Ad Hoc 2011
KBA profits from strong standing in niche markets
- Orders up 15.4%
- Modest lift in sales
- Shipping delays, new provisions affect third-quarter figures
- High cash flow, solid finances
- Strong fourth quarter sales and earnings expected
- Moderate growth of group sales and pre-tax profit
While the third quarter saw demand in the press engineering sector slow, German press vendor Koenig & Bauer AG (KBA) profited from a strong presence in niche markets such as security printing, metal decorating and industrial coding, where demand is robust. In the summer quarter the group booked new orders worth EUR472.8m, the highest level since the record year of 2006. The order intake for the nine months to October was up 15.4% at EUR1,155.7m (2010: EUR1,001.2m). The order backlog passed the EUR800m mark for the first time since summer 2008, totalling EUR810.8m. However, revenue for the full nine months rose by just 1.8% to EUR785.7m (2010: EUR772.1m). Delayed shipments and substantial charges for further capacity cuts at KBA’s underutilised web press production plants led to a pre-tax loss of EUR15.6m for the third quarter and EUR26.6m for the full nine months (2010: –EUR6.7m). The group posted a net loss of EUR32.5m (2010: –EUR9.2m), which corresponds to earnings per share of EUR –1.97 (2010: EUR –0.56).
With demand flagging, the total volume of incoming orders for sheetfed offset presses was just 2.2% higher at EUR472m (2010: EUR462m). This contrasted with brisk business in niche products, which boosted the volume of new orders for web and special presses by 26.8% to EUR683.7m (2010: EUR539.2m). Sheetfed sales, however, climbed by 14.9% to EUR397.4m (2010: EUR346m), whereas sales of web and special presses slid by 8.9% to EUR388.3m (2010: EUR426.1m), largely due to shipping delays. But despite the loss of revenue, and the need for additional provisions to fund personnel adjustments, KBA’s web and special press division posted a modest profit for the nine months. In the sheetfed division, pricing pressures and the substantial upfront expense associated with developing new products for the Drupa trade fair next year outweighed the cost savings achieved, eliminating any operating profit.
Cash flows from operating activities swelled from EUR11.6m a year before to EUR64.6m following an increase in customer prepayments and a drop in trade receivables. This more than covered cash flows for investing activities and raised the free cash flow to EUR40.7m. Funds totalling EUR128.1m and ample credit lines, underscore KBA’s strong financial position. Compared to the higher balance sheet total the group’s equity ratio was a sound 36.7%.
At the end of September there were 6,446 employees on the group payroll, just a few more than in 2010 even though three subsidiaries were consolidated in January. Once the capacity adjustments at KBA’s web press plants have been completed the group will have a payroll of around 6,000.
Management is confident that a surge in sales of high-margin products in the fourth quarter will enable KBA to post the moderate increase in group sales (2010: EUR1.18bn) that was projected in the spring. Claus Bolza-Schünemann, KBA’s new president and CEO since 1 November, confirmed that the group is targeting a pre-tax profit for the third year in succession. However, the group is unlikely to achieve the anticipated modest improvement on prior-year pre-tax earnings of EUR15.3m. This is because the additional charge for capacity cuts at the group’s web press plants was higher than expected, and the perceptible market slowdown has led to a reassessment of certain items in the accounts.
In view of the challenging business environment and uncertainty concerning investment in print prior to the Drupa trade fair next May, management is issuing no detailed projections for sales and earnings in 2012 until March next year.
Koenig & Bauer AG: Changes in the board of directors
Helge Hansen hands CEO post over to Claus Bolza-Schünemann, Dr. Axel Kaufmann appointed deputy president
After successful realignment of Koenig & Bauer AG (KBA), president and CEO Helge Hansen approached the supervisory board to suggest that his forthcoming retirement at the age of 65 years be brought forward to allow the company reins to be handed to a successor on 31.10.2011. With great respect and equal understanding, the supervisory board has accepted this offer and proposal. Supervisory board chairman Dieter Rampl: “Despite the very difficult circumstances, Helge Hansen has, with great expertise and his many years of experience, furthered the sound development of both earnings and finances at Koenig & Bauer AG, and has helped to position the company group for a successful future. We are expressly grateful to Helge Hansen for the fruitful cooperation, his great personal commitment and his excellent work for the good of the company. We wish him all the best for the future.”
