Heidelberg hit by slow sales

Sales slide to tip Heidelberg into operating loss of $AU37.4 million for its preliminary second quarter results.

Heidelberg expects to achieve sales between 800 and 820 million Euro in the second quarter of the current financial year 2008/2009. Sales volume is less than expected for the quarter following drupa and decreased by ten percent compared with the same quarter in the previous financial year.

Based on orders generated at drupa, Heidelberg had expected a stronger increase in sales in comparison to the first quarter of the current financial year, but recognises significant reluctance to invest in all regions because of the actual economic situation.

Locally, HAN general manager, Andy Vels Jensen, confirmed that this was the case in Australia and New Zealand.

"It's not a reluctance to invest in new/drupa technology as such," he said. "It's more a question of a reluctance of lenders to finance these days or cost of funds blowing out. Not only our industry. We have plenty of projects on the go for new equipment and technology so the market is alive and kicking."

Vels Jensen noted that while second quarter sales and orders following drupa were soft, Heidelberg's market shares are not suffering, indicating the general slowdown in investments at present.

"The day-to-day activity in our business is strong with consumables, spares and service results doing well on the back of solid print production in the market and previous successful years of installing new equipment," he said.

According to a release from the company, operating result in second quarter will likely reach, due to declining sales and continuing negative effects, without restructuring costs up to minus 20 million Euro (AU 37.4 million). In addition, the restructuring costs caused by the comprehensive package of measures in second quarter will amount to up to 20 million Euro.
 
The recently signed collective labour agreement on partial retirement may lead to further provisions of up to 30 million Euro; the coming into effect of this regulation and the accounting treatment of the issue however still need to be clarified by associations and financial auditors.
 
Free cash-flow in second quarter will, according to first preliminary calculations, amount to minus 70 to minus 90 million Euro, mostly due to the lower sales volume.
 
The implementation of the comprehensive package of measures to enhance the cost structure decided on in the first quarter is on track. The package will be expanded according to the economic development. With the announcement of the final quarterly/half-yearly results on November 6, 2008 Heidelberg will provide a forecast for the whole financial year 2008/2009.