Rebound year for Heidelberg in Australia and New Zealand

A record order backlog, a good result at drupa and a renewed willingness by local printers to invest in presses and technology is powering a revival in the fortunes of Heidelberg Australia and New Zealand (HAN). The largest supplier in the industry is predicting a return to profit this year on the back of improving sales figures and $74.6 million in forward orders.

According to Andy Vels Jensen, managing director HAN, (pictured at this year's NPA) total new orders and installations of new press units for calendar year 2004 had already reached some 450 units as of end May, a major turnaround compared to the total of around 340 new printing units installed during the full year 2003. The result reverses a trend that has seen the numbers of press units installed by the local industry collapse from the estimated high point of some 530 new printing units in 2001 and 480 in 2002.

“This could prove to be the biggest year in five years for us and other press suppliers to the industry. Business is still tough and it is difficult to make money and pay for the substantial support structures that are in place to support the industry and installed base at large. But we still consider ourselves the lucky country. Elsewhere the industry has dropped like lead over the past three years.

“Although margins are still under pressure in our region, the erosion of the street price for presses seems to have bottomed out. This is good news not only for suppliers but for printers who have seen the value of their assets, the superannuation fund on the press floor, deteriorate in recent years. Although there are still - and always will be - good deals to be had, some stability and common sense appears to be returning to the market,” he said.

The erosion of the street price of press units along with a decline in the price of printing is a worldwide trend. Australia and New Zealand seem to have escaped the dramatic falls that have devastated the industry elsewhere. Even so, the street prices of presses here have dropped considerably. While this has provided printers with cheaper new equipment, it is a double-edged sword, compounding a decrease is the asset value of existing presses. Any further drop in equipment and press prices is likely to see more printing companies move into critical asset/debt ratios, finance institutions and lenders questioning the industry, and suppliers having to curtail costs to the extent where service and support levels drop significantly.

“Australia is the lucky country compared with the collapse in, for instance, Germany and the USA where profitability on print has dropped alarmingly; overall business has eroded as much as 30% in the space of two years. Of ten leading printers in Denmark only a few reported being profitable last year” said Vels Jensen. “Overall profitability of these printers dropped 90% over only one year!


New Zealand is in better shape

"Surprisingly New Zealand has proven to be one of the most stable markets in our world. Why? I’m not sure, perhaps because it is more export oriented, or because as a small country the industry is more sensitive to the economy. In any respect, the print industry in New Zealand remains more aligned to GDP growth than in most other countries where we see economies grow but print/ad spend decline heavily.”

He points out that New Zealand was in the forefront of the long perfecting revolution that has changed the face of the industry over the past five years. This is an area where HAN dominates the local market with over 85 % of the new long perfectors (in excess of 460 printing units) sold and installed. On the opposite side of the coin, HAN is exporting an average of 120-140 older printing units taken as trade-ins each year. "The process of two or three old presses coming out and one new productive press, open to full connectivity and workflow, going in continues unabated," said Vels Jensen.

Prepress is doing OK

The good result for HAN also translates into prepress with the company within the last year installing the largest number of CTP systems of all suppliers; from polyester PolySetters and Blue Violet ProSetters to Thermal CPT devices . Finishing equipment has remained relatively unaffected by the changes over recent times while recent upgrades and improvements of the folder, cutter and stitcher range, as well as the addition of new binders, diecutters and foldergluers, have added to already strong sales and market shares.

Changing face of Heidelberg

The company that Vels Jensen is predicting will return to profit this year is vastly different to the one he inherited five years ago. In an era of cost reassessment he has improved productivity and efficiency numbers within sales and service as well as reducing discretionary costs by more than 20%, although he is quick to point out that he still has by far the largest service division in the region. HAN has more than 150 people employed within the service area.

He is now facing the remainder of the year without the web press and digital division, which represented 15% of the company’s turnover. The web division’s dedicated five employees, led by industry veteran Jim Wand, will transfer to Goss this month. Vels Jensen also no longer has a digital division following NexPress’s departure to Kodak.

The focus for the company will be on it's core sheetfed market as the major growth sector and the continuing development of a three-year initiative to provide added value in key account management.

“It is a changing and consolidating industry. Companies are getting bigger and requiring different services from us. Successful Heidelberg companies are run by individuals who can be equally successful in any other industry; professional business people. We have a business development team of five consultants who are able to provide auditing and benchmarking for companies, identify bottlenecks and suggest ways to improve and where they should be going in the future. It is important that we, and our customers, understand the total business; we are dealing with professional manufacturing companies, not ‘merely’ printers,” he said.

Adding consulting value to key accounts

Key account management looks at ways to improve such areas as production and labour costs, paper wastage and optimum time to write off equipment as well as providing strategic investment advice. So far over 30 of the company’s largest customers have availed themselves of the service, which is a key part of HAN’s future and support structure.

Other key products for HAN’s future prospects include the continuing rollout of the workflow system, Prinect. With the arrival of the MIS module Prinance, the company will have the only single-branded end-to-end workflow in the industry. As the integration of computer-integrated manufacturing (CIM) continues in the printing industry, this is an area where the company’s sees it has a strong strategic advantage and not only to support Heidelberg branded equipment

A renewed resistance to the impact of digital printing is also on the cards, now that the company has exited the sector. The promotion of fast-changeover small offset, such as the Speedmaster 52, combined with the polyester CTP on the PolySetter, as an economical alternative in the short run, print on demand market has already struck a chord with many Heidelberg customers.

Following a testing time, not only for the company, but also for the industry as a whole, there appears to be positive signs of a recovery. “There is some sense that the industry has bottomed out. And while the shake-out and natural consolidation process will continue, I think we can expect some improvement,” said Vels Jensen. "The industry has changed considerably over the past five years – seeing also some significant structural changes – however, it remains an industry that is both exciting and, done the right way, profitable with a bright, albeit evolving and challenging, future. You don't sit back and relax in this industry; straighten up, put on a brave face and enjoy the ride!"