- Order intake up 37.4%
- Group sales up 20.7%
- Order backlog 40% higher
- Huge improvement on the prior-year earnings
- Strong cash flow, high liquidity
- Sales and profit projections for 2011 reaffirmed
Würzburg. German press manufacturer Koenig & Bauer AG (KBA) made a much better start to the business year than in 2010, even though international sales of printing presses were only moderately higher than last year and primarily driven by demand from China and other emerging economies. The group order intake climbed 37.4% to €432.1m (2010: €314.4m), with brisk demand for niche products driving up the volume of contracts awarded for KBA's web and special presses by 42.8% to €290.6m. But orders for newspaper and commercial presses stagnated in the wake of structural changes wrought by the spread of e-media. Business was better in the sheetfed sector, where the internet has had less of an impact and packaging printing has helped to fuel growth. The influx of new orders for sheetfed offset presses swelled by 27.6% to €141.5m. The group order backlog of €619.6m was over 40% bigger than at the end of last year, with web and special presses contributing €441.4m and sheetfed presses €178.2m.
Growth and cost savings improve operating result
First-quarter sales of €253.3m topped the prior-year figure of €209.8m by 20.7%. Sheetfed offset presses contributed €126m, a jump of 46.9% over the previous year, while web and special presses generated €127.3m. This was just 2.7% more than twelve months earlier and resulted from a smaller intake of new web press orders in previous years.
Cost savings and higher profit contributions slashed the group operating loss for the quarter from €19.4m to just €1.8m. A low level of debt and interest charges also helped cut KBA's pre-tax loss (EBT) from €21.3m to €3.9m. After taxes the group disclosed a net loss of €5.8m, a big reduction on the prior-year loss of €20.2m. Earnings per share improved to -€0.35 (2010: -€1.23).
Bigger cash flow and healthy finances
Despite bigger inventories in preparation for scheduled shipments, cash flows from operating activities rocketed from -€41.3m twelve months earlier to €40.1m, the free cash flow from -€43.4m to €36.3m. This was largely attributable to higher earnings, a rise in customer prepayments and a drop in trade receivables. Funds totalled €127.5m at the end of March, up from €91m at the end of December 2010. Net liquidity of €83.6m was very much better than twelve months earlier (-€16.7m), and KBA has access to ample credit lines. At the end of the quarter equity was worth an above-average 38.2% of a higher balance sheet total.
Adjustments at web press plants not yet concluded
At the end of March the KBA group's payroll totalled 6,404. Excluding employees at three newly consolidated sales and service subsidiaries in China and Italy this was 214 fewer than twelve months earlier. With demand for big web presses unlikely to revive in the foreseeable future, management sees a need for further capacity adjustments at KBA's web press production plants.
Export level remains at record high of 86.5%
Domestic sales climbed by 20.4%, but the export level remained unchanged at 86.5% because foreign sales soared. The contribution from the rest of Europe rose from 27.9% to 40.1% of group sales following a modest recovery in western and eastern states. However, southern Europe has yet to emerge from the economic crisis. North American sales accounted for just 7.6%, down from 15%. This historic low reflects a continuing reluctance among US newspaper printers to invest in new kit. While sales to Asia and the Pacific were higher, the regional contribution of 24.3% was lower than the previous year (27.7%). 14.5% of group sales were generated in Africa and Latin America.
Forecast for 2011 unchanged
Notwithstanding the economic and political repercussions of events in North Africa and Japan, KBA management stands by the projections made at the end of March. Staff at KBA's Frankenthal plant have been on strike since 5 May following the breakdown of talks on further capacity adjustments at the group's web press factories, in line with diminished market prospects. According to KBA president and CEO Helge Hansen, a protracted industrial dispute could present a challenge. He said: "The management board is making every effort to resume the constructive dialogue with employee representatives, and we are hopeful that we shall soon be able to reach a compromise that is acceptable to both sides. In view of our broad product portfolio, 40% bigger order backlog and revitalised service and niche activities, we are confident of achieving a small increase in group sales and a modest improvement in the pre-tax result over 2010."