KBA Sees Successful drupa Boosts Its Business in the Second Half-Year

WÜRZBURG, GERMANY—June 14, 2012—At its well-attended 87th annual general meeting, Koenig & Bauer AG (KBA) President and CEO Claus Bolza-Schünemann reported a strong group performance at drupa 2012. Contracts worth well €100 million were signed at the fair in Düsseldorf, most of them for batch-produced sheetfed offset presses. Post-drupa business remains brisk.

While the positive impact of Drupa on order intake and sales will not work through to the bottom line for some weeks or even months, preliminary figures for KBA’s sheetfed offset division show that the volume of new orders booked to the end of May approached €300 million, up roughly 12 percent on 2011. However, orders for web and special presses totaled approximately €190 million, a big drop on the prior-year figure of more than €335 million, which had been boosted by some major contracts.

The group order intake of just over €486 million for the first five months was thus lower than 12 months earlier, but higher than group sales for the same period, which stood at around €458 million or around 8 percent up on the prior-year figure. The order backlog as of May 31, 2012, exceeded €854 million and was a good €236 million above the prior-year figure. This will contribute to the higher sales targeted in the second six months.

Payroll falls below 6,000, excluding apprentices
While Bolza-Schünemann anticipates higher earnings for the first six months compared to 2011, he was unwilling to disclose any concrete figures before the half-year report is published on August 14, 2012. Notwithstanding the increased risks relating to the global economy, management is targeting sales of more than €1.2 billion for 2012 and a higher pre-tax group profit compared to 2011 (€3.3 million).

This projection is based on an anticipated high level of plant utilization in the second half-year and a positive impact on earnings from ongoing cost-cutting activities. At the end of May the KBA group payroll totaled 6,256, or 121 fewer than in the previous year. Excluding 328 apprentices the group payroll has already fallen below 6,000 and will be reduced by several hundred more over the next few years as a number of measures such as phased retirement reach completion.

KBA aiming to actively shape print’s future
Discussing changes in the media environment, technological advances and structural transitions in the print media industry, Bolza-Schünemann said they offer opportunities for the KBA group, with its extensive portfolio of innovative products and services, to expand market share.

“We are aiming to close the gap to the number one player in sheetfed offset and move up to the number two slot in commercial web offset. As the market leader for newspaper presses we are adjusting our product palette to a smaller market volume while boosting profitability. We are also planning to expand our range of special presses. Over and above this, we are rigorously stepping up our service activities,” he explained.

Focus on profitable niche markets and new business lines
KBA has weathered the financial crisis better than many others, largely thanks to acquisitions in profitable print-related niche markets over the past eleven years. To achieve its medium-term growth potential it is planning to develop promising new business lines and markets.

A major step in this direction is its entry into high-volume digital print with the KBA RotaJET 76, an inkjet web press manufactured at the group’s main plant in Würzburg and launched to great acclaim at Drupa 2012. It will initially target printers of books, brochures, commercials, direct mail and magazines. KBA is also planning to expand its sizable share of the packaging press market with a new web offset press for flexible packaging, the Varius 80 built by KBA-MePrint.

Subsidiary KBA-Metronic is extending its range of packaging-related systems encompassing marking, coding and brand protection. Given China’s growing significance, KBA is seeking to acquire a substantial interest in a domestic manufacturer of sheetfed offset presses before the year is out, so as to expand the lower end of its press range with products manufactured locally.

Administration recommends dispensing with dividend for 2011
Looking back on the 2011 business year, Bolza-Schünemann expressed dissatisfaction with the meagre group profit of €0.4 million on sales approaching €1.2 billion. Nonetheless, KBA was unique among major press manufacturers in posting a pre-tax profit for three years in succession following an industry crisis that necessitated substantial restructuring expenses.

Since going public 27 years ago KBA has paid shareholders a dividend almost every year from the earnings retained by the parent, Koenig & Bauer AG. Last year was an exception in that the parent’s earnings were insufficient and a dividend of 30 cents was based on consolidated profit, which is the determining factor for the group. As a logical consequence of this dividend policy, the management and supervisory boards tabled a motion at the AGM recommending that, in view of the unsatisfactory group performance, no dividend be paid for 2011 even though the parent posted a net profit for the year of €11.3 million as a result of unusually high earnings from shareholdings. The proposal prompted a number of counter-proposals from investors and a heated debate.

Urging shareholders to approve the administration’s proposal for the utilization of retained earnings, Claus Bolza-Schünemann said, “Net profit is key to securing the group’s future and our ability to operate. Paying the dividend demanded in certain counter-proposals would withdraw capital from the parent which could not be created from consolidated earnings last year and would not be available for upcoming moves to restore profitability, develop new business lines such as digital print and exploit further strategic options.”

Detailed figures for the first half-year will be published on August 14, 2012.

Source: KBA.