KBA Sees Perceptible Upturn in Printing Press Sector

WÜRZBURG, GERMANY—06/17/10—At the 85th annual shareholders’ meeting of press manufacturer Koenig & Bauer AG (KBA), president and CEO Helge Hansen reported that demand for both sheetfed and web presses had picked up strongly since March. According to preliminary figures, the order intake of €500m for the first five months of the current business year was almost 23% up on the prior-year figure. Since January 1, the order backlog has increased by a good €160m to almost €500m.

Race to regain lost ground in the second half-year
After five months, KBA’s sales of €332m fell well short of group targets, but this is par for the course in the engineering sector, and Hansen is confident that lost ground can be regained in the second half-year. So despite a big reduction in capacity over the past twelve months KBA is aiming for a modest lift in sales from €1.05bn in 2009 to just over €1.1bn. By the end of May the group payroll had been trimmed to 6,465, and measures being implemented in the web press division will help reduce it to some 6,100 by the end of the year.

Higher pre-tax profit targeted for 2010
Slower sales and the bigger inventories built up for increased shipments in the second half-year are having a modest impact on earnings, the operating cash flow and liquidity, making a pre-tax loss likely for the six months to 30 June even though earnings will improve compared to the previous year. At the same time Hansen sees the moderate increase in sales and pre-tax earnings targeted for 2010 as being within reach. By dint of cutting material and personnel costs by some €110m, in 2009 KBA was unique among the world’s leading German, Japanese and US press manufacturers in bucking the industry crisis to post a pre-tax profit of €2.7m. Savings are expected to top €582m by the end of 2012.

Successful trade fairs in England and China
Hansen was pleased with attendance figures and the investment climate at the Ipex international trade fair last month in Birmingham, UK, and at the CHIPF packaging exhibition earlier this month in Beijing, China. Most of the contracts sealed at these two shows were for sheetfed presses. So far this year KBA has sold 20 large-format presses to book and packaging printers in China alone, underscoring its pole position in this format class. The market leader in newspaper presses and specific niche markets such as metal decorating and security presses, last year KBA boosted its domestic and its international standing in the biggest sector of all, sheetfed presses.

KBA has also booked some major web press orders from commercial and newspaper printers in Europe and the Middle East. One example Hansen mentioned was a big order from the UK for two web presses with a total of 22 towers.

Rumours of mergers and acquisitions
Shareholders acknowledged the fact that in 2009 KBA succeeded in containing the damage exacted by the economic crisis, and that it did this through its own efforts, with neither state aid nor additional credit lines, by rapidly adjusting capacity to medium-term market expectations. However, Hansen emphasised that while efforts have been made towards consolidation on the supply side, the fact that excess capacity continues to weigh on prices indicates a need for further action. This has nurtured rumours of mergers and takeovers, which in the German engineering sector, however, have proved to be unfounded.

Said Hansen: “While we are always open to constructive approaches for resolving the industry’s problems, our primary focus is on pursuing an independent course. Mergers or acquisitions without consolidation do nothing to resolve capacity issues, but individual players can make a signal contribution by rigorously adjusting their resources. In this respect KBA has done more than many others.”

Tighter focus on packaging technology and digital print
Referring to the group’s intention, expressed last year, of boosting earnings, growth and employment by entering a new line of business, Hansen reported that print-related packaging technology and digital print soon proved to have the greatest appeal for KBA. He said: “Having made some promising contacts in these two fields and shortlisted a number of projects, we are now screening potential acquisitions or alliances. I am confident that we shall soon be able to reveal further details.”

No dividend for 2009
With the economic recession continuing to impact on sales, resulting in a net loss by the parent, Koenig & Bauer, and ongoing personnel adjustments within the group, the management and supervisory boards recommended foregoing the payment of a dividend for 2009.

Detailed figures for the first six months of 2010 will be published on 13 August 2010.

For further information go to http://www.kba.com/en/investor/hv.html.