Koenig & Bauer Reports Figures from 1H 2024

Koenig & Bauer AG can look back on a challenging first half of the year in 2024. With regard to the general conditions, on the upside, inflation and interest rates are declining somewhat this year after the last few years, which were overshadowed by crises, wars, high inflation and rising interest rates.

However, like almost all manufacturing companies, Koenig & Bauer continues to face a persistently difficult market situation.

Nevertheless, the company was able to confirm a few days ago that its operating earnings for 2024 will come in at the lower end of the forecast range of €25 million – €40 million and that it will reach its revenue target of around €1.3 billion.

However, the challenges remain high. As announced, Koenig & Bauer has scaled its “Spotlight” focus program, which includes both revenue enhancement measures in profitable areas and restructuring measures in non-profitable areas, on the basis of the impetus derived from drupa.

“With ‘Spotlight’, we are focusing on a combination of cost optimization, process improvements and targeted investments in future-oriented technologies and markets,” said CEO Dr. Andreas Pleßke. “This program will help us to address the current challenges and secure our long-term competitiveness.”

In the first half of 2024, order intake increased by 16.0% to €641.5 million also as a result of drupa, the world’s largest trade fair for the printing and graphics industry. The order intake also resulted in an order backlog of €1,021 million, which is the highest half-year figure in the company’s recent history.

A large part of this order backlog will manifest itself after 2024 and is spread across the segments unevenly. It was not only for this reason that drupa was invaluable for Koenig & Bauer. In addition, drupa showed that customers’ willingness to invest seems to be slowly recovering again. At the same time, however, it was also a proof point for the company’s strategy as customer feedback showed that Koenig & Bauer is absolutely headed in the right direction with its product and market strategy.

As expected, however, non-operating extraordinary expenses, mainly in connection with the drupa trade fair, had a negative impact of approximately €10 million in the second quarter. In addition to this one-off effect, the operating EBIT of around €-13.7 million in the second quarter fell slightly short of the figure of around €-10.2 million recorded in the first quarter but was in line with forecasts.

At the end of the first half of the year, operating EBIT reached €-23.9 million, translating into Group EBIT of €-33.9 million (previous year: €-5.4 million). Accordingly, the EBIT margin dropped from -0.9% in the first half of the previous year to -6.4% in the first half of 2024.

Group revenue came to €532 million in the first half of the year in a challenging market environment, thus falling 10.8% short of the same period in the previous year (previous year: €596.4 million). This was particularly due to reduced order intake in the Sheetfed segment in the third quarter of 2023 as well as a lower percentage of completion (POC) achieved in production in the Banknote Solutions business unit compared to the previous year.

However, an improvement of €25.6 million to €278.8 million was achieved in the second quarter. This is another reason why the company expects a strong second half of the year in 2024 in terms of revenue and earnings as a basis for achieving its full-year operating earnings.

After sequential increases in the last three quarters, the Sheetfed segment was able to post a further improvement in order intake, reaching a figure of €350.8 million in the first half of 2024 (previous year: €342.1 million). Reflecting the muted order situation in the third quarter of 2023, revenue came to €290.6 million, 17.5% down on the previous year.

The order intake of €54.4 million (previous year: €73.1 million) in the Digital & Webfed segment reflects the current temporary weakness afflicting the market for corrugated board. However, good sales successes were achieved in the second quarter for digital pre-print of corrugated cardboard liners. Revenue climbed by 7.4% over the previous year to €75.3 million.

At €251.3 million as of June 30, 2024, order intake in the Special segment was up 62.8% on the previous year’s figure of €154.4 million. The orders of €197.2m in the second quarter were €54.1m higher than in the first quarter, but lagged behind the strong fourth quarter. These heavy fluctuations in order intake are due to government and big-ticket printing press business.

Under its “Spotlight” focus program, Koenig & Bauer is working on measures to boost revenue in profitable areas and on efforts to restructure areas that are not profitable. As previously announced, the company has now scaled “Spotlight” and defined further details on the basis of real post-drupa effects.

It primarily entails measures to improve costs at the Holding and in the Digital & Webfed segment in Würzburg as well as in the Special segment at various locations. This is likely to cause special effects of €30 million – €45 million on earnings.

The path that the company has already embarked on to achieve the EBIT target of around 6% and group revenue of approximately €1.5 billion in 2026 at the latest and to strengthen operating EBIT in 2025 is also secured by the “Spotlight” focus program.

“We are following a clear plan to take the company strengthened out of the difficult market phase,” Dr. Stephen Kimmich, CFO and CEO of the Special segment, said. “Koenig & Bauer’s future must be one of greater profitability,” adding that “it is time to profitably leverage the results of the product and market initiatives of recent years, and this is what we are seeking to achieve with ‘Spotlight’.”