KBA Sales Leap 33.9% In First Quarter Profit

With order intake up three per cent, a 33.9 per cent leap in sales and a EUR13 million pre-tax profit, German press manufacturer KBA has started 2007 strongly.

KBA's performance for the first quarter of this year with the pre-tax profit representing a complete turn-around, transforming the company's EUR6.5 million loss for the same period last year.

At the same time the company converted the first quarter of 2006's net loss of EUR5.3 million in to a net profit of EUR9.3 million.

The increase in group orders to EUR350.9m improved on 2006's level of EUR340.6m.

KBA reported that whilst demand was soft for big newspaper and gravure web presses, a brisk influx of orders for special presses helped boost new bookings for web and special presses by an above-average 7.3 per cent to EUR180.2m from EUR167.9m.

The volume of incoming orders for sheetfed presses, at EUR170.7m, was on a par with the previous year (EUR172.7m).

A big increase in shipments of commercial and security presses pushed up sales of web and special presses from EUR146.7m to EUR257.6m.

However, sheetfed sales of EUR156.6m, compared to 2006's EUR162.7m, were not in-line with annual targets, added the company.

A jump in shipments reduced the volume of orders on hand from EUR1,072.1m 12 months earlier to EUR885.4m.

A EUR319.5m (2006: EUR321.7m) backlog of orders for sheetfed presses, which have relatively short delivery time-frames, will keep KBA's production plants in Radebeul (Germany) and Dobruska (Czech Republic) busy until well in to the second half of the year.

Whilst domestic sales at EUR48.3m remained roughly on a par with the previous year (EUR50.4m), the export level rose from 83.7 per cent in 2006 to 88.3 per cent.

KBA's biggest market was the rest of Europe beyond Germany, with 55.3 per cent of group sales, followed by Asia and the Pacific (14.5 per cent), North America (10.3 per cent) and Africa and Latin America (8.2 per cent).

However, the company commented that the same cannot be said of its web press production plants, where capacity utilisation will fall in the second half-year following slack demand for big newspaper and gravure presses.

That shrank the backlog of orders for web and special presses to EUR565.9m (2006: EUR750.4m).

KBA's president Albrecht Bolza-Schunemann attributes that to developments in the media market, which have caused many newspaper publishers to place new investments on hold.

KBA said it is addressing the capacity shortfall by expanding flexitime, re-assigning manufacturing tasks in the group and bringing work in-house that was previously outsourced.

The management board is also reassessing capacity needs in the web division based on market projections.

Earnings per share of 57 cents were an improvement on the prior-year loss of 33 cents.

Cash flows from operating activities declined to EUR41.5m from EUR57m the year before.

After deducting cash outflows of EUR9.9m (2006: EUR10m) for investments the free cash flow fell to EUR35m (2006: EUR51.6m).

Funds swelled to EUR188.3m from EUR154m.

The group payroll on 31 March totalled 8,289 people (2006: 7,951) with the increase was largely due to the consolidation of a new subsidiary, KBA-Metalprint.

Looking ahead, KBA reaffirmed its end of quarter projections that group sales and pre-tax earnings in 2007 would be similar to last year at EUR1.7 billion and EUR47.4 million.

The existing order backlog and a recent influx of new contracts means that the web and special press division is already well on the way to meeting its sales targets for 2007.

The drop in plant utilisation will not hit the division's sales until next year.

A steady inflow of orders for sheetfed presses indicates that sales targets will be met there as well, said the company.

KBA president Albrecht Bolza-Schunemann, said: "Whilst the market for sheetfed, commercial and special presses remained firm, this positive first impression was marred by a substantial decline in the number of major web press projects put out to tender.

The long production cycles for big web presses mean that there will be a substantial drop in capacity utilisation at our web press factories and this is bound to have an impact on our bottom line." He added: "Also, the strength of the Euro seriously impairs our ability to defend margins when bidding for contracts against US, Japanese and other Asian competitors.

However, this was factored in to our forecast for 2007.

Fluctuations in demand such as we have experienced in the newspaper and gravure markets are by no means unusual and have partially been offset by higher sales in niche markets." And he concluded: "So, whilst the situation in the print media industry is not as uniform as it may at first glance seem, in the year we celebrate our 190th anniversary we look forward with optimism to the future.".

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