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Half-Year Report for Koenig & Bauer (KBA)


Substantially more sheetfed orders in second quarter

Compared to the end of March, earnings at the Koenig & Bauer Group (KBA) have improved considerably after six months. The world’s number two in press manufacturing generated a pre-tax profit of €10 million in the second quarter thanks to higher sales, a profitable product mix and cost savings. After the first three months the pre-tax loss stood at –€18.8 million resulting from the insufficient sales volume. A pre-tax loss of –€8.8 million (2012: +€6.7 million) was reported due to the shortfall in sales still noticeable after six months. Group net loss came to –€10.6 million (2012: +€3.6 million) and corresponds to earnings per share of –€0.64. Management expects earnings to continue to improve in the second half of the year and to achieve positive pre-tax earnings similar to 2012 despite ongoing restructuring measures.

KBA’s strong position in packaging printing and successful trade fairs in China and Turkey pushed new sheetfed orders to €161 million in the second quarter. However, over the full six months orders in this division were down by 19.3% to €293.8 million compared to last year’s high figure boosted by the global trade fair Drupa.

Despite several orders from Germany, France and the Middle East, KBA has felt the reluctance of newspaper and commercial printers to invest in web presses. This reservation has been driven by media shifts and intensified by a weak economy in some markets. After the extraordinary high in 2011, the order volume for special presses has fallen back to the average level, even though significant restraint is currently noticeable and new project conclusions are delayed. Thus the volume of new orders in the web and special press division stood at €150.8 million, 30% lower than the previous year. To sum up after six months group order intake of €444.6 million was 23.3% down on last year’s figure. At June 30, group order backlog came to €590.4m.

With above-average revenue of €311.5 million generated in the second quarter the gap to last year has become considerably smaller. However, after six months group sales of €502.2 million were 15% lower than 12 months ago (€590.5 million). Sales of €255.4 million generated by the web and special press division fell over 26% short of last year’s figure due to deliveries postponed to the second half of the year. In contrast, sheetfed sales were up 1.6% to €246.8 million.

Advances made in various cost-cutting measures have contributed to halving last year’s operating loss of –€18 million in the sheetfed division to –€9.4 million. From April to June results in this division improved from –€5.9 million in the first quarter to –€3.5 million. Postponed shipments to the second half of the year, market-related insufficient capacity utilization at KBA’s web press facilities and development expenses associated with new business field digital printing reduced operating profit in the web and special press division from €30.5 million in 2012 to €4.5 million.

Domestic sales were up €38.1 million on 2012 to €98.9 million and KBA’s export ratio was below average at 80.3% accordingly. Economic weakness saw shipments to the rest of Europe fall to €129.8 million compared to €168.6 million the previous year. At 25.8% the proportion of sales generated in this region in the first-half year 2013 stood at only half of the historical average of more than 50%. In contrast, given the lift in sheetfed sales and some web press deliveries, the regional proportion of North America was up to 12.6%. At €210.4 million the future markets Asia-Pacific, Latin America and Africa contributed 41.9% to group sales.

Given the slowdown in the global economy and the unstable situation in the Middle East and Latin America, KBA’s management is aware of some risks facing the export business.

“The volume of orders obtained in the next three months is crucial to just how close group sales in 2013 will come to last year’s figure of nearly €1.3 billion” said CEO Claus Bolza-Schünemann. “Taking into account the current economic climate, we cannot rule out a single-digit percentage decline in sales compared to 2012.”

KBA expects improved operating results in the course of the year as it pushes forward with turn-around programs in its traditional web and sheetfed business. Projects to harmonize processes and align group-wide purchasing are well on target. As part of this KBA is also investing in ensuring its competitiveness in the future. Despite the risks and expenses mentioned, management is targeting a group pre-tax profit (EBT) similar to last year (€6.1m).

“Our annual earnings guidance anticipates a similar product mix as last year and takes into account the possibility of a slight decline in sales,” said CFO Dr. Axel Kaufmann. “It also covers our investment strategy for growth and process harmonizing or potential expenses resulting from capacity adjustments at our web facilities.”

In the half-year report, CEO Claus Bolza-Schünemann also pointed to advances in the continuing strategic development of KBA. An important milestone was reached in setting up the new product field high-performance digital printing with the first order for the KBA RotaJET inkjet press. Further digital projects will soon be finalized.

The final closing of the acquisition of Italian press manufacturer Flexotecnica is planned for September. Flexotecnica is active in the flexible packaging market. A further diversification step in another prospering packaging niche is the recently announced majority takeover of Kammann Maschinenbau. Kammann is the market leader in screen printing presses for directly decorating premium-quality hollow glass containers for the cosmetics and spirituous beverage industry. In the mid-term KBA aims to compensate as much as possible for the slump in traditional web offset sales with the entry into growing and profitable market segments and to improve group earnings.