Heidelberg Records Net Profit in Q3; Is on Track for Positive 2015/2016 Financial Year
HEIDELBERG, Germany — February 10, 2016 — Heidelberger Druckmaschinen AG (Heidelberg) has ended the latest quarter with a positive net result after taxes, and its net result before taxes after nine months (April 1 to Dec. 31, 2015) reached the break-even point. This means the company is on track to once again record a positive net result after taxes for financial year 2015/2016 as a whole and secure a long-term return to profitability. Developments during the current financial year prove the success of the realignment implemented by Heidelberg. The main focal points for the future will be further developing the growing digital business and continuing to expand service business. The Heidelberg Services segment already accounted for almost half of Group sales after nine months.
“We’ve made good progress with our goal of ensuring long-term profitability at Heidelberg. Our new portfolio is more closely geared toward stable market segments, is more profitable, and creates the conditions for further growth,” said Heidelberg CEO Gerold Linzbach.
Net Profit After Taxes in Third Quarter
The nine-month business results achieved by Heidelberg are pointing in the right direction overall. Sales and the operating result for the reporting period were a significant improvement on the previous year’s figures. Group sales were 16% up on the equivalent nine months of the previous year at € 1.802 billion (previous year: € 1.552 billion). This figure includes positive exchange rate effects amounting to € 93 million. The successful integration of the newly acquired PSG Group also made a substantial contribution to the higher sales. At a regional level, sales were well up in North America and Europe, while Eastern Europe and Latin America remained stable. Sales after nine months are also encouraging in the Asia/Pacific region. In the third quarter, however, the very subdued market development in China was reflected by a fall in orders. Total incoming orders in the reporting period were significantly higher than in the previous year at € 1.904 billion (previous year: € 1.780 billion).
The operating result in the third quarter and after 9 months continued its upward trend. EBITDA excluding special items as at Dec. 31, 2015, increased to € 119 million (previous year: € 80 million), while EBIT excluding special items doubled to € 65 million (previous year: € 29 million). The Heidelberg Services segment is still on target to achieve the planned EBITDA margin of 9 to 11%. Improvements resulting from the portfolio measures were the reason for the better result. Regional weaknesses, especially in China, mean the Heidelberg Equipment segment has not yet been able to reach the expected EBITDA target margin of 4 to 6%.
Refinancing measures in previous quarters led to a financial result as at Dec. 31, 2015, of € -42 million (previous year: € -49 million). The pre-tax result after nine months reached the break-even point (€ 0 million; previous year: € -92 million). The net result after taxes for the third quarter improved by € 60 million to € 7 million (previous year: € -53 million) and the nine-month figure of € -7 million was far better than the € -95 million recorded for the equivalent period of the previous year.
The free cash flow after nine months was € -37 million (previous year: € -16 million). The negative result was primarily due to restructuring costs and the PSG acquisition. The net debt for the quarter under review remained low at € 282 million (March 31, 2015: € 256 million). The resultant leverage (ratio of net financial debt to EBITDA excluding special items for the last four quarters) of 1.2 thus remained significantly below the target value of 2.
“We have created the financial scope to finance acquisitions and invest in growth and innovation. In the future, we will keep working on further optimizing our financing framework and ensuring the continued strategic development of Heidelberg,” said CFO Dirk Kaliebe.
Heidelberg a Driving Force Behind Industry’s Digitization at drupa
At the drupa trade show in May this year, Heidelberg will be presenting smart services and networked products required for further industry digitization. The digitized print shop of the future will feature automated, cost-optimized production processes and equipment that works almost entirely independently and autonomously. Over 10,000 presses have already been installed and networked worldwide, creating the basis for innovative data-based services. Heidelberg will also be joining forces with its cooperation partner Fujifilm to unveil a new, highly productive inkjet-based digital printing system for industrial applications. It is the only supplier to offer customers the opportunity to run offset and digital technologies in parallel based on a user-friendly, integrated process.
Outlook for Year as a Whole Unchanged
Boosted by healthy order books, Heidelberg is aiming for sales growth of 2 to 4% after adjustment for exchange rate movements in the current financial year 2015/2016. As in the previous year, the company is assuming that sales will be higher in the second half of the financial year than in the first.
Assuming that the initiatives to increase margins in the Equipment area in particular and to optimize the portfolio take effect towards the end of the financial year, the company still expects to be able to achieve an operating margin based on EBITDA of at least 8% of sales, adjusted for exchange rate effects, in financial year 2015/2016. The Heidelberg Equipment segment is expected to contribute within a range of between 4 and 6% to this result and the Heidelberg Services segment 9 to 11%. In the Heidelberg Financial Services segment, customer financing is still primarily outsourced. This segment, too, should continue to make a positive contribution to EBITDA in the future.