The supervisory board has by unanimous decision appointed Claus Bolza-Schünemann (55) to follow Helge Hansen as company president. Claus Bolza-Schünemann has to date served as deputy president with executive responsibility for engineering and web press manufacturing. Dieter Rampl: “As an acknowledged press engineering expert, one of the branch's strategic visionaries and a representative of the founding family, Claus Bolza-Schünemann has all the qualifications necessary to take the helm and to uphold our continued development as the second-largest press manufacturer in the world. The supervisory board wishes him every success for the tasks to come.”
Parallel to the change at the top, the supervisory board has furthermore announced that CFO Dr. Axel Kaufmann (41) is to take on the duties of deputy president alongside his financial remit.
Christoph Müller’s contract has been extended.
KBA group: leap in earnings, sales and new orders
German printing-press manufacturer Koenig & Bauer AG (KBA) issues its group financial statements for 2010:
Pre-tax profit EUR15.3m, free cash flow EUR20.4m
Group sales up 12.3% at EUR1,179.1m
New orders jump by 45.4%, order backlog by 31.6%
39.6% equity ratio and no net debts
Dividend of 30 cents per share proposed
Target for 2011: moderate growth in sales and earnings
Brisker demand following a revival in the spring drove the group order intake up to EUR1,284.9m, a 45.4% improvement on the crisis-shaken previous year. Orders for sheetfed offset presses jumped 33.8% to EUR621.6m, while those for web and special presses soared 58.2% to EUR663.3m. The group order backlog at the end of December was up 31.6% at EUR440.8m. The above-average growth rates for the world’s second-biggest press manufacturer were partly attributable to its broad product range, which addresses both volume markets such as commercial, packaging and newspaper printing, and less volatile niche markets such as metal decorating, coding and security printing.
Group sales climbed 12.3% to EUR1,179.1m (2009: EUR1,050.4m) following a substantial two-year decline triggered by the economic slump and structural changes in the market. Sales of sheetfed offset presses came to EUR551.1m, 15.1% above the prior-year figure. The web and special press division posted a 9.8% increase in sales to €628m.
In KBA’s core markets – sheetfed, commercial web offset and newspaper printing – persistent excess capacity on the supply side continues to weigh heavily on prices. Nonetheless, a double-digit jump in revenue, and the cost savings delivered by consolidation, enabled KBA to more than double its operating profit from EUR8.7m to EUR22.2m, with both divisions posting a positive operating result. KBA posted a financial loss of EUR6.9m (2009: a loss of EUR6m), but boosted group pre-tax profit from EUR2.7m in 2009 to EUR15.3m. Net profit of EUR12.5m was also well above the prior-year figure of EUR6.6m and equates to earnings per share of 76 cents. Following a two-year hiatus in dividend payments the management and supervisory boards will table a motion at the AGM on 16 June in Würzburg proposing a dividend of 30 cents per share for the 2010 business year.
Assessing the prospects for 2011, KBA chief executive Helge Hansen noted that the recent events in North Africa and Japan, the unresolved debt crisis in Europe, soaring prices for energy and raw materials and inflationary pressures in China have raised the level of risk to which exporters are exposed. Nonetheless he is confident that the upturn in Group sales and earnings over the past two years can be maintained in 2011. He said: “Last year’s growth rates were high partly because they followed exceptionally poor prior-year figures, and are therefore unlikely to be repeated on this scale. For 2011 we are targeting a moderate increase in sales and earnings, with both divisions contributing their share.” In view of current market volatility, management is reserving further details for the first-quarter report in mid-May.