Koenig & Bauer Achieves, Exceeds Targets for 2017

Driven by strong revenue and earnings in the fourth quarter, Koenig & Bauer fully achieved or exceeded its guidance for 2017. The printing press manufacturer’s consolidated figures show that with the increase in revenue, earnings and order intake achieved last year it is well on track towards achieving its medium-term targets by 2021.
 
With security business remaining strong, Koenig & Bauer achieved growth in the packaging markets for cardboard printing, metal, glass and hollow container decorating and coding as well as with new products such as rotary and flatbed die-cutters. Market share was widened in all business fields.
 
“In addition to the market success of the rotary die-cutter, the sharp rise in new contracts for flatbed die-cutters over the previous year exceeded our expectations substantially,” said CEO Claus Bolza-Schünemann.
 
Moreover, the group’s revenue and earnings growth was particularly underpinned by expansion in service business. Thus, the proportion of group revenue generated by service business widened from 23.5% in the previous year to 25.6%.
 
“This shows that the group-wide service initiative launched at the beginning of 2016, with which we want to widen the share of service business in group revenue step by step to 30% by 2021 in the interests of greater earnings potential and stability, is now beginning to bear fruit,” noted CFO Mathias Dähn. “We want to create satisfied and loyal customers by offering excellent service. At the same time, rising service revenue is an important measure of customer satisfaction for us.”
 
Koenig & Bauer is working intensively on further applications in packaging, digital and industrial printing to achieve additional profitable growth beyond its medium-term targets. One key aspect is corrugated board printing, which is flourishing at above-average rates thanks to long-term trends such as home-shopping as well as more sophisticated and colourful outer packaging.
 
“We have already started marketing the sheetfed flexo presses CorruFLEX and CorruCUT (with an integrated rotary die-cutter), both of which have been developed with a number of unique features,” said Bolza-Schünemann. “In early 2019 we will be installing a CorruCUT system at the pilot customer Klingele.”
 
A further target market is 2-piece can printing. “As a globally leading supplier of presses for 3-piece can printing, we want to expand our profile by entering the 2-piece can market,” said Dähn. “Presented in May 2017 with a number of important advantages for users, the newly developed CS MetalCan press for 2-piece can decorating met with strong customer interest. Following two contract signings, we are now able to commence intensive field-testing with the target of sales launch at the end of 2018.”
 
At €1,217.6 million, group revenue reached the target corridor of up to €1.25 billion defined in the guidance. With revenue up 4.3% over the previous year (€1,167.1 million), Koenig & Bauer fully achieved its mid-term organic revenue growth rate of nearly 4% p.a., thus more than making up for the further decline of €25 million in revenue from newspaper and commercial web presses.
 
The group’s new orders rose substantially by 10.1% over 2016 (€1,149.7 million) to €1,266.3 million. With orders up 29.7% over the previous year, the fourth quarter was particularly strong. The book-to-bill ratio came to 1.04, while order backlog stood at €606.2 million, up 8.7% on the previous year.
 
The increased revenue in tandem with more service business across the Group caused the profit rise. Adjusted for the non-recurring income in the previous year, EBIT climbed from €62.9 million to €81.4 million.
 
“Thanks to the positive earnings performance and the retained profit generated by the holding company Koenig & Bauer AG, we are able to continue our dividend policy with a distribution rate of between 15% and 35% of the group’s net profit,” said Bolza-Schünemann.
 
Driven by innovative, bespoke solutions for folding carton and commercial printing as well as a broader sales and service footprint in the markets of the future, order intake in the Sheetfed segment, which as the largest segment is dominated by packaging printing, rose by 15.2% over the previous year (€569.7 million) to €656.2 million. Revenue climbed by 7.3% over 2016 (€615 million) to €660.2 million. EBIT increased from €31.3 million in the previous year to €37.5 million, with the EBIT margin widening from 5.1% to 5.7%.
 
Digital & Web order intake and revenue fell short of the previous year primarily as a result of the expected further decline in orders for newspaper and commercial web presses. Segment earnings came under strain from optimization efforts for flexible packaging printing as well as R&D expenses, resulting in an EBIT of –€4.3 million, down on the previous year’s figure of €0.5 million.
 
Cash flows from operating activities increased slightly from €21.9 million in the previous year to €23.8 million despite the higher net working capital. The free cash flow of –€59.6 million (2016: €2.3 million) was burdened by high investments (€48.5 million) and payment instalments (€36.8 million) made for the external funding of a part of the pension provisions.
 
In the absence of any material deterioration in global economic and political conditions for our international business, the management board expects to achieve organic growth of approximately 4% in group revenue and an EBIT margin of approximately 7% in 2018.

Koenig & Bauer CorruCUT sheetfed flexo press. (Source: Koenig & Bauer)