Koenig & Bauer Reports Good Order Situation, Cash Flow in 3Q 2018

Driven by strong security press business and growth in packaging printing markets, order intake in the Koenig & Bauer group rose by 4.4% over the previous year to €943.2 million in the first nine months of 2018. At the end of Q3, order backlog was up 25.5%, standing at €769.3 million.
 
Group revenue came to €788.8 million but fell short of the previous year’s figure of €847.7 million due to the even greater accumulation of delivery dates requested by customers in Q4 and bottlenecks in the parts availability. This was also reflected in EBIT, which at €28.6 million was lower than in 2017 (€36.4 million).
 
While the project situation is good, order intake, revenue and EBIT in the Sheetfed segment were affected in particular by bottlenecks in the availability of parts.
 
“The situation with respect to parts and the high order backlog dampen our new business due to longer delivery times,” said Claus Bolza-Schünemann, president and CEO. “We are currently working intensely on optimizing our entire supply chain to achieve a sustained reduction in delivery times.”
 
Despite the growth in flexible packaging printing, order intake for Digital & Web was up only slightly on the previous year’s figure due to fewer orders for newspaper and digital printing presses. Together with market-entry and growth-related expenses for corrugated board and flexible packaging, the lower revenue exerted pressure on EBIT in this segment. Despite substantially higher orders, revenue in the Special segment was slightly below the previous year’s figure. However, the EBIT margin remained stable in this segment.
 
Cash flows from operating activities rose substantially over the previous year (–€24.6 million) to €50.5 million. Although free cash flow was burdened by the final payment installment of €34.8 million made in Q1 for the external funding of a part of the pension provisions, it also improved substantially. The equity ratio widened from 36.4% at the end of 2017 to 37.4%.
 
“The numerous press deliveries and service activities scheduled in the final months of the year will trigger a surge in revenue and earnings in Q4,” CFO Mathias Dähn said. “In view of this business concentration, which is challenging due to the high capacity utilization and the parts situation but not really unusual, we aim to achieve organic growth of around 4% in Group revenue for 2018. In terms of our earnings target for 2018, we are confident that we will achieve an EBIT margin of around 7% for the full year with higher revenue in view of the EBIT margin of 6.6% in the third quarter with low revenue. Global macroeconomic risks have increased due to trade conflicts and barriers, rising US interest rates and political uncertainties in Europe (Brexit, Italy) and in the emerging markets.”
 
Depending on trends in the global economy, end markets and the necessary investments in growth, management is targeting a group-wide organic revenue growth rate of around 4% p.a. and an EBIT margin of between 4% and 9% by 2021.
 
Describing in greater detail the additional growth offensive 2023, Dähn said, “For a stronger profitable growth, we want to actively exploit the currently available market opportunities in corrugated board printing, flexible packaging and 2-piece can decorating alongside our service initiative. The same thing applies to marking & coding and post press equipment such as rotary and flatbed die-cutters. Based on an addressed total market volume of currently around €2 billion p.a. for machines, these business fields are expanding at annual rates of between 2% and 10% as they are benefiting from growth in consumer spending and demand for packaging around the world as well as long-term trends such as e-commerce, more sophisticated packaging and smaller sizes due to more single-person households.
 
“With newly developed products such as CorruCUT, CorruFLEX and CorruJET for corrugated board printing, CS MetalCan for 2-piece can decorating and the Rapida RDC 106 rotary die-cutter, we want to stand out from the competition with improved total cost of ownership, shorter make-ready times for even more frequent job changes, greater ease of operation and high production output,” he added. “We estimate the cumulative market-entry, growth-related and R&D expenses for 2019 to 2021 at around €50 million. By 2023, we want to gradually generate additional revenue of around €200 million in these addressed business areas. Given this favorable market environment with structural and above-average growth as well as less cyclical end markets such as food, beverages and pharmaceuticals, we want to gradually increase the EBIT margin from additional business to a double-digit figure at steady-state.”
 
 

New orders for flexible packaging printing rose at a good rate. (Source: Koenig & Bauer)