Business News
Cost savings will boost results in subsequent quarters
Friday 15. May 2009 - Printing presses: Koenig & Bauer AG (KBA) interim report
Demand remains subdued
Order intake down 40.7% on previous year
27% drop in sales
Quarterly loss within expectations
Cost savings from payroll and structural adjustments
Management reaffirms sales and profit forecast
Following slack demand in the final quarter of 2008, the first quarter brought little relief to the printing press sector. The group order intake for Koenig & Bauer AG (KBA) totalled 219.5m, a drop of 40.7% from the prior-year figure of 370.3m. However, this was better than the industry average, largely thanks to KBAs broad product range addressing both volume and niche markets. While orders for web and special presses were down 28.7% at 142.2m (2008: 199.3m), the knock-on effects of the financial and economic crisis caused demand for sheetfed presses to shrink by more than half to 77.3m (2008: 171m).
Disparate performance by business divisions
The impact on sales, which declined by 27% to 220.2m (2008: 301.7m), was equally disparate. A relatively moderate drop of 9.1% to 143.4m (2008: 157.7m) in the web and special press division, where production cycles tend to be much longer, contrasted with a plunge of 46.7% to 76.8m (2008: 144m) in the sheetfed division.
The group order backlog of 500.8m at the end of the quarter was roughly the same as at the beginning, but was 41.8% below the corresponding figure for the previous year of 860.5m. Web and special presses accounted for almost four-fifths of unfilled orders.
The savings in personnel expenses delivered by short-time work at all KBAs production plants failed to offset the revenue lost through slower sales. Management anticipates a substantial reduction in personnel and material costs in coming months following the implementation of the scheduled capacity adjustments, for which ample provision was made last year. These entail extensive job cuts at the sheetfed factories. A first-quarter operating loss of 32.7m (2008: -5m) and pre-tax loss of 35.2m (2008: -6.4m) were in line with expectations. The net loss came to 33.2m (2008: -1m), resulting in earnings per share of -2.03 (2008: -6 cents).
Positive cash flow
Cash flows from operating activities were positive, totalling 19.2m (2008: 88.6m). This was largely due to a substantial drop in trade receivables. The free cash flow came to 13.5m (2008: 73.7m). Liquid assets swelled from 85.8m at the end of December to 99.4m at the end of March, and the net financial position improved from 22.6m to 36.6m over the same period. Despite the quarterly loss, the equity ratio of 33.9% was higher than the industry average.
At the end of March there were 7,646 employees on the group payroll, 535 fewer than twelve months earlier and 192 fewer than at the beginning of the quarter.
Sales slump in Europe
Domestic sales were down 24.2% at 36.4m (2008: 48m), but exports also fell, from 84.1% in 2008 to 83.5% of total output. The proportion of sales generated in the rest of Europe dropped to 36.8%, well below the customary 50 – 60%. This was primarily due to downturns in key print markets like Italy, Spain and the UK. Asia and the Pacific contributed 16.7%, North America 13.9%, Africa and Latin America 16.1% of group sales.
Forecast for 2009
KBA president and CEO Helge Hansen says: “In the current market environment, our March prediction of a 20% decline in sales is fairly optimistic, as is the balanced pre-tax result we are targeting. We shall therefore continue to devote all our energies to pursuing these goals. We are currently in the process of adjusting capacities to a smaller market volume, and this will materially improve our profitability by the end of the year. The total package aims for savings of several hundred million euros in personnel and material costs by 2011. Well keep you posted on progress in our interim reports.”