Heidelberg's Nine-Month Figures Show Cost-Cutting Measures Having a Positive Impact
HEIDELBERG, GERMANY—02/03/2009—Heidelberger Druckmaschinen AG (Heidelberg) is publishing its financial statements for the first nine months of financial year 2008/2009 (April 1 to December 31, 2008). Despite a weaker performance, the company achieved a break-even operating result in the third quarter for the first time in the current financial year thanks to the cost-cutting measures initiated. Heidelberg Group sales from October to December 2008 totaled 750 million Euro (previous year: 929 million Euro). In the same period, the operating result excluding special items achieved break-even (previous year: 81 million Euro). The unfavorable macro-economic climate and the crisis on the financial markets had an adverse effect on business as a whole and resulted in a further drop in incoming orders to 560 million Euro in the third quarter (previous year: 958 million Euro).
"The crisis on the financial markets hit the mechanical engineering sector hard at the end of 2008," said Heidelberg CEO Bernhard Schreier. "There has been a sharp drop in investments because our customers are expecting capacity requirements to fall and are feeling unsettled. One key factor in our favor is that we were quick to introduce stringent cost management measures. We have trimmed personnel costs with measures that include short-time working in all areas, scaled down production, streamlined administrative structures, and reduced our investments and the amount spent on research and development. These measures are having a positive impact despite the difficult situation at present. Heidelberg benefits from a solid footing and sound financing. We were also quick to respond to the current economic crisis with our package of measures," he added.
Heidelberg adopted a package of measures to cut costs as early as the middle of 2008. Both the package's scope and its speed of implementation were stepped up at the end of October 2008 in response to the economic situation. As a result, costs will be cut by between 150 and 180 million Euro already in the next financial year. Further measures in financial year 2010/2011 should generate total annual savings in the order of 200 million Euro.
The total amount spent on the cost-cutting program is between 110 and 130 million Euro and the majority of this can be expected to be posted in financial year 2008/2009. These costs are lower than the predicted figure of between 130 and 150 million Euro. This is due to the release of provisions for partial retirement put aside in September 2008.
In December 2008, Heidelberg sold all its shares in the Swedish mailroom supplier IDAB WAMAC. In addition, short-time work was introduced at the German sites at the end of the third quarter as an immediate measure to reduce capacity and this is to continue in the coming months.
Figures for the first nine months of financial year 2008/2009
Heidelberg Group sales after nine months (April 1 to December 31, 2008) amounted to 2.211 billion Euro (previous year: 2.568 billion Euro). The company recorded a fall in sales in all regions. Incoming orders in the first nine months totaled 2.432 billion Euro (previous year: 2.824 billion Euro) and were down in all regions except Latin America.
As a result of the lower volume of orders in the third quarter, the Heidelberg Group's order backlog as at December 31, 2008 fell to 978 million Euro (previous year: 1.196 billion Euro).
The operating result (excluding special items) recorded by the Heidelberg Group after the first three quarters was minus 45 million Euro (previous year: 177 million Euro). The cumulative figure for special items as at December 31, 2008 was minus 32 million Euro. The release of provisions amounting to 22 million Euro for the collective bargaining agreement on partial retirement adopted in September 2008 generated earnings of eight million Euro in the third quarter. The net result as at December 31, 2008 amounted to minus 119 million Euro (previous year: 87 million Euro).
"The initial results achieved by our package of measures have enabled us to make savings on personnel and material costs in particular," said company CFO Dirk Kaliebe. "Our free cash flow was close to break-even in the third quarter thanks to the asset management measures implemented," he added.
In total, Heidelberg now employs around 860 fewer people than at the start of financial year 2008/2009. Excluding trainees and adjusted to take into account the employees of the companies newly consolidated in the period under review, the workforce fell by 474 in the first nine months of the financial year. The number of loaned employees working for the Group also fell by 390. At December 31, 2008, the Heidelberg Group had a workforce of 19,548.
Of the measures announced on October 30, 2008 for reducing the workforce by fiscal year 2010/2011 to boost efficiency, to date, the reduction of approximately 1,600 personnel has partly been completed worldwide. In this connection, the company's management and workforce representatives are approaching an initial agreement on how to proceed with the personnel downsizing yet undetermined.
Uncertain economic situation looks set to continue
The global economic and financial crisis had an extremely adverse effect on economic developments in the second half of 2008. In view of the poor capacity utilization at print shops, the print media industry's reluctance to invest will not change to any great extent in the short term.
Heidelberg is expecting its sales for financial year 2008/2009 to be significantly down on the previous year, resulting in a marked deterioration in the operating result and a worsening of the financial result. These developments, including special items, will lead to a substantial annual deficit in the current financial year.
Given the continuing uncertainty of the global economy and the associated difficulty in planning for financial year 2009/2010, the Heidelberg management team will continue to take all necessary measures to stabilize the company's earnings on a lasting basis.
The complete report for the third quarter of financial year 2008/2009 will be available online at www.heidelberg.com on February 3 from 7 a.m. CET onwards.