Financial year 2011/2012: Heidelberg publishes nine-month figures – business in line with expectations in difficult economic environment

In the third quarter of financial year 2011/2012 (October 1 to December 31, 2011), Heidelberger Druckmaschinen AG (FWB: HDD) achieved a slightly positive result of operating activities with stable sales. The "FOCUS 2012” efficiency program was adopted in January 2012. The aim is to ensure that the target operating result excluding special items of around EUR 150 million is achieved in financial year 2013/2014.

Incoming orders in the first nine months (April 1 to December 31, 2011) amounted to EUR 1.975 billion, 7 percent down on the previous year’s figure for the same period (EUR 2.120 billion). The Heidelberg Group’s order backlog at the end of the third quarter amounted to EUR 728 million, which was on a par with the previous quarter (EUR 731 million).

Sales in the first nine months amounted to EUR 1.811 billion, 4 percent down on the previous year’s figure for the same period (EUR 1.883 billion). After adjustment for exchange rate effects, sales were almost on a par with the previous year’s level at EUR 1.841 billion.

"The economic uncertainty and the resultant reluctance to invest have impacted on the business operations of Heidelberg as expected,” said Heidelberg CEO Bernhard Schreier. "Nevertheless, consistent cost management has ensured that the operating result in the third quarter is positive and on the whole in line with the scaled-down expectations.”

Despite lower sales revenues, the result of operating activities excluding special items after nine months has improved to EUR -19 million (previous year: EUR -26 million). The special items amounting to EUR 10 million mainly consisted of expenditure relating to further restructuring.

Thanks to successful refinancing and lower financing costs, the financial result improved significantly on the previous year from EUR -103 million to EUR -62 million. The result before taxes for the first nine months improved from EUR -103 million in the same period the previous year to EUR -91 million. After three quarters, the shortfall for the current financial year is EUR -79 million (previous year: EUR -78 million).

The free cash flow for the first nine months was negative at EUR -23 million. This is primarily a result of the annual loss and investments in the expansion of our plant in China. The company’s net financial debt fell again slightly after three quarters to the comparatively low figure of EUR 273 million. The equity ratio remained stable at almost 30 percent during the period under review.

"Heidelberg is on a stable financial footing thanks to successful refinancing and systematic asset management,” said Heidelberg CFO Dirk Kaliebe. "The success of our financial measures is reflected in the consistently stable equity ratio and significantly reduced net financial debt.”

As of December 31, 2011, Heidelberg had a workforce of 15,666 worldwide (previous year: 15,828).

Business results in the divisions and regions

The incoming orders of the Heidelberg Services division improved in the third quarter to EUR 277 million, up on the previous quarters. Compared with the equivalent nine months of the previous year, incoming orders were 5 percent below the previous year’s good figure at EUR 792 million. In the same period, the division’s sales dropped by 5 percent to EUR 769 million. The main reason for this development was the drop in sales in the remarketed equipment business. In the Heidelberg Equipment division, incoming orders for the first three quarters totaled EUR 1.172 billion. This was 8 percent down on the previous year, which was boosted by the IPEX and ExpoPrint trade shows. Nine-month sales of EUR 1.031 billion were equivalent to the same period the previous year after adjusting for exchange rate effects.

The order situation at Heidelberg continues to vary from region to region. While incoming orders in the Europe, Middle East and Africa (EMEA), South America, and Asia/Pacific regions lay below last year’s high level after three quarters resulting from trade shows, the Eastern Europe and North America regions improved on the previous year’s levels. Sales in the North America region were up significantly on the previous year’s weak figure. Sales in the Asia/Pacific and South America regions in the period under review were on a par with the high level of the previous year after adjustment for exchange rate effects, while the Europe, Middle East and Africa and Eastern Europe regions were down on the previous year.

Outlook for financial year 2011/2012

In an endeavor to increase operating profitability in the current financial year, measures relating to material costs and staffing that can be implemented quickly were already introduced in the first six months of the year. The company expects that the operating result excluding special items for financial year 2011/2012 as a whole will be noticeably better than that of the previous year. Although weak demand means it will take longer than originally planned to increase sales to more than EUR 3 billion, Heidelberg is sticking to its medium-term profitability targets.

Back to sustainable profitability with "FOCUS 2012”

To achieve the profitability targets, "FOCUS 2012” is designed to help realize total sustainable savings of around EUR 180 million in financial year 2013/2014. Many of the measures will be initiated and implemented quickly, before the end of calendar year 2012. In addition, the program includes a number of medium- to long-term measures aimed at adapting the organization to the changed structures.

Negotiations between the Management Board and employee representatives on the implementation of "FOCUS 2012” began in January 2012. The company is focusing first and foremost on the rapid agreement and implementation of the program in the interests of everyone involved.

"FOCUS 2012” is our answer to the changes in our industry and will put in place the foundation and efficient structures needed for profitable business development in the long term,” said Schreier. "Our aim is to ensure that the target operating result of around EUR 150 million is achieved in financial year 2013/2014 as planned and that Heidelberg can independently continue to build on its leading position in the future.”

Growth opportunities from drupa 2012 through consistent focus on customer requirements and market trends

The structural changes taking place in the media and communications markets are presenting new challenges for the entire print industry. Heidelberg has therefore geared its portfolio to the changing customer requirements and most important market trends in the print industry. The aim is to further expand the company’s range of high-quality and environmentally friendly consumables to enable further growth in this market segment in the future. The new Speedmaster CX 102 is another example of this consistent focus on growth areas in the print media industry. Customers in the industrial advertising and packaging printing sectors warmly welcome this press in order to meet the market trends for maximum productivity, economic success, and optimum energy efficiency. The popularity of this press is reflected in the sales figures. The 1,000th printing unit for the Speedmaster CX 102 was sold within just one year of it being launched at the IPEX trade show in 2010.

"The success of the Speedmaster CX 102 demonstrates our ability, as the global technological and market leader, to offer our customers processes that have been optimized from a business management perspective and solutions for innovative business models,” explained Schreier. "At drupa 2012, our latest products will be geared towards the growth areas in the print media industry. As the biggest exhibitor at the trade show, we also see drupa as an opportunity to boost confidence in our industry once more.”

For additional details and further information about the company, please visit press portal of Heidelberger Druckmaschinen AG at www.heidelberg.com.

Important date:

The drupa press conference for the business press will take place on May 2, 2012 at 12 noon in Hall 1 at the Exhibition Center in Düsseldorf.

Heidelberg at drupa 2012

drupa 2012, the world's largest trade show for the print media and printing industry, is being held from May 3 to 16 in Düsseldorf. Since drupa first started in 1951, Heidelberg has traditionally been the largest exhibitor.

The trade show presentation, held under the banner "Discover HEI”, will center on lean production (HEI Productivity), green printing (HEI Eco), web-to-print (HEI Integration), short-run printing (HEI Flexibility), differentiation through coatings and special effects (HEI Emotions), the future of packaging printing (HEI End), and gaining an edge through the latest know-how (HEI School). The company is exhibiting solutions that enable print shops and postpress businesses to meet the latest market requirements in full. www.drupa.heidelberg.com

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.