Giesecke & Devrient Starts 2014 with a Large Order Book

For Giesecke & Devrient (G&D), 2013 was a year of upheaval, with a Management Board reshuffle and other forward-looking strategic decisions. Sales were held almost steady, dropping 2% to €1.75 billion.

The three business units – Banknote, Mobile Security, and Government Solutions – fell short of their sales and earning targets. Group earnings (EBIT) fell to €56.2 million in 2013 (FY 2012: €95 million). This includes restructuring costs in the Mobile Security business unit amounting to €10.9 million. Net income for the Group was €2.6 million at the end of the year. Investment in R&D remained high at €128 million.

“Current performance at G&D is due to the new Software and Services business unit falling short of expectations and a major drop in prices, predominantly of products in the Mobile Security business unit. In order to achieve higher margins, we are optimizing the product portfolio. At the same time, strict cost management should improve our competitiveness,” said Dr. Walter Schlebusch, chairman of the Management Board of Giesecke & Devrient.

The Banknote and Government Solutions business units must also improve considerably to face the challenges in their markets. “Despite the current challenges, G&D remains a fundamentally stable, medium-sized family-owned company with cutting-edge technology and outstanding prospects,” Schlebusch noted.

“The goal for the current fiscal year is to put G&D back on a growth path,” he added. “The conditions are good. Order intake across the Group is much higher than in 2013.”

The Banknote business unit made by far the largest contribution to sales and earnings in the past fiscal year. Nevertheless, sales fell 6.4% year-on-year to €844 million. In Banknote Printing, G&D defended its market share by providing great technical expertise and reliable delivery. With new production sites – a second printing line in Malaysia and a state-of-the-art foil works in Gmund by Tegernsee – the business unit is perfectly positioned to deal with the increasing competition in the global market.

In addition, G&D is reacting to the trend to integrate more security features, such as foil elements, into the substrates of banknotes. Greater automation of the cash cycle and increasing cash volumes resulted in sustained market growth in Processing Solutions. With the BPS X9, a special system to check the quality of banknotes at printing works, G&D continued its success in this field. At the same time, the company continued to systematically expand its global service business, achieving annual sales of around €150 million. The Banknote business unit continued to expand its position as global market leader in the banknote sector despite shrinking sales.

Significantly higher revenues in card products for banks – driven by ongoing EMV migration, primarily in China – resulted in a 6.4% increase in sales in the Mobile Security business unit to €731 million euros. In the same period, sales of server and software solutions surged by more than 50%.

Despite this growth, the high investment in software solutions is currently not making a positive contribution to earnings. Although G&D participated in numerous projects around the world relating to mobile payment solutions, this technology has not yet achieved broad customer acceptance and therefore commercial success. In the telecommunications sector, G&D increased the number of SIM cards sold by 6%, but at the same time recorded a significant drop in prices.

Protection of identity is becoming increasingly important in the digitally connected world. G&D has already established major milestones with Mobile Security, Government Solutions and Secunet AG. G&D combines its activities in the field of cyber-security across all business units to form a comprehensive solution and target new markets.

The Government Solutions business unit achieved sales of €178.1 million in 2013, down 11.3% year-on-year. At the same time, the business unit achieved the highest order intake since it was founded. In the next three years, G&D will supply more than 800,000 electronic ID cards and complete personalization systems to Kosovo. Furthermore, it has two large orders for passports and ID cards for Iraq and 60 million voter identity cards for Mexico. G&D also positioned itself successfully for the German health insurance card, with a large order from BARMER GEK and orders to develop the second generation of health insurance cards.