Business News
Printing presses: Koenig & Bauer AG (KBA) interim report
Wednesday 12. May 2010 - Big jump in orders, but earnings hit by slack sales
Order intake up 43% on previous year
Order backlog over 100m higher than at year-end 2009
Group sales still behind target
Consolidation and realignment progressing well
Management reaffirms positive sales and profit forecast
In the first quarter of 2010 German press manufacturer Koenig & Bauer AG (KBA) booked a big increase in new business compared to the same period the previous year. The group order intake climbed 43.2% to 314.4m (2009: 219.5m), with the increase in web and special presses (43.1%) roughly the same as in sheetfed presses (43.5%). The group order backlog of 439.6m was over 100m higher than at the end of last year (335m) and comprised 322.3m for web and special presses and 117.3m for sheetfed presses.
Following a weak intake of orders from November 2009 to February 2010 and reduced web-press shipments in the first three months, group sales of 209.8m were 4.7% down on the previous years 220.2m. While the sheetfed division posted an 11.7% increase in sales to 85.8m, sales generated by the web and special press division slid 13.5% to 124m.
Better operating result but lack of profit contributions
Weak quarterly sales impacted on profit contributions and earnings. Although the gross profit margin climbed from 13.6% twelve months earlier to 21.7% as a result of cost-cutting measures, KBA posted an operating loss for the quarter of 19.4m. This, however, was well below the prior-year figure of 32.7m. Following a small financial loss of 1.9m the group made a pre-tax loss (EBT) of 21.3m, compared to a loss of 35.2m the previous year. After taxes it disclosed a net loss of 20.2m (2009: a loss of 33.2m). Earnings per share also improved to -1.23 (2009: -2.03).
Bigger inventories for scheduled shipments reduce cash flow
The quarterly loss and bigger inventories reduced cash flows from operating activities to -41.3m, well below the 2009 figure of 19.2m. The free cash flow came to -43.4m, against 13.5m twelve months earlier. Funds shrank from 76.1m at the end of December to 38.8m at the end of March. While bank loans totalling 55.5m were higher than at the end of last year (48.3m), net debt was a manageable 16.7m. This is well within the long-term credit lines available and should improve significantly along with the cash flow as sales pick up in the second half-year. Group equity represented 38% of the balance sheet total, well above the industry average.
At the end of March the KBA group employed a total of 6,559 people, 410 fewer than at the end of 2009 and 1,087 fewer than a year earlier. The groups realignment to a global market which industry experts warn will be 25% smaller, even in the event of a strong economic recovery, will see the payroll reduced to around 6,000.
Record export level of 86.5%
With domestic sales down 22% at 28.4m, the export level rose from 83.5% to a record 86.5%. Sales to the rest of Europe slid from 81.1m to 58.4m, due to slack demand in southern and eastern states. This reduced the proportion of sales generated in this region to 27.9%, an historic low. Brisk demand in China boosted sales to Asia and the Pacific from 36.8m to 58.1m, causing a leap from 16.7% to 27.7% in the proportion of group sales generated in this region. North America, a relatively weak market, contributed 15% of group sales, Africa and Latin America 15.9%.
Forecast for 2010
Last year KBA was the only leading press manufacturer to post a profit, and notwithstanding its weak start to the year management is confident that, thanks to the realignment process implemented over the past twelve months, the group is on track to meet its targets.
President and CEO Helge Hansen says: “By the end of the year we anticipate higher group sales and a better pre-tax result than in 2009. In view of the strong increase in our order backlog in the first quarter, and the volume of orders expected in the second quarter, we have a real chance of achieving these objectives. However, at this early stage, and in view of current economic instability, we see little sense in issuing a sales and earnings forecast for the year. We shall keep you informed of progress to date in our regular financial reports.”