Heidelberg Profitability Up Significantly After Nine Months, Earnings Target Confirmed

HEIDELBERG, GERMANY—February 5, 2014—After nine months of financial year 2013/2014 (April 1 to December 31, 2013), Heidelberger Druckmaschinen AG (Heidelberg) remains on track with regard to earnings trend and profitability. After three quarters, the operating result is up significantly on the previous year. In the third quarter (October 1 to December 31, 2013), EBITDA remained at the previous year's level despite the marked drop in sales. As a result, the company is on track to achieve its targets for the current financial year.

"After nine months, Heidelberg has made significant progress regarding profitability," said Heidelberg CEO Gerold Linzbach. "As we expect our sales to pick up and the result to increase in the final quarter, we remain confident that we will meet our target of achieving a net profit."

Group sales after nine months for the period under review stood at € 1.685 billion (previous year: € 1.905 billion). Negative exchange rate movements accounted for around a third of this drop. This also led to restrained investment activity in new machinery sales among customers in Asia/Pacific and South America, particularly Brazil, which were the regions hit hardest by these developments. Furthermore, Heidelberg continued to scale back its involvement in low-margin areas of business. In contrast, the North America region—particularly the United States—showed a revival in demand.

Results up again on the same period of the previous year
After the first nine months of financial year 2013/2014, the operating break-even point was exceeded despite falling sales. As a result of sustained savings from the Focus efficiency program and measures to increase profit contributions, all KPIs (Key Performance Indicators) affecting the results were up again on the same period of the previous year. After three quarters, EBITDA excluding special items increased from € 4 million in the previous year to € 67 million. The EBITDA margin thus reached a value of 4 percent. The result of operating activities (EBIT) excluding special items after nine months climbed from € -58 million to € 10 million. This is the first time this financial year that Heidelberg has achieved a positive cumulative EBIT result.

In the period under review, the financial result after three quarters was € -41 million (previous year: € -36 million). The previous year included positive one-time effects from interest on tax refunds. After the first nine months of the current financial year, the pre-tax result improved from € -118 million in the previous year to € -32 million. Consequently, the cumulative net result for the first nine months of financial year 2013/2014 improved to € -40 million after € -94 million in the previous year.

At € 588 million, the Heidelberg Group's order backlog at December 31, 2013 remained stable compared to the previous quarter (€ 598 million).

Sound financing structure—free cash flow almost balanced
After the first nine months of financial year 2013/2014, the free cash flow including restructuring expenses (€ -57 million) was almost balanced at around € -10 million. Free cash flow improved significantly on the previous year (€ -87 million) due to the increased result of operating activities and the funds released by the company's asset and net working capital management.

Net financial debt fell year-on-year to € 271 million (previous year: € 325 million). Despite further payments for Focus, debt at December 31, 2013 was maintained at the low level of March 31, 2013 (€ 261 million).

Financial framework successfully extended to 2017/2018
At the start of December, Heidelberg further improved its financing structure as regards its maturities by extending its syndicated credit line and increasing its bond by € 51 million. The financial framework essentially comprises the syndicated credit line which currently stands at € 340 million and a € 60 million convertible bond (both due to mature by mid-2017) and a bond for € 355 million that matures in April 2018. Thus, Heidelberg has arranged an adequate financial framework for its business development and offers a diversified financing structure.

"By successfully refinancing our credit line, we have made further significant progress in optimizing our financing structure," relayed Heidelberg CFO Dirk Kaliebe. "We have extended the terms of our key financing pillars to 2017 and 2018. Thanks to our asset and net working capital management, the company's net financial debt remains at a low level. In the medium term, we intend to reduce our debt even further."

At December 31, 2013, the Heidelberg Group had a workforce of 12,851, excluding 621 trainees (previous year: 13,901, excluding 662 trainees).

Outlook: Net profit remains target for financial year 2013/2014
The outlook for the 2013/2014 financial year and the aim of generating a consolidated net profit remain unchanged. In past quarters, Heidelberg has increasingly geared its strategy towards improving profitability. The key figures for the first three quarters of the 2013/2014 financial year show that the company is making good progress in this. To remain prepared for volatility in individual markets and business areas in the future, the operating break-even point needs to be lowered further. Heidelberg is therefore using all available tools to make working hours more flexible in addition to the measures forming part of the Focus efficiency program. Furthermore, the company will push for continued improvement in product-specific profit contributions to clearly improve the result of operating activities excluding special items and achieve a significantly higher annual figure than in the previous year.

In light of persistent adverse exchange rate developments against the euro, the resultant reluctance to invest in some markets and the scaling back of low margin business, the company expects sales volumes for the year as a whole to be around 10 percent lower than in the previous year. Additional extraordinary expenses will arise in the current financial year in connection with Focus. The financial result will improve compared with the prior-year figure, which was reported in accordance with IAS 19 (2004). Given the measures initiated and in light of the positive trend already seen in the first three quarters, Heidelberg continues to strive for a consolidated net profit in the 2013/2014 financial year.

Source: Heidelberg.