The world’s second-largest press manufacturer Koenig & Bauer (KBA) made significant progress in the third quarter with the implementation of its Fit@All programme and in achieving its sales and earnings targets for 2014. Group sales to 30 September were up 8.5% to €791.8m. The increase in sales, the expanded service business and cost savings achieved resulted in an operating profit of €7m. This was an improvement of approx. €18m. The group posted a pre-tax profit (EBT) of €1.2m after nine months compared to a loss of €16.3m year-on-year. Group results came in at –€2.3m after tax deductions and corresponds to earnings per share of –€0.12. Over the next quarters the management board expects a further reduction in costs from Fit@All with positive effects on earnings.
The economic climate in key threshold countries and in parts of Europe has worsened, and the impacts of the financial crisis are yet to be overcome. Military conflicts and concerns about Ebola result in dampened expectations for the future and act as a brake on new orders. To sum up group order intake of €668.7m was 5.8% less than the prior-year figure (€709.6m), however, both segments declined to a different extent. Order intake in the sheetfed offset segment after nine months was down only 1.9% year-on-year to €449.9m due to a strong third quarter. In contrast, compared to 2013 orders for web and special presses fell by 12.9% to €218.8m. Bookings for newspaper and commercial web presses remained far below KBA’s low expectations and new orders for banknote printing presses have only been placed hesitantly despite a raft of projects. At the end of September group order backlog came to €437.4m, substantially lower than a year earlier (2013: €627.7m).
Positive segment results
Sales of sheetfed offset presses increased by 6.5% to €406.3m compared to €381.4m twelve months ago. The rise in sales, cost savings and slightly better prices triggered an operating profit in this segment of €2.8m (2013: –€7.8m). In the web and special press division higher revenue in banknote and special packaging printing led to a 10.6% climb in sales to €385.5m compared to 2013 (€348.5m). Notwithstanding poor capacity utilisation at KBA’s web press facilities the web and special press division posted an operating profit of €4.2m, an improvement on last year’s loss of €2.9m.
Export level over 85%
KBA’s export level was high once again at 85.3%. 35.8% of group sales was generated in other parts of Europe (2013: 25.2%) and deliveries to this previously dominant KBA market rose by 54.2%. Sales attributable to Asia and the Pacific were down year-on-year at 24.2% (2013: 28.9%) as a result of economic slowdown in China. North America contributed 10.1% to the group total, and Latin America and Africa generated 15.2%.
Strong cash flow
Operating cash flow was clearly positive at €32.9m driven by the improvement in earnings and lower trade receivables, although customer prepayments sank and funds flowed out for job cuts. The management board has seen its efforts to reduce working capital pay off. Free cash flow which was up nearly €19m on the previous year to €21m increased funds to €204m. Less reduced bank loans of €19.3m, net liquidity stood at a comfortable €184.7m. The equity ratio was 23.7%.
Group payroll sinks further
At the end of September 2014 there were 5,930 employees on group payroll, including 429 apprentices and trainees. Without taking into account apprentices and trainees, redundancies, temporary employees and staff on phased retirement schemes, and not including the newly consolidated companies KBA-Kammann and KBA-Flexotecnica the Group workforce sank by 445 to 4,907. The total will fall to below 4,500 by 2016 with the further implementation of Fit@All.
Outlook for 2014
Despite political conflicts and dampened economic expectations the KBA management board stands by its targets for 2014. In the third-quarter financial report, president and CEO Claus Bolza-Schünemann confirmed his outlook for 2014: “A lot is currently happening at KBA with regard to securing the company’s profitability in the long term. Nevertheless, from today’s point of view we will achieve group sales of more than €1bn and at least balanced group earnings before taxes (EBT) in 2014. Following high provisions made in the financial statements for 2013 we expect only limited special expenses for Fit@All which impact on earnings. In contrast, cost savings from the restructuring measures implemented will become noticeable.”
Along with the success already achieved by expanding the service business, the expansion of activities in growth markets, such as digital and special packaging printing, is aimed at contributing to stronger group earnings.
