Ad Hoc 2007
KBA and Cerutti sign an agreement on rotogravure business
Press manufacturers Koenig & Bauer AG (KBA) in Germany and Officine Meccaniche Giovanni Cerutti S.p.A. (Cerutti) in Italy have signed an agreement transferring to Cerutti for an undisclosed sum all KBA’s intellectual property rights (know-how, industrial designs and patents) relating to rotogravure printing presses for magazines, catalogues and decorative paper. KBA will design and manufacture the folders for all new Cerutti publication rotogravure presses. In addition KBA will continue to provide after-sales service for the rotogravure presses it sold up to the date of the transaction. The agreement will allow the two groups to optimise the development and manufacture of their products and to achieve substantial synergies. It will deliver major competitive advantages to printers operating publication rotogravure presses in a highly competitive environment that is being further exacerbated by the evolution of other printing process and new communication technologies.
The agreement was approved by KBA’s supervisory board at its latest meeting. The sale to Cerutti of KBA’s gravure business, which for some time has felt the impact of weak demand in the gravure market, will lead to personnel changes at KBA’s production plant in Frankenthal. As KBA president Albrecht Bolza-Schünemann had already announced in the company’s half-year report published in mid-August, slack demand in the newspaper industry during the past eighteen months also means that capacity must be reduced at KBA’s newspaper production plants. The scenario envisaged by the board of directors for downsizing capacity and safeguarding earnings will first be discussed by the competent worker committees before concrete figures are released. Despite the slide in demand for multi-unit press lines the KBA board reaffirmed its forecast that group profit and pre-tax earnings in 2007 would be roughly on a par with the previous year.
Slow demand for big press lines mars fine performance
At the 82nd AGM of German press manufacturer Koenig & Bauer AG (KBA), group president and CEO Albrecht Bolza-Schünemann reaffirmed his March projections for 2007 of group sales totalling €1.7bn and a pre-tax profit on a similar scale to last year’s €47.4m. Although investment in big newspaper and gravure press lines has been slow for the past year, buoyant demand for sheetfed and special presses meant that the volume of orders for the first five months of 2007 was a good €70m up on the prior-year figure. Sales were also higher, and KBA projects a rise in sales and a profit in the first half-year, figures for which will be published on 14 August.
While KBA’s sheetfed division has enough orders to keep it busy until well into the fourth quarter, a year-on-year drop in the order backlog for newspaper and gravure presses, due in part to higher shipments, will cause capacity fluctuations in the second half-year at the group’s web press production plants. Because of the long lead times for web presses, recent contracts for newspaper and commercial presses will have no immediate impact on manufacturing and assembly levels.
Having reduced the volume of work outsourced, downsized the temporary labour force and rescheduled internal manufacturing jobs, KBA is planning to introduce short-time work in certain departments from 1 July. The costs associated with this cut in capacity utilisation have already been factored into the earnings forecast for 2007.
Says Albrecht Bolza-Schünemann: “Among newspaper publishers, investment in new kit has been hit by demographic trends in many developed economies and by the fact that daily titles in Europe and North America have now largely completed conversion to full colour. It is too soon to tell whether this is cyclic, like the downturn six years ago, a temporary phenomenon as the media industry absorbs ongoing changes in the market, or a permanent and irreversible trend. If the last hypothesis is correct we shall be obliged to trim our web press operations and focus on core components.” He was unwilling to be more specific.
Good start to 2007
In the first three months of the year German printing press manufacturer Koenig & Bauer AG (KBA) posted a 3% increase in group orders to €350.9m (2006: €340.6m). While demand was soft for big newspaper and gravure web presses, a brisk influx of orders for special presses helped boost new bookings for web and special presses by an above-average 7.3% to €180.2m from €167.9m. The volume of incoming orders for sheetfed presses, at €170.7m, was roughly on a par with the previous year (€172.7m). Group sales of €414.2m surpassed the prior-year figure of €309.4m by a substantial 33.9%. A big increase in shipments of commercial and security presses pushed up sales of web and special presses from €146.7m to an impressive €257.6m. However, sheetfed sales of €156.6m (2006: €162.7m) were not in line with annual targets.
A jump in shipments reduced the volume of orders on hand from €1,072.1m twelve months earlier to €885.4m. A €319.5m (2006: €321.7m) backlog of orders for sheetfed presses, which have relatively short delivery time-frames, will keep KBA’s production plants in Radebeul and Dobruška (Czech Republic) busy until well into the second half of the year. The same cannot be said of KBA’s web press production plants, where capacity utilisation will fall in the second half-year following slack demand for big newspaper and gravure presses, which shrank the backlog of orders for web and special presses to €565.9m (2006: €750.4m).
Cost savings and a substantial improvement in sales transformed an operating loss of €6.5m in the first quarter of 2006 into a €13.5m profit, and a net loss of €5.3m into a net profit of €9.3m. Earnings per share of 57 cents were a big improvement on the prior-year loss of 33 cents.
Looking ahead, KBA reaffirmed its end of quarter projections that group sales and pre-tax earnings in 2007 would be similar to last year, namely €1.7bn and €47.4m.
Koenig & Bauer AG: big jump in sales and earnings in 2006
Group sales climbed 7.5% to €1,741.9m (2005: €1,621m), the highest level in KBA’s 189-year history. While a total of €1,649.7m for new bookings represented a double-digit improvement on 2004, which had been boosted by the Drupa trade fair, it was 6.7% down on the record figure for 2005 of €1,768.9m. President and CEO Albrecht Bolza-Schünemann attributed this to the smaller number of major newspaper and gravure contracts put up for tender. An increase in shipments trimmed the order backlog to €948.7m at the end of the year, from €1,040.9m in 2005. A high level of capacity utilisation at KBA’s production plants and efficiency gains from restructuring the web press division enabled the group to boost operating profit from €33.3m in 2005 to €46.2m. While the financial profit was no more than modest, pre-tax earnings (EBT) soared to €47.4m (2005: €25.8m), net group profit to €34.3m (2005: €18.5m). Earnings per share thus came to €2.11 (2005: €1.14). Although the export level of 82.7% was marginally higher than in 2005 (81.9%), group profitability in the fiercely competitive global press market was hit by the weakness of the Japanese yen, the US dollar and the Swiss franc against the euro, by higher steel and energy prices and by an increase in unit labour costs, which together wiped out some of the cost savings and productivity gains made. At the AGM on 19 June in Würzburg management and the supervisory board will propose a dividend of 50 cents per share, up from 40 cents in 2005. €8.2m of the parent’s net profit of €16.1m (2005: €6.5m) will be paid out as dividends, €7.9m reinvested. Despite softer sales of multi-unit web presses, KBA management is confident that group sales and pre-tax earnings in 2007 will be roughly on a par with 2006.