KBA turns loss into break-even after cost savings

Despite a decline in sales KBA has succeeded in moving from a pre-tax loss of EUR87.1 million in 2008 to a balanced result in 2009, and the company anticipates a modest post-tax profit for the year.

That is despite the fact that market conditions for export-bound German press manufacturers shows little sign of easing with the recession and a slump in advertising ensuring that global demand in 2009 was over 40 per cent below the level for 2007.

Following quarterly losses in the first six months, in the third quarter there were signs that the KBA group's turn-around was working through to the bottom line, boosted by savings of more than EUR100m in personnel and material costs.

All the obligations anticipated for outstanding restructuring measures were included in the 2009 balance sheet and adequate provision made for other risks, added the company.

KBA said that it was affected by a widespread moratorium on new investment in the print media industry.

Reflecting that, the company has reported that although incoming orders of web and special presses picked up slightly in the fourth quarter of 2009, group orders for the year came to just under EUR890 million, a drop of 29 per cent on the 2008 figure of EUR1,241.5m.

With demand for web presses even weaker than expected, KBA's group sales came to EUR1.06 billion, 31 per cent below the prior-year's figure of EUR1.53bn.

In 2009 the KBA group payroll was trimmed from around 8,000 people to fewer than 7,000, largely due to capacity cuts in the sheetfed division, and this year it will be reduced even further, to approximately 6,300 staff.

Downsizing, in-line with market prospects, has helped provide permanent gains in cost savings and break even thresholds, believes the company.

The cost-intensive restructuring process was funded by KBA with no state aid or new debt, it added.

The group's equity ratio of over 34 per cent is well above the industry average, and its net financial position remains positive.

It has not had to draw on pre-arranged credit lines.

In view of the efforts KBA has made, the management said that it is deeply concerned that other companies appear to be using state aid to preserve excess capacities by building for inventory and selling off stock at deep discounts.

This has seriously undermined the price of both new and second-hand equipment, making it difficult for competitors to win contracts at an economically viable price, and counteracting the benefits of consolidation.

KBA said that it believes that such behaviour harms the entire industry and demonstrates once again that state aid for individual companies can distort competition for the rest of the field.

Jobs secured at the tax-payer's expense are ultimately lost elsewhere.

KBA will issue its final figures for 2009 on 26 March along with a preliminary outlook for 2010.

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