KBA Posts Pre-tax Profit in Third Quarter as Incoming Orders Spike
WÜRZBURG, GERMANY—Nov. 15, 2010—The upturn in demand for printing presses that first became evident in March continued in the summer months, but has been weaker than in other engineering sectors. The global volume is still well below the pre-crisis levels of Sept. 2008, largely due to shifts in the media marketplace and structural changes in the printing industry.
In this scenario, the surge in orders booked by German press manufacturer Koenig & Bauer AG (KBA) in the nine months to October, 2010 is pretty impressive. Group order intake jumped by 46.7 percent to €1.0 billion (2009: €682.3 million), enabling KBA to further expand its share of the market for sheetfed and newspaper presses and certain niche applications.
Group sales rose by 4.7 percent to €772.1m (2009: €737.3 million). Higher revenues in the third quarter, in conjunction with cost savings from an ongoing consolidation program, resulted in a pre-tax profit of €15.3m (2009: €9.6 million).
Earnings before taxes for the full nine months improved from €–37.8 million in 2009 to €–6.7 million. A net loss of €-9.2 million was also much better than the prior-year loss of €-39 million.
Gains in both business divisions
The order intake for sheetfed offset presses increased by 24.3 percent to €462 million (2009: €371.7 million), while major contracts for newspaper presses and buoyant demand for niche products sent the volume of new orders for web and special presses soaring by 73.6 percent to €539.2 million (2009: €310.6 million). Year-on-year, sheetfed offset sales improved by 8.5 percent to €346 million. Although slack demand last year for big, multi-unit installations continued to weigh on sales, the web and special press division posted a modest gain of 1.8 percent to €426.1 million. The influx in orders for big newspaper presses booked in the third quarter will not be reflected in sales until next year.
Big improvement in capacity utilization
The group order backlog on Sept. 30, 2010 was worth €564.1 million, a 26.3 percent gain on the prior-year figure of €446.5 million. At €208.2 million, the volume of unfilled orders in the sheetfed division will keep it busy for a good few months, while the backlog of orders for web and special presses climbed to €355.9 million, raising the level of plant utilization in this division, too.
At the end of September there were 6,437 employees on the group’s payroll, 658 fewer than at the same time last year. Since the financial crisis broke in summer 2008 it has shed around 1,700 jobs. Even so, to maintain the high standard of technological skills necessary in the international printing press market KBA took on 419 apprentices and interns at the beginning of the new academic year, raising its training level from 5.8 percent to 6.5 percent. For the past 140 years the world’s oldest press manufacturer has run a government-approved training school at its main plant in Würzburg.
Finances and balance sheet outperform industry average
Notwithstanding an increase in working capital to support a bigger turnover in the fourth quarter, higher earnings and payments received helped to swell cash flows from operating activities to €11.6 million (2009: €9.5 million). This was much better than the half-year figure of €-18.1 million. Following investment payments the free cash flow came to €0.4m (2009: €-4.6 million). Alongside access to ample credit lines the group had funds amounting to €67.9 million. Its net financial position remained positive at €24.7 million, due in part to a reduction in bank loans to €43.2 million. Despite a €69.6m increase in the balance sheet total to €1,130 million the equity ratio was an above-average 37.3 percent.
Export level rises to 87.8 percent
The export level rose to an exceptionally high 87.8 percent. The proportion of group sales generated in the rest of Europe (30.3 percent) was well below the pre-crisis level, having slipped from 34.8 percent last year. The same applied to North America (9.7 percent). By contrast, sales to Asia and the Pacific accounted for 26.8 percent (2009: 23.5 percent) of the Group total, largely thanks to brisk demand from China. The figure of 21 percent for Africa and Latin America was also much higher. On the whole, KBA’s sales distribution reflects major regional differences in global market activity.
Positive outlook for 2010 – dividend on the cards
In the third-quarter report KBA president Helge Hansen reaffirmed the goals for 2010 stated in the spring: “I am confident that the scheduled rise in fourth-quarter sales will enable us to boost the year-end total by around 7 percent to achieve our goal of €1.1bn-plus. On current readings, our pre-tax profit will also be appreciably higher than in 2009 (€2.7m). If this is confirmed at the end of December, we shall consider paying a dividend again after a two-year hiatus.”
KBA is still pursuing its goal of engaging in a new, high-potential field of operation alongside its core business of press technology. Says Hansen: “Unfortunately this is taking far longer than I originally expected and predicted. Not every project that at first glance appeared promising and relatively quick to implement could withstand closer scrutiny.”
In view of the current economic and political uncertainties, management will not be venturing any projections for 2011 until March next year, when KBA’s financial statements for 2010 are published.
Source: Financial release.