KBA Racks Up Record Sales At EUR1.7 Billion

KBA has reported what it described as substantially higher earnings than in 2005,with record sales of EUR1.7 billion and pre-tax profit almost doubled at EUR47.4 million.

KBA has reported what it described as substantially higher earnings than in 2005,with record sales of EUR1.7 billion and pre-tax profit almost doubled at EUR47.4 million.

KBA group sales climbed 7.5 per cent to EUR1.741.9m in 2006, compared to EUR1.621m in 2005, which is the highest level in KBA's 189-year history.

KBA commented that a high level of capacity utilisation at its production plants and efficiency gains from restructuring the web press division enabled the group to boost operating profit from EUR33.3m in 2005 to EUR46.2m last year.

Whilst the company believes that the financial profit was no more than modest, pre-tax earnings soared to EUR47.4m last year, compared to 2005's EUR25.8m.

At the same time, net group profit to EUR34.3m for the year, up from EUR18.5m in 2005.

Earnings per share thus came to EUR2.11 (2005: EUR1.14).

Although the export level of 82.7 per cent was marginally higher than in 2005 (81.9 per cent), KBA added that group profitability in the fiercely competitive global press market was hit by the weakness of the Japanese Yen, the US Dollar and the Swiss Franc against the Euro, by higher steel and energy prices and by an increase in unit labour costs, which together wiped out some of the cost savings and productivity gains made.

That result for 2006 was achieved even though there was a slide in multi-unit web press sales.

The volume of sheetfed orders on hand at the beginning of the year, and contracts placed since then, will keep the relevant production plants busy until well in to the third quarter of 2007, whilst the backlog of orders for web presses swelled in January and February with contracts from Italy, Spain, the UK and USA for newspaper and commercial presses, and a further decorative gravure printing press.

Even so, capacity utilisation at KBA's web press production plants will fluctuate during this year, believes the company, especially in the second half of the year.

Some projects were delayed by customers, indicating that some major contracts may be expected in the second quarter.

The subsidiaries specialising in niche applications look set to maintain their profitable growth and will help balance volatile demand for big web presses as the year progresses.

KBA added that despite softer sales of multi-unit web presses, its management is confident that group sales and pre-tax earnings will be roughly on a par with 2006.

However, in view of the uncertainties relating to wage negotiations and currency movements the company will not be issuing a more detailed prognosis for 2007 until a later date, when interim figures are available.

Whilst a total of EUR1.649.7m for new sales bookings represented a double-digit improvement on 2004, (which had been boosted by the Drupa trade fair) it was 6.7 per cent down on the record figure for 2005 of EUR1.768.9m.

Albrecht Bolza-Schunemann, KBA's president and chief executive officer, attributed that to the smaller number of major newspaper and gravure contracts put up for tender.

An increase in shipments trimmed the order backlog to EUR948.7m at the end of the year, from EUR1,040.9m in 2005.

The company reported that earnings per share jump from EUR1.14 to EUR2.11.

In view of the higher earnings, KBA said that at its AGM on June 19 the company's supervisory board will propose a dividend of 50 cents per share, up from 40 cents in 2005.

EUR8.2m of the parent's net profit of EUR16.1m (2005: EUR6.5m) will be paid out as dividends, EUR7.9m reinvested.

KBA's sheetfed offset division lifted sales by 6.5 per cent to EUR870.6m (2005: EUR817.6m) just under half of the group total.

KBA-Grafitec, a Czech sub-sidiary acquired in 2005, posted double-digit sales growth with its small-format presses.

The volume of incoming orders, including those booked by KBA-Metalprint, a new subsidiary consolidated in the second half of the year, came to EUR864.3m, 4.2 per cent up on the previous year (EUR829.5m).

The company added that despite a raft of cost-cutting initiatives, earnings by the sheetfed division were below target at EUR5m (2005: EUR2.7m).

Margins were hit by price erosion in press markets and the cost of optimising new products.

As in 2005, the web and special press division, which includes systems built by subsidiaries KBA-Giori, KBA-Modling and KBA-Metronic, made the bigger contribution to group profit with earnings of EUR41.2m (2005: EUR30.6m) on sales of EUR871.3m, 8.5 per cent above the prior-year figure of EUR803.4m.

However, the volume of new bookings shrank to EUR785.4m (2005: EUR939.4m), primarily due to a dearth of contracts up for tender in the newspaper press market and softer sales of gravure presses following heavy investment in recent years.

KBA said that once again, the rest of Europe was KBA's biggest market, taking 49.3 per cent of group sales (2005: 44.3 per cent).

Germany accounted for 17.3 per cent, down from 18.1 per cent the previous year, whilst Asia and the Pacific moved up in to third place in the regional sales statistics, with 16.4 per cent of the group total (2005: 15.5 per cent).

A drop in shipments of web presses meant that just 12 per cent of group sales went to North America (2005:15.9 per cent), though sheetfed business thrived, added the company.

The figure for Africa and Latin America, where volumes are generally smaller, was five per cent (2005: 6.2 per cent).

However, there was a welcome lift in demand for sheetfed presses in Egypt and other North African markets, reported the company.

At the end of 2006 there were 8,296 employees on the group payroll (2005: 7,962), with KBA-Metalprint in Stuttgart accounting for 293 people, the rest of the group for just 41 of the additional 334 jobs.

KBA said that its training level was again above the industry average for an enterprise of its size, with a total of 461 (2005: 487) apprentices and student trainees representing 5.6 per cent of the workforce.

In 2006 KBA invested EUR52.5m (2005: EUR37.2m) in property, plant and equipment with the aim of boosting productivity and product quality.

Pure research and development costs came to EUR63.6m (2005: EUR55.2m).

Including new customer-specific developments six per cent of turnover was devoted to research and development.

The company said that 2006 saw an increase in cash and cash equivalents to EUR145.8m (2005: EUR116m).

Cash inflows of EUR90m (2005: EUR174.6m) from operating activities financed investments and generated a free cash flow of EUR37.8m (2005: EUR147.2m).

At the same time current and non-current liabilities sank from EUR947.1m to EUR917.9m and KBA's net financial position strengthened from EUR50.3m to EUR75.2m.

With the balance sheet total roughly the same as in 2005, the return on equity eased up to 34.2 per cent from the prior year's 32.1 per cent.

As sales climbed, active receivables management enabled trade receivables to be trimmed from EUR465.6m to EUR399.8m, added KBA.

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