Heidelberg Achieves Significant Improvement in Result for Q1 of 2013/2014

HEIDELBERG, GERMANY—August 13, 2013—The new organization and the comprehensive range of cost-cutting measures are showing tangible results at Heidelberger Druckmaschinen AG (Heidelberg). As expected, the company significantly improved its operating result in the first quarter of financial year 2013/2014 (April 1 to June 30, 2013), which puts it on the right track for meeting its target of a positive net result for the year.

"The substantial increase in our operating result makes us confident that we will record a profit for the year as a whole," said Heidelberg CEO Gerold Linzbach. "In order to achieve this, we are systematically pressing ahead with our strategic reorganization so as to further improve our margins for new machine sales in the future and adapt our cost structures to the market situation on an ongoing basis," he added.

Group sales in the first quarter were in line with expectations at EUR 504 million, despite being around 3 percent down on the figure for the same quarter of the previous year (EUR 520 million). Sales fell slightly in all three segments—Equipment, Services and Financial Services. In most regions, they matched the previous year's level. In the South America region, however, Brazil's continuing economic difficulties hit business hard.

As expected, results improved significantly in the first quarter thanks to sustained savings from Focus 2012 and higher profit contributions for new equipment. What's more, the previous year's results had been burdened by trade show expenditures. EBITDA excluding special items improved considerably from EUR -47 million to EUR -2 million. At EUR -20 million, the result of operating activities ( EBIT) excluding special items clearly surpassed the previous year's figure of EUR -67 million. Special items in the reporting period totaled EUR 1 million (previous year: EUR 6 million). At EUR -12 million, the financial result for the first quarter remained stable at the previous year's level. Accordingly, the pre-tax result improved significantly from EUR -85 million to around EUR -33 million. Overall, the net loss in the first quarter of 2013/2014 was halved from the previous year's figure of EUR -76 million to EUR -38 million.

Incoming orders amounted to EUR 643 million in the reporting period. The far higher order volume of EUR 890 million in the same quarter of the previous year can be explained by the industry trade show drupa, which took place in May 2012. The China Print trade show in May this year went well, but coincided with a reluctance to invest in the Europe, Middle East and Africa region and the South America region, especially in Brazil. At EUR 602 million, the order backlog at June 30, 2013 was 20 percent up on the figure for the previous quarter (EUR 502 million).

Free cash flow, including payments for Focus totaling EUR 31 million, at break-even; net debt at the same level

Thanks to the continuation of comprehensive asset management and the net working capital program, the free cash flow reached break-even in the first quarter. This was a sizable improvement of around EUR 112 million compared to the figure for the same quarter of the previous year.

Thanks to the free cash flow breaking even, at EUR 258 million net debt remained at almost the same level as at financial year-end 2012/2013 and did so despite further payments for Focus 2012 amounting to some EUR 31 million in the first quarter.

"Thanks to systematic asset management over the past four years, we have succeeded in also covering our restructuring costs with the free cash flow. This has enabled Heidelberg to keep its net debt at a low level," noted CFO Dirk Kaliebe. "With the recent successful convertible bond issue and our existing bond, the majority of our debt is now covered by long-term capital market instruments. This places Heidelberg on a sound financial footing," he added.

By issuing a convertible bond in July 2013, Heidelberg further diversified its financing structure in terms of both financing sources and maturity profile. The EUR 60 million convertible bond matures in July 2017. Issuing it enabled the company to further reduce its syndicated credit line to around EUR 416 million.

As expected, due to the net loss for the quarter, equity at June 30, 2013 had decreased by € 37 million to € 364 million compared to the level recorded at March 31, 2013. The equity ratio was 16 percent (previous year: 17 percent). Along with the planned return to profitability, Heidelberg is endeavoring to achieve a sustainable improvement in its equity ratio in the medium term.

As planned, the workforce as of June 30, 2013 fell to 13,669 (same quarter of the previous year: 14,899). The aim is to reduce the Group's headcount to less than 13,500 by mid-2014 at the latest.

Outlook remains unchanged: Aiming for net profit in financial year 2013/2014

The outlook for financial year 2013/2014 and the subsequent years remains unchanged. Economic uncertainties and risks persist, especially in the emerging markets of China and Brazil that are important to Heidelberg. As in previous years, Heidelberg is expecting its sales to pick up in the second half of the financial year. Accordingly, the company's aim is to match the previous year's Group sales in financial year 2013/2014 as a whole. The expected distribution of sales between the first and second half of the year will also influence the operating result in the course of the year. This was still negative in the first quarter but nevertheless was a big improvement on the figure for the previous year. The company expects the result of operating activities excluding special items to continue to improve over the coming quarters and be considerably higher for the year as a whole than in the previous year. Further one-time expenses for Focus 2012 will be incurred during the current financial year. The financial result will be slightly better than in the previous year. With the measures it has introduced, the company still aims at achieving a net profit in financial year 2013/2014.

The report on the first quarter of financial year 2013/2014, image material, and further information about the company can be accessed at www.heidelberg.com.

Next dates:
The figures for the second quarter 2013/2014 are due to be published on November 5, 2013.

Source: Heidelberg.