Heidelberg Releases Final Half-Year Figures, Including Stable Sales

HEIDELBERG, GERMANY—Nov. 8, 2011—In the first six months of financial year 2011/2012 (April 1 to Sept. 30, 2011), Heidelberger Druckmaschinen AG (Heidelberg) significantly improved its operating result while recording stable sales.

Incoming orders for the first half-year totaled €1.333 billion. After adjustment for exchange rate effects, this was around 5 percent below the high level for the same period the previous year (€1.436 billion), which was influenced by the Ipex and ExpoPrint trade shows. The Heidelberg Group’s order backlog at the end of the second quarter amounted to €731 million, which was slightly higher than the previous quarter (€718 million).

Sales for the first six months totaled €1.180 billion (€1.209 billion after adjustment for exchange rate effects), which was on a par with the previous year’s level of €1.196 billion.

Over the same period, the operating result—excluding special items—improved significantly to €-21 million (previous year: €-41 million). Amounting to €3 million, the special items mainly consisted of personnel-related expenditure. In the previous year, special items yielded an income of €22 million.

“With stable sales, the continued consistent cost management that forms part of the reorganization and the associated efficiency gains have led to a significant improvement in profitability compared to the previous year. To achieve our medium-term earnings target, we will take action to counter the fact that the global economic situation has become more uncertain and the market is not recovering as expected,” said Heidelberg Group CEO Bernhard Schreier.

At €-42 million, the financial result was clearly improved against the previous year’s figure of €-87 million. The pre-tax result for the second quarter improved from €-50 million in the previous year to €-19 million. The result for the half-year under review improved substantially from €-106 million in the previous year to €-66 million. Heidelberg achieved a net result for the first six months of €-66 million (previous year: €-88 million).

The free cash flow for the first half-year was negative at €-19 million. This was partly due to the outflow of funds resulting from the plant expansion in China. The net financial debt for the first six months was comparatively low at €279 million. At the beginning of the previous financial year, this debt was still as high as €695 million. The equity ratio remained stable at around 30 percent during the period under review.

“Successful refinancing and effective asset management enabled us to secure the company’s financial stability and thereby significantly reduce our financing costs. Thanks to the further optimization of net working capital in the second quarter, the free cash flow was better than expected, which had a positive impact on our net debt,” said Heidelberg CFO Dirk Kaliebe.

As at Sept. 30, 2011, Heidelberg had a workforce of 15,782 worldwide (previous year: 16,228). The number of employees thus fell by 446 compared to the previous year.

Business results in the divisions and regions
In the Heidelberg Equipment division, incoming orders for the first half-year totaled €810 million. This was 8 percent down on the previous year, which was boosted by the IPEX and ExpoPrint trade shows. Over the same period, the division saw sales grow by 4 percent (7 percent after adjustment for exchange rate effects) to €674 million.

The Heidelberg Services division was still feeling the effects of the declining business with remarketed equipment. Incoming orders were 7 percent below the previous year’s figure at €515 million. The division’s half-yearly sales fell by 7 percent (6 percent after adjustment for exchange rate effects) to €498 million.

The order situation at Heidelberg continues to vary from region to region. While incoming orders for the first six months in the Europe, Middle East and Africa (EMEA) and the South America regions were down on the relevant figures for the previous year, which had been boosted by trade shows in these areas, the Asia/Pacific and Eastern Europe regions matched the previous year’s level (after adjustment for exchange rate effects) and the North America region saw a slight improvement on the previous year’s weak incoming orders. Sales were up on the previous year’s figure in the North America, South America, and Asia/Pacific regions after adjustment for exchange rate effects. In the Europe, Middle East and Africa and Eastern Europe regions, on the other hand, they were below the previous year’s figure after adjustment for exchange rate effects.

Outlook
Heidelberg continues to believe that economic uncertainties will have a restraining influence on investment behavior in our industry during the second half of the financial year. The distortions in the capital markets and the weaker overall economic momentum have once more clearly increased uncertainties respecting further cyclical trends compared with the first quarter 2011/2012. The order backlog for Heidelberg is highly differentiated internationally, and is influenced on the one hand by the continuing uncertainties in the US, Japan, and the Mediterranean countries, and on the other hand by the favorable business trend in China and South America.

Due to the economic outlook, it can be expected that demand will be weaker than anticipated during the second half of the financial year, and that sales and the operating result will not reach the level aimed at by Heidelberg. As a consequence, the goal of a balanced pre-tax result will probably not be attained. In an endeavor to increase operating profitability in the current financial year, measures relating to non-personnel costs and the human resources area that can be implemented quickly have been introduced. The company expects that the operating result excluding special items for financial year 2011/2012 will be noticeably better than that of the previous year.

Heidelberg’s medium-term profitability goals will continue in effect, even if the planned sales increase to over €3 billion is delayed due to weak demand. In order to attain these profitability targets, Heidelberg is working on a program to ensure the already established target of an operating result of €150 million within the next two financial years. Building on the reorganization of the company that was implemented in 2010, the focus will be not only on further capacity and cost adjustments, but also on structural changes in order to create long-term profitability for this business model. In doing so, we closely examine all areas, products, and processes.

“We will prepare ourselves to effectively satisfy the requirements of a changing and more volatile environment of the professional commercial and packaging printing market. As soon as we have completed our examination and measures have been approved, this will be announced promptly,” said Schreier.

Heidelberg will publish further details and an explanation of the figures for the third quarter of financial year 2011/12 on Feb. 8, 2012.

Source: Heidelberg.