Heidelberg says it is hoping to return to profitability in the coming financial year after reporting a net loss of EU€-110 million for the financial year ending 2013.
The press manufacturer published its results for the financial year ending March on 13 June, reporting a five percent surge in sales, earnings before tax (EBITDA) of €111 million, but also a recording a overall net loss of €-110 million – a dramatic reduction from its €-230 million loss the previous year.
While the company says it has reached a milestone in its return to profitability by recording a positive operating result excluding special items of €28 million (previous year, €3 million), other costs and expenses led to a negative financial result of €-82 million and a pre-tax result of €-118 million.
However, with the company’s sales increasing by five per cent for the year to €2.735 billion, and its ‘Focus 2012 efficiency program’ leading to savings for its bottom line, Heidelberg chief, Gerold Linzbach (pictured), says he expects the company to return to profitability by the end of the coming financial year.
“In the financial year just closed, we introduced the necessary steps to return to profitability in financial year 2013/2014,” said Linzbach. “Heidelberg now has a more flexible setup with clearly assigned responsibilities. We are focusing our full attention on our profitability by adapting to the market situation. We will make strategic adjustments to the portfolio and increasingly focus on business areas that offer the potential to achieve long-term profitability.”
Although Heidelberg experience a sales surge, it says that sales of new equipment did not meet expectations, because drupa did not result in a lasting revitalization of the market as had been hoped.
Growth was also less dynamic in certain countries such as Brazil. The services and consumables areas progressed entirely according to plan. Sales in China exceeded the previous year’s value and accounted for around 16 percent of total sales, making it the company’s largest single market.
Despite a number of negative effects, the growth in volume combined with the savings made by the ‘Focus 2012 efficiency program’ led to a €21 million improvement in earnings before interest and tax (EBITDA) to €111 million (previous year: €90 million). The result of operating activities (EBIT) excluding special items climbed to €28 million (previous year: €3 million).
The costs of ‘Focus 2012’ accounted for a large part of special items totaling €-65 million in the financial year just closed (previous year: €-142 million). To further improve the ability of Heidelberg to respond to short-term fluctuations in sales, and to further lower its cost base and make this more flexible, the management board decided in the fourth quarter to step up a number of measures in the ‘Focus 2012 program’.
The majority of these measures will be geared toward cutting staff costs by reducing the headcount to significantly below 14,000. The additional measures will increase the annual savings achieved by ‘Focus 2012’ to more than €200 million from the end of the current financial year.
The measures decided on as part of ‘Focus 2012’ continued over the year. By March 31, 2013, the headcount had fallen by around 1,200 to 14,215 (previous year: 15,414).
“Systematic implementation of the ‘Focus 2012 efficiency program’ played a key role in achieving our forecast result in the financial year just closed,” said Heidelberg CFO Dirk Kaliebe. “Thanks to our comprehensive asset management, we have succeeded in keeping our debt at a low level overall. What’s more, Heidelberg benefits from a sound financial footing.”
While Heidelberg says it has recognized the majority of the costs for expanding the ‘Focus 2012 program’ in the past financial year, it expects that extraordinary expenses could be incurred again in the current financial year while implementing activities.
In the year under review, the Heidelberg Equipment segment generated around 60 per cent of Group sales with a figure of €1.712 billion (previous year: €1.610 billion).
The company says that the structural changes in the printing industry are being reflected in the format classes that are in demand. Orders for large-format sheetfed offset presses rose overall, while orders for small-format presses were lower than in previous years. The operating result excluding special items improved to €-45 million (previous year: €-71 million).
In the financial year just closed, sales and incoming orders in the Heidelberg Services segment each climbed by four per cent to €1.012 billion and €1.021 billion respectively.
The company says the consumables business made a major contribution to the increase in sales. The higher level of sales and the savings made helped improve the operating result excluding special items by eight percent over the previous year to €65 million.
Heidelberg says that, while its first step in the strategic process is to turn a profit again in the current financial year 2013/2014 and to record a positive net result, its medium-term goal is to further reduce the company’s debt level to no more than twice the operating result before depreciation and amortization. At the moment, Heidelberg’s net financial debt is sitting at €261 million.
Heidelberg is assuming stable to slightly rising sales in the years after the 2014/2015 financial year. In addition to initiatives to raise margins and optimize the portfolio, the company says it will also continue to reduce the cost base in future in order to achieve a medium term margin target of above eight percent EBITDA on sales.