Heidelberg hit by falling sales

Hard times look set to continue for Heidelberg with further drop in sales.

In its first quarter results, incoming orders were up on the previous quarter's figure of EUR 474 million at EUR 550 million and appear to be stabilising at a low level. They were 52 per cent down on the figure for the same quarter the previous year, which was boosted by the drupa trade show (previous year: EUR 1.151 billion).

As a result of the global slump in demand in the industry, the Heidelberg group's order backlog at June 30, 2009 was 53 per cent below the previous year's value of EUR 1.298 billion at EUR 616 million.

"Incoming orders stabilised slightly in the first quarter compared with recent months, providing an initial indication that the downturn is leveling out. However, we still need to wait and see how things develop," said CEO of Heidelberg, Bernhard Schreier (pictured).

In the first three months of the financial year, the Heidelberg Group generated sales amounting to EUR 514 million; 22 per cent lower than the EUR 657 million achieved in the first quarter of the previous year. The operating result excluding special items was EUR -63 million in the period under review (previous year: EUR -35 million). The net result in the first quarter was EUR -69 million (previous year: EUR -39 million).

Heidelberg achieved some success in limiting the outflow of funds from free cash flow compared to the same quarter the previous year through active control of working capital and savings on investments. As a result, the free cash flow improved to EUR -29 million (previous year: EUR -211 million), largely due to a further cutback in inventory levels.

"Our package of cost-cutting measures is proceeding according to plan," said company CFO, Dirk Kaliebe. "In the first three months of the financial year, we achieved a further reduction in personnel costs compared to the previous year, cut inventory levels, lowered research and development expenditure, and cut back significantly on investments. These savings contribute to compensating the impact falling sales are having on the result.”

Around half of the 5,000 job cuts announced by Heidelberg have already been achieved or firmly agreed through socially acceptable measures. To make further savings, the company is continuing to make use of short-time work throughout Germany.

There is little sign of improvement Heidelberg expecting a negative result for financial year 2009/2010. Due to the persisting difficult economic conditions, Heidelberg is still predicting that sales for financial year 2009/2010 as a whole will be below the very low level of financial year 2008/2009. Although the cost-cutting measures already initiated will help the company lower the break-even level as quickly as possible, the sharp rise in refinancing costs, which also include the cost of the guarantees in the Economic Stimulus Package II, will weigh heavily on the financial result.