KBA Reports Jump in Press Orders
WÜRZBURG, GERMAN—March 25, 2011—Printing press manufacturer Koenig & Bauer AG (KBA), which announced in early March that it is expanding its product range to address the high-potential digital print market, has issued its group financial statements for 2010.
Broad product base attracts big influx of new orders
Brisker demand following a revival in the spring drove the group order intake up to €1.285 billion, a 45.4 percent improvement on the crisis-shaken previous year. Orders for sheetfed offset presses jumped 33.8 percent to €621.6 million, while those for web and special presses soared 58.2 percent to €663.3 million. The group order backlog at the end of December was up 31.6 percent at €440.8 million.
Demand for sheetfed and special presses was greater than for web
Group sales climbed 12.3 percent to €1.179 billion (2009: €1.050 biillion) following a substantial two-year decline triggered by the economic slump and structural changes in the market. Sales of sheetfed offset presses came to €551.1 million, 15.1 percent above the prior-year figure. Even though the web and special press division started the year with a much smaller backlog of unfilled orders, and competition from online media impacted on demand for big newspaper presses, it posted a 9.8 percent increase in sales to €628 million.
Demand for multi-unit web presses picked up in the second half of the year, but remained well below pre-crisis levels. Most of the orders booked for newspaper presses, where KBA is the market leader, came from Germany and elsewhere in Europe.
Operating profit more than doubled
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 €8.7 million to €22.2 million, with both divisions posting a positive operating result.
Benefiting from firmer sales and the reduced cost base accruing from restructuring measures, the sheetfed division converted a €23.1 million operating loss the previous year into an €8.2 million profit. Provided global economic growth in 2011 is not seriously impaired by current developments, KBA is confident that the higher order backlog at the start of the year and initial brisk demand will enable it to maintain this upward trajectory in sales and profits.
The decline in operating profit generated by web and special presses, from €31.8 million in 2009 to €14 million, reflected more acutely than in the previous year the plunge in demand for web presses: the backlog of orders from better years, which helped sustain figures in 2008 and 2009, was no longer there to cushion the impact of unsatisfactory profit margins in a buyers’ market and the poor level of capacity utilisation at the production plants concerned.
KBA posted a financial loss of €6.9 million (2009: a loss of €6 million), but boosted group pre-tax profit from €2.7 million in 2009 to €15.3 million. Net profit of €12.5 million was also well above the prior-year figure of €6.6 million.
Solid finances create room for innovation
Cash flows from operating activities of €30.1 million were roughly on a par with the previous year (€29.6 million), while the free cash flow surged from €4.9 million in 2009 to €20.4 million. With liquid assets totalling €91 million and bank loans reduced from €48.3 million to €43.1 million, KBA’s net financial position, at €47.9 million, was much stronger than the year before (€27.8 million).
Unlike many other players in this sector KBA has weathered the economic crisis, media transitions and a cost-intensive realignment to a smaller market volume without drawing on external financing or injections of capital. A net profit for the year, foreign currency translations and the issue of employee shares raised equity at the end of last year by €41.5 million to €461.3 million. An above-average equity ratio of 39.6 percent relative to a €100 million higher balance sheet total underscores the solid financial structure of the world’s oldest press manufacturer. The company has access to additional cash credit lines for more than €100m from banks.
In the print media industry KBA is considered an engine of innovation and technological advances. Cost-cutting initiatives notwithstanding, last year investment in research and development exceeded 4 percent of total group sales. At the end of the year the Wall Street Journal’s Patent Scorecard™ for heavy industrial equipment in the USA ranked KBA 24th among the top 50.
Export level nudges 90 percent – Asia and the Pacific overtake Europe
Although domestic sales started to revive, KBA’s export level hit a historic high of 88.5 percent (2009: 84.5 percent). But with economies in southern Europe and other parts of the EU continuing to struggle, the proportion of group sales generated in Europe (excluding Germany) dropped to 28.5 percent, well below the historic average of 50 percent-plus.
For the first time in KBA’s 194-year history, sales to the rest of Europe, traditionally the group’s biggest market, were surpassed by sales to Asia and the Pacific, which accounted for 29.4 percent of the total. Brisk demand in China for sheetfed presses was a major contributory factor. This shift in demand towards the Far East is seen throughout the German engineering industry.
Despite a perceptible lift in sales of batch-produced presses in North America, slack demand for newspaper web presses caused the proportion of the group total generated in this region to slide from 13.9 percent to 10 percent. However, sales to the threshold markets of Latin America and Africa soared, pushing up the regional total from 12.1 percent in 2009 to 20.6 percent.
Market-driven payroll adjustments
At the end of the year the Group workforce totalled 6,419, down 550 from the same time the previous year and 1,700 fewer than before the crisis. The payroll cuts necessitated by diminishing market and sales volumes were implemented in a socially responsible manner to minimise the impact on employees. When consolidation is complete the group payroll will be approximately 25 percent smaller than before. Even so, the group continues to invest heavily in staff training and qualifications. The training ratio rose from 5.8 percent in 2009 to 6.5 percent.
Prospects for 2011: moderate growth in sales and earnings
Assessing the prospects for 2011, KBA CEO 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.
Hansen 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.
Source: financial release.