Financial Year 2011/2012: Heidelberg Presents First-Quarter Figures – Operating Result Improves

In the first quarter of financial year 2011/2012 (April 1 to June 30, 2011), after adjusting for exchange rate effects, sales by Heidelberger Druckmaschinen AG (FWB: HDD) held stable compared to the previous year and the operating result improved.

At EUR 665 million – EUR 690 million after adjusting for exchange rate effects – incoming orders in the first quarter 2011/2012 were in line with the company’s expectations. The prior year's higher level (EUR 786 million) was mainly due to additional orders generated at the IPEX and ExpoPrint trade shows that took place in the same period of the previous year. Compared to the previous quarter (EUR 637 million), after adjustment for exchange rate effects, incoming orders grew by 8 percent. At the end of the first quarter of 2011/2012, the order backlog of the Heidelberg Group amounted to EUR 718 million, up EUR 84 million on the previous quarter.

In the first three months of the current financial year, Heidelberg recorded sales of EUR 544 million, compared to EUR 563 million in the same period of the previous year. Adjusted for exchange rate effects of EUR 19 million, net sales matched the prior-year level, but were slightly below our expectations. This is due in part to sales being shifted into subsequent quarters as a result of the earthquake catastrophe in Japan and delays resulting from the extended liquidity shortage in the Chinese banking system.

The result of operating activities excluding special items (EBIT) for the first quarter improved over the same period of the previous year from EUR -35 million to EUR -25 million. There were no significant special items in the quarter under review. In the same quarter the previous year, the special items had included income of EUR 15 million.

"In the first quarter, we were able to improve our operating result excluding special items on the previous year while sales remained stable,” said Heidelberg Group CEO Bernhard Schreier. "We are keeping a close eye on current economic developments across the globe, but it is difficult to predict what will happen. However, given the continuing high demand and strong economic growth on the Chinese market, we are assuming that the regional effects on business development at Heidelberg will be only temporary.”

At EUR -22 million, the financial result in the period under review improved over the same period of the previous year (EUR -35 million) due to the lower financing costs resulting from the successful refinancing measures in the first quarter. Income before taxes improved from EUR -56 million in the same quarter the previous year to EUR - 47 million in the first quarter of 2011/2012. Income after taxes was EUR -46 million (previous year: EUR -52 million).

As a result of the successful capital increase in the past financial year and the improved operating result, the net financial debt fell considerably from EUR 629 million in the previous year to EUR 260 million and remained stable in comparison to the previous quarter (EUR 247 million). Supported by consistent cash management, free cash flow in the quarter under review more or less balanced out at EUR -6 million despite one-off refinancing costs.

"The significantly reduced net financial debt and our refinancing operation concluded in spring are evidence that Heidelberg is on a stable financial footing,” said Heidelberg CFO Dirk Kaliebe. "We will forge ahead with our successful strategy, particularly through consistent cost and asset management.”

The workforce fell by a further 110 in the first quarter of 2011/2012. As at June 30, 2011, the Heidelberg Group thus had a workforce of 15,718 worldwide (previous year: 16,218).

Business results in the divisions

In the Heidelberg Equipment Division, incoming orders in the first quarter amounted to EUR 404 million, up 11 percent on the previous quarter (EUR 365 million). As expected, the high figure for the same period the previous year (EUR 501 million) achieved as a result of high incoming orders at last year's IPEX and ExpoPrint trade shows could not be repeated. At EUR 300 million, sales matched the level of the same quarter the previous year. After adjustment for exchange rate effects, this is equivalent to a rise of 5 percent. Although there was almost no change in sales, the result of operating activities excluding special items improved by 19 percent from EUR -48 million to EUR -39 million.

In the Heidelberg Services Division, incoming orders amounted to EUR 258 million, a drop of 8 percent compared to the previous year’s figure for this period (EUR 280 million). At EUR 241 million, net sales were also down 8 percent on the same quarter the previous year (EUR 261 million). Despite low sales, the operating result excluding special items amounted to EUR 10 million, matching the positive level of the same period the previous year.

The Heidelberg Financial Services Division once again achieved a positive operating result in the quarter under review. At EUR 4 million, the operating result was up on the same quarter the previous year (EUR 3 million).

Business developments in the regions

In the Europe, Middle East and Africa region, incoming orders of EUR 245 million in the first quarter failed to match the high level of the previous year, mainly due to the IPEX trade show held the previous year in the United Kingdom. Incoming orders in the Eastern Europe region of EUR 73 million were down 13 percent against the comparable quarter of the previous year. In the North America region, incoming orders – after adjustment for exchange rate effects – increased by 6 percent over the previous year. In the South America region, incoming orders were 21 percent below the previous year’s figure for this period, mainly due to the ExpoPrint trade show that took place at this time. In the Asia/Pacific region, incoming orders were down 10 percent, but matched the prior year level after adjustment for exchange rate effects. While net sales for the first quarter after adjustment for exchange rate effects grew slightly in Eastern Europe, North America, and South America, sales in Europe, Middle East and Africa, and Asia/Pacific were either on a par or below the previous year's levels.

Outlook

The global economic and market risks are still high and have increased significantly overall in the last few days. The worsening of the debt crisis in some European countries and in the United States, coupled with the recent upheavals on the international financial markets, could slow the pace of macroeconomic growth and have a negative impact on investment behavior. If underlying macroeconomic conditions and the sector as a whole remain stable, Heidelberg nevertheless continues to strive for a break-even pre-tax result in financial year 2011/2012 – based on a higher operating result and lower financing expenses.

The global printing volume remains stable and will require investments in production equipment. Based on this, Heidelberg intends to achieve a medium-term sales target of over € 3 billion annually over the next two to three years.

Assuming that the economic environment will continue to be generally stable, Heidelberg expects to gradually approach this target during the current and next financial year. Due to drupa 2012 and the ongoing upswing in the print media industry, sales in the next year should grow more strongly than during the current financial year.

Additional details on the company can be found at www.heidelberg.com.

Other dates:

The figures for the second quarter of financial year 2011/2012 are due to be published on November 8, 2011.

Important note:

This press release contains forward-looking statements based on assumptions and estimations by the Management Board of Heidelberger Druckmaschinen Aktiengesellschaft. Even though the Management Board is of the opinion that those assumptions and estimations are realistic, the actual future development and results may deviate substantially from these forward-looking statements due to various factors, such as changes in the macro-economic situation, in the exchange rates, in the interest rates and in the print media industry. Heidelberger Druckmaschinen Aktiengesellschaft gives no warranty and does not assume liability for any damages in case the future development and the projected results do not correspond with the forward-looking statements contained in this press release.