bernhard Schreier, CEO of Heidelberger Druckmaschinen AG.
In the first three months of the financial year, the Heidelberg Group generated sales amounting to EUR 514 million. This figure is 22 percent lower than the EUR 657 million achieved in the first quarter of the previous year.
The operating result excluding special items was EUR -63 million in the period under review (previous year: EUR -35 million). The net result in the first quarter was EUR -69 million (previous year: EUR -39 million).
Heidelberg achieved considerable success in limiting the outflow of funds from free cash flow compared to the same quarter the previous year through active control of working capital and savings on investments. As a result, the free cash flow improved to EUR -29 million (previous year: EUR -211 million), largely due to a further cutback in inventory levels.
"Our package of cost-cutting measures is proceeding according to plan," said company CFO Dirk Kaliebe. "In the first three months of the financial year, we achieved a further reduction in personnel costs compared to the previous year, cut inventory levels, lowered research and development expenditure, and cut back significantly on investments. These savings contribute to compensating the impact falling sales are having on the result," he added.
Around half of the 5,000 job cuts announced by Heidelberg have already been achieved or firmly agreed through socially acceptable measures. To make further short-term savings on personnel costs, the company is continuing to make use of short-time work throughout Germany.
In the first quarter alone, just under 600 employees left the Group (including approximately 60 temporary agency staff). As of June 30, 2009, Heidelberg had a workforce of 18,353 worldwide (previous quarter: 18,926).
Results in the Press and Postpress divisions
As a result of the unfavorable economic situation, incoming orders for the first quarter in the Press Division (offset printing) remained at the low level of the previous quarters at EUR 493 million. This is 52 percent down on the figure of EUR 1.030 billion for the same quarter the previous year, which did, however, include the high level of incoming orders from the drupa trade show. Due to weak demand and the low order backlog at the beginning of the quarter under review, the previous year's sales figure was not matched either. At EUR 460 million, sales were 19 percent lower than the same quarter the previous year (previous year: EUR 568 million). The operating result was EUR -53 million (previous year: EUR -29 million).
The Postpress Division (finishing) also suffered from the unfavorable underlying conditions in the quarter under review and only achieved incoming orders totaling EUR 52 million. This was 54 percent down on the figure of EUR 114 million for the same quarter the previous year. At a level of EUR 49 million, sales were 40 percent down on the previous year's figure of EUR 82 million - double the rate of decline experienced in the Press Division. The operating result excluding special items was EUR -13 million (previous year: EUR -11 million).
All regions except North America recorded higher incoming orders in the first quarter than in the previous quarter. In some parts of the EMEA, North America, and Latin America regions, incoming orders were more than 60 percent below the previous year's values due to the global financial and economic crisis. The Asia/Pacific region recorded the smallest decline in incoming orders compared to the previous year. Thanks to the China Print trade show and the resultant healthy incoming orders on the Chinese market, order levels were only 24 percent down on the previous year at EUR 185 million. Sales were slightly up on the previous year's figure at EUR 150 million, with a significant increase recorded primarily in China.
Due to the persisting difficult underlying conditions, Heidelberg is still predicting that sales for financial year 2009/2010 as a whole will be below the very low level of financial year 2008/2009. Although the cost-cutting measures already initiated will help the company lower the break-even level as quickly as possible, the sharp rise in refinancing costs, which also include the cost of the guarantees in the Economic Stimulus Package II, will weigh heavily on the financial result. Consequently, Heidelberg is expecting a negative result for financial year 2009/2010.
Heidelberg concludes negotiations on new financing concept
On August 7, 2009, Heidelberg successfully concluded negotiations on loan agreements with its banks, thereby securing its medium-term financing structure. The components of the financing package include state guarantees and an indemnity from the KfW. The deeds of guarantee will be issued and sent out before the end of August.
This provides the company with a credit line totaling EUR 1.4 billion for the period up to the middle of 2012.
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