Koenig & Bauer Releases 1Q 2015 Report

In the words of president and CEO Claus Bolza-Schünemann, Koenig & Bauer’s (KBA) financial figures for the first quarter of 2015 still paint “a differentiated picture.”
 
Bucking the industry trend, the press manufacturer’s group order intake of €306.7 million was 27% up on the previous year and order backlog was around €130 million higher than at the beginning of the quarter.
 
In contrast, there is still some catching up to do in terms of sales and earnings. At €177.3 million, group sales were down 16.9% on the prior-year figure. Given the low sales volume this quarter due to the delivery structure and capacity underutilisation at KBA’s German web press sites, which have now been rescaled, group earnings before taxes (EBT) of –€17.7 million were also lower than the prior-year figure of –€12.1 million. Still, the company’s management has affirmed its forecast for 2015.
 
“KBA will generate far more than 50% of group sales in the second-half of the year with corresponding positive effects on earnings,” Bolza-Schünemann said. “In light of the solid number of new projects, I am confident that we will be able to achieve our group sales target for 2015 of over €1 billion with a better EBT than in 2014 and an EBT margin of up to 2% of sales in spite of a weaker Q1 and Q2 this year.”
 
For the first time this KBA interim report contains the new break down of the business into the segments sheetfed offset presses (Sheetfed Solutions), digital and web offset presses (Digital & Web Solutions) and special presses (Special Solutions). Companies in security printing belonging to KBA-NotaSys as well as the subsidiaries KBA-MetalPrint, KBA-MePrint, KBA-Metronic, KBA-Kammann and KBA-Flexotecnica active in packaging markets are grouped under Special Solutions.
 
More transparency, clear management responsibility and enhanced strategic flexibility are the goals of the new company structure proposal, which the AGM will decide upon on May 21. Accordingly, KBA-Sheetfed Solutions in Radebeul and KBA-Digital & Web Solutions in Würzburg are to be spun-off from the parent as autonomously operating business units. Group-wide production (KBA-Industrial Solutions) and security press activities in Würzburg (KBA-NotaSys) are expected to form further legal entities.
 
Koenig & Bauer AG as a holding with a management board consisting of three members will take over central and strategic tasks. The other members of the management board will become managing directors of the operating companies. Cross-subsidies between the business units will not be tolerated and KBA will invest the capital available to achieve the long-term higher returns on capital necessary. The new company structure is expected to be implemented from Jan. 1, 2015 retrospectively upon approval by the AGM.
 
At €546.7 million, group order backlog on March 31 was almost €130 million higher than at the beginning of the year. Compared to the prior-year quarter low sales, the product mix and capacity underutilization which has yet to be completely eliminated in the Digital & Web segment hit earnings. The group’s gross profit margin fell from 25.4% to 20.6% and EBIT from –€10.2 million to –€16.2 million.
 
At €174.7 million order intake after three months in Sheetfed Solutions, KBA’s largest segment, was up 30.5% on 2014, while sales of €109.8 million remained slightly below the prior-year figure of €111.1 million. The book-to-bill ratio triggered a growth in order backlog of 26.7% to €246.6 million. This segment’s loss of €2.7 million was somewhat higher than the prior year (2014: –€1.6 million) due to the unfavourable product mix and expenses associated with restructuring the international sales network.
 
The volume of new orders in the Digital & Web Solutions segment rose by 5.7% to €27.9 million, up from €26.4 million in 2014. At €13.3 million, revenue fell short of the previous year’s figure of €41.5 million, which made a major contribution to the segment’s loss of €8.7 million. Promising strategic opportunities have opened up for this new segment through addressing new business fields for KBA RotaJET presses and the alliance with HP in the digital corrugated printing market.
 
Orders in the Special Solutions segment were up 31% to €117.4 million. At €63.2 million, sales this quarter were 8.1% lower than in 2014 (€68.8 million). Operating profit in this segment stood at €1.2 million compared to the prior-year figure of €4 million.
 
Cash flows from operating activities improved to –€29.3 million (2014: –€51.3 million) despite considerable cash outflows for severance payments. At the end of March 2015, there were 5,321 employees on the KBA group payroll, 916 fewer than twelve months earlier (6,237). This total is expected to fall to around 4,500 following the completion of the group restructuring program in 2016.
 
Today, sheetfed offset presses and related systems generate more than 50% of the group’s sales. Packaging printers dominate the business of KBA-Sheetfed Solutions and the majority of companies in the Special Solutions segment. In this segment presses and systems for producing banknotes make the largest contribution to the company’s sales and earnings.