03.24.21
The Koenig & Bauer Group achieved revenue of €1.0 billion in 2020 (2019: €1.2 billion) despite the challenges posed by the COVID-19 pandemic.
The 17.4% decline in revenue reflects the measures adopted by governments worldwide in 2020 to halt the spread of the COVID-19 pandemic.
Travel restrictions in particular hampered international sales activities as well as order and project execution.
Service business accounted for about 30% of the Group’s revenue in 2020 against the backdrop of the pandemic. This means that the target of 30% was reached, albeit based on lower new press business than in the previous year.
The 14.6% decline in order intake to €975 million (2019: €1.1 billion) is also due to COVID-19-related constraints on global economic activity and customers’ reluctance to invest given reduced planning visibility.
However, the decline in Koenig & Bauer’s revenue and order intake in 2020 was much less pronounced than for the printing press industry as a whole (24.2% decline in revenue; 21.9% decline in order intake) according to figures released by industry association VDMA (German Machinery and Plant Manufacturers’ Association).
Koenig & Bauer’s order backlog as of Dec. 31, 2020, was valued at €632 million, down 7.9% on the previous year (Dec. 31, 2019: €686 million).
Earnings before interest and taxes (EBIT) amounted to €-68 million in 2020, compared to €70 million in the previous year.
In addition to the COVID-19-related decline in revenue, EBIT was adversely affected by non-recurring expenses of €58 million in connection with the expanded “P24x” efficiency program announced in fall 2020.
However, non-recurring income from the successful outcome of a legal dispute (€4 million) and the sale of a real estate asset in Frankenthal (€5 million) had a positive effect on EBIT.
Adjusted for these non-recurring effects, EBIT came to -€19 million in 2020.
Despite the effects of the pandemic, a clear quarterly recovery emerged in EBIT: after -€17 million in the first quarter, operating loss before exceptionals was only in the single digits (-€7 million) in the second quarter.
In the third quarter, it came close to reaching the break-even threshold (-€1 million), while in the final quarter a slightly positive EBIT before non-recurring effects of €6 million was achieved.
After net interest expense of around €6 million (2019: €6 million), Koenig & Bauer achieved earnings before taxes (EBIT) of -€73 million in 2020, compared with €64 million in the previous year.
Tax expense came to €30 million in 2020 (previous year: €12 million).
The higher tax expense in the year under review is primarily due to impairments of deferred tax assets on unused tax losses, which were not considered to be recoverable for the preparation of a new integrated five-year plan.
The Group net loss of €103 million (2019: Group net profit of €52 million) translates into a loss per share of €6.27 (2019: earnings per share of €3.15).
“Looking at order intake, we can see that the Koenig & Bauer Group held up better in the difficult year of 2020 than our industry as a whole," said Dr. Andreas Pleßke, CEO of Koenig & Bauer AG. "Despite all due caution given the still very uncertain economic conditions, we take this as a sign that we are focusing on the right end and future markets with our range of presses and services. For example, corrugated-board printing could experience a significant boost in the coming years given the growth in e-commerce. Packaging printing for food, cosmetics and pharmaceutical products, for example, is also proving to be an intact and growing market. Koenig & Bauer has expanded its Radebeul facility, turning it into a global customer experience center to demonstrate the performance of our presses to customers in these sectors as effectively as possible. The customer experience center presents networked solutions for packaging production featuring innovative printing technology, flatbed and rotary die cutters, folding-box gluers and fully automated material flow. We are convinced that we will strengthen and further expand our market position not only in the area of packaging printing.”
At the level of the individual segments, the COVID-19-related burdens and the provisions recognized for the measures defined in the “P24x” efficiency program were also clearly evident in the decline in order intake, revenue and EBIT in 2020.
That said, order intake in the Sheetfed segment declined by only a moderate 5.5%. In 2020, this segment achieved growth in medium- and large-format sheetfed offset presses and folding-box gluers, which were primarily ordered by customers in the packaging printing sector. In the fourth quarter, the Sheetfed segment recorded order intake of €178 million, thus exceeding the previous year’s figure (Q4 2019: €166 million).
In the final quarter of 2020, the Digital & Webfed segment successfully commissioned the first CorruFLEX system for the production of high-quality printed packaging at corrugated cardboard printing company THIMM’s plant in Romania. This means that all three Corru models for direct corrugated-board printing have now been successfully placed on the market.
In the Special segment, Banknote Solutions, Kammann and Coding reported lower order intake in 2020 because of the effects of the coronavirus pandemic. MetalPrint, on the other hand, recorded an increase in order intake in 2020.
The Koenig & Bauer Group’s cash flow from operating activities turned positive in 2020, coming to €12 million (2019: -€8 million). The decline in inventories was the main reason for this positive performance. Net working capital fell from €349 million in the previous year to €344 million. Free cash flow improved significantly from -€52 million in the previous year to -€24 million in 2020.
With an equity base of €342 million (end of 2019: €433 million), the Koenig & Bauer Group achieved a solid equity ratio of 25.9% (end of 2019: 30.6%).
Koenig & Bauer projects slight organic revenue growth of around 4% to €1.07 billion in 2021. On the earnings side, it expects to break even at the EBIT level in 2021 following the successful launch of the “P24x” efficiency program and the planned savings effects.
Implementation of the “P24x” program will leave traces on free cash flow in 2021, resulting in a negative free cash flow in the mid-double-digit millions.
“The order backlog of more than €630m provides solid underpinnings for our forecast for the Koenig & Bauer Group in 2021. With the efficiency measures under “P24x”, we have also laid important foundations for improving our profitability," said Dr. Stephen Kimmich, CFO of Koenig & Bauer AG. "In 2021, this should already allow us to break even at the EBIT level. After the completion of the four-year efficiency program, we hope - as stated in autumn 2020 - to achieve revenue of €1.3 billion and an EBIT margin of at least 7% and to reduce net working capital to a maximum of 25% of annual revenue.”
