Struggling sales buoyed by Drupa and Brazil

Heidelberg matched the previous year's incoming orders in the first six months of financial year 2008/2009, thanks to the industry trade show Drupa in May this year.

Looking at the second quarter (July to September 2008) in isolation, incoming orders fell sharply by around 23 per cent due to the continuing financial crisis and the resultant global economic uncertainties.

Incoming orders for the Heidelberg Group in the period under review totalled EUR1.872bn (previous year: EUR1.866bn), EUR721m of this in the second quarter (previous year: EUR932m).

Sales by the Heidelberg Group in the first two quarters amounted to EUR1.461bn (previous year: EUR1.639bn).

In the second quarter, Heidelberg achieved sales of EUR804m (previous year: EUR897m).

This figure was lower than expected.

The order backlog at the end of the second quarter was EUR1.206bn (previous quarter to 30 June 2008: EUR1.298bn).

The operating result of the Heidelberg Group in the second quarter of financial year 2008/2009 was well into negative figures at EUR-50m (previous year: EUR70m).

This result includes special items totalling EUR40m, among them a EUR22m provision from the collective labour agreement for partial retirement, and the outlay for the package of cost-cutting measures.

After adjustments for special items, the operating result for the second quarter was EUR-10m.

Falling sales and the resultant low profit contributions, the start of series production for new products, higher raw material prices, and the remaining costs for Drupa all burdened results during the second quarter.

The cumulative operating result after two quarters was EUR-85m (previous year: EUR96m) and the net result in the first six months was EUR-95m (previous year: EUR44m).

After the first six months of the financial year, the free cash flow stood at EUR-273m (previous year: EUR-43m).

The figure for the second quarter on its own was EUR-62m.

At 30 September 2008, the Heidelberg Group had a workforce of 19,865 (19,596 at 31 March, 2008).

Adjusted to take into account the number of trainees and the employees of Heidelberg Graphic Equipment in Shanghai and Hi-Tech Coatings, which were newly consolidated in the year under review, the total workforce fell by 129 in the first six months.

In the Press Division (offset printing), sales stood at EUR1.268bn in the first six months (previous year: EUR1.424bn).

Incoming orders in the period under review amounted to EUR1.654bn (previous year: EUR1.632bn).

The operating result in the first six months totalled EUR-78m (previous year: EUR81m).

In the Post-press Division (finishing), half-yearly sales fell to EUR180m (previous year: EUR199m).

Incoming orders amounted to EUR205m (previous year: EUR218m).

Above all due to falling sales, the operating result for the period under review was down on the previous year at EUR-18m (previous year: EUR-4m).

As expected following the high level of orders generated at Drupa, incoming orders fell in the second quarter in the EMEA, North America and Asia/Pacific regions.

Orders remained stable in the Eastern Europe region and increased in the Latin America region.

Thanks mainly to orders from the Brazilian market, this region was 26 per cent up on the same quarter of the previous year.

There was also a significant improvement of 18 per cent in the half-yearly figure.

Sales in all regions for the first six months were down on the previous year's level.

Heidelberg expects a significant downturn in sales and thus a marked reduction in operating result (EBIT) for the current financial year (1 April 2008 to 31 March, 2009) compared to last year.

The financial result is also expected to be down, due to the current financial crisis and the movements in interest rates.

These developments, coupled with restructuring costs, will lead to a significant annual deficit in the current financial year.

Because of the unpredictable nature of the current financial crisis and its impact on customers' investment decisions, Heidelberg will not, contrary to earlier announcements, provide a quantitative forecast for the current financial year.

Financial year 2009/2010 is even more difficult to forecast, and the management board does not currently expect any change for the better given the current developments.

In the light of the significant fall in sales and earnings, Heidelberg is extending its existing package of cost cutting measures to around EUR200m and accelerating its implementation.

Instead of the total cuts of EUR75m announced so far, the total package will now yield savings of EUR150m to 180m as early as financial year 2009/2010.

Further measures in financial year 2010/2011 will boost total savings to around EUR200m.

Given this additional need for restructuring, the overall cost for the extended package of measures will rise from EUR130m to EUR150m.

The restructuring measures already include provisions from the collective labour agreement for partial retirement recently signed for the metal industry.

Most of the restructuring costs are expected to arise in financial year 2008/2009.

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