In operational terms, the first quarter of financial year 2014/2015 (April 1 to June 30, 2014) went as expected. The operating result (EBITDA) was up on the previous year and moved back into positive figures, even though sales in the reporting period fell as anticipated. Thanks to a higher order backlog at the end of the first quarter, the company is expecting an increase in sales in the following quarters.
“Measures aimed at boosting efficiency have enabled us to achieve an operating profit even in light of the persistently volatile market environment. Realigning our portfolio will help us to further improve our profitability,” said Heidelberg CEO Gerold Linzbach.
While being around 14% down on the figure for the same quarter of the previous year (€504 million), Group sales in the first quarter were in line with expectations at €435 million. This development can be explained by the strong year-end rally in the preceding quarter, renewed negative exchange rate effects, and a slackening of business in the Asia/Pacific region. In the other regions, sales matched the previous year’s level.
Both EBITDA and EBIT in the first quarter were once again up on the same quarter of the previous year. EBITDA excluding special items was positive at €6 million, following a negative figure in the previous year (€-2 million). At €-11 million, the result of operating activities (EBIT) excluding special items was also better than the previous year’s figure of €-20 million. The operating result has therefore been continuously improving for just under two years now.
Due to lower financial income and the refinancing in the previous year, the financial result for the first quarter was €-17 million (previous year: €-12 million). Nevertheless, income before taxes improved from €-33 million to around €-28 million. Overall, the net result for the first quarter was in line with expectations at €-34 million (previous year: €-38 million).
Primarily due to the net loss for the quarter and payments totaling €12 million for the Focus efficiency program, the free cash flow after the first quarter was negative at €-66 million (previous year: €0 million). Accordingly, the net debt rose to €297 million (previous year: €258 million) but remains at a low level. This enabled Heidelberg to maintain the leverage (ratio of net debt to EBITDA excluding special items for the last four quarters) at our target value of 2.
“In addition to continuously improving the operating result over the past two years, we have also succeeded in getting the debt back down to a low level,” said Heidelberg CFO Dirk Kaliebe. “At the same time, we placed our financing on a stable footing, which lays the financial foundation for restructuring the company.”
As already announced, the Group is systematically removing low-margin products from its portfolio. At the beginning of August, for example, the company announced the strategic realignment of its Postpress Commercial and Postpress Packaging business areas. This will involve discontinuing production capacities, developing and manufacturing products and solutions through OEM partners in future, and/or outsourcing activities to partners. A total of around 650 employees worldwide will be affected. The Group expects these measures to yield an annual improvement in the result of some €30 million, most of this from financial year 2015/2016 onward.
The actual development of sales and the result in financial year 2014/2015 will depend to a great extent on implementation of the portfolio optimization measures initiated. Heidelberg currently expects that sales in financial year 2014/2015 will match those in the previous financial year. As in the previous year, sales are once again likely to be higher in the second half of the financial year than in the first.