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KBA Group Presses Ahead with Realignment


Anticipating sales of more than one billion euros in 2014

In his speech at this year’s annual general meeting, Claus Bolza-Schünemann, Koenig & Bauer (KBA) president and CEO, mainly reported on the measures, goals and current status of the Fit@All program for the restructuring of the group started at the beginning of the year. He also spoke about the group’s financial statements for 2013 and the figures for the first quarter of 2014.

“Strengthening KBA’s lasting profitability and competitiveness are the focus and goals of Fit@All,” said Bolza-Schünemann. “It is clear that we must sustainably restructure our core business with web and sheetfed offset presses as well as realign capacities to new market conditions. The expansion of new growth areas is also a key aspect of our program. We are convinced that we will be able to harvest the fruits of our realignment in 2015 and that the group will return to sustainable profitability by 2016 at the latest.”

In the coming months, KBA will continue to work on lasting capacity and structural measures, the new site concept as well as reducing the depth of added value by outsourcing more activities which lie outside of the group’s press-related core competences.

Between 1,100 and 1,500 jobs from today’s figure of approximately 6,200 will be cut as part of implementing these measures. So far voluntary cancellation and phased retirement agreements as well as social wage agreements and social compensation plans were agreed with union and workforce representatives for around 700 employees at the sites in Mödling, Ternitz, Trennfeld and Würzburg. An agreement and arrangement is also in place for the plant in Radebeul, near Dresden, which will see a reduction of 180 jobs in the middle of next year. Negotiations regarding the necessary cut in payroll by 200 employees at Frankenthal/Pfalz due to capacity and earnings remain ongoing.

In spite of efforts to find socially acceptable solutions by all parties involved, operational layoffs are unavoidable. Personnel adjustments will take place in several steps until the end of 2015 given the periods of notice which must be observed and upcoming relocations.

However, Bolza-Schünemann made it clear that Fit@All is more than just a restructuring program. “We aim to achieve an overall cost base at which group sales of €1 billion will lead to appropriate earnings,” he said. “We do not want to go overboard with cost savings or shrink beyond recognition, which is why the expansion of potential growth areas is a further pillar of our realignment.”

In this context, he referred to KBA’s special applications which can be expanded further, such as banknote and digital printing, metal decorating and coding, as well as to the new subsidiaries KBA-Flexotecnica and KBA-Kammann acquired last year. These are currently being integrated into the world’s second-largest press manufacturer’s international market presence and have opened up growth markets for flexible packaging and the direct decoration of hollow containers which were previously not served by KBA.

According to Bolza-Schünemann KBA is preparing a new group and management structure with the goal of becoming a decentralized, highly flexible press manufacturing group. Units for production, sheetfed offset, web offset and special presses with clear responsibilities for earnings should carry out operational activities under the umbrella of Koenig & Bauer AG. KBA calls these product houses, and anticipates more transparency and strategic flexibility with the establishment of these distinct areas of responsibility.

On May 1, 2014 KBA took a first step towards defining the new organizational structure. From an organizational point of view, along with a sheetfed product house (sheetfed offset in Radebeul), a web product house (web offset in Würzburg, excluding special machines) was also established.

When looking back at 2013, Bolza-Schünemann referred to demand for web presses for newspapers and commercial printing, but also for sheetfed offset presses, that remained considerably below expectations. The lower level of investment in KBA’s traditional offset business compared to the drupa year of 2012 contributed largely to a decrease in order intake of 9.3% to more than €1 billion. Group sales stood at about €1.1 billion. Despite sales which were approx. €200 million below targets, KBA posted an operating profit of €24.5 million. Nevertheless, special effects of –€155.2m for provisions as part of the Fit@All program and impairments of fixed assets were incurred in 2013. To sum up, the KBA group generated a pre-tax loss (EBT) of €138.1 million.

KBA reported that 2014 began far more successfully fthan in the weak first quarter of 2013. New orders rose 20.8% to €241.5 million and sales increased by 11.9% to €213.4 million. In addition, at –€10.2 million, the group’s operating result after three months was noticeably better than in the corresponding prior-year quarter (2013: –€16.9 million). The sheetfed offset division generated an operating profit of €1.2 million again after a prolonged period of time. Ultimately, group results before taxes (EBT) after three months came to –€12.1 million compared to last year’s figure of –€18.8 million.

Notwithstanding the current somewhat unstable economic and political environment, Bolza-Schünemann confirmed group sales of €1 billion to €1.1 billion and a positive operating result before special items as goals for 2014.