Gerold Linzbach has addressed his penultimate AGM as CEO of Heidelberg, having a week earlier announced his intention to leave the company at the end of his contract in August 2017.
While there will be one more occasion to talk to shareholders, he took the opportunity of the well attended meeting in Mannheim to compare a business he joined in 2011/12 financial year with losses that year of €280million to the company that has reported a €26 million operating profit in the 12 months to the end of March this year.
“We had to find a simple business model that avoided the need some a new turnaround programme every year,” he told shareholders. It has meant change throughput the company, from the products produced, to the locations it operates from and the culture across the business. Most management positions are filled by executives in place for less than four years.
And there is now optimism for the business he declared, restating a theme from the company’s annual report where he urged investors to buy Heidelberg shares. The perception that the printing industry is under pressure comes from media products, newspapers and magazines, is not reflective of an industry he said which is larger than the automotive sector worldwide and which has worldwide sales of €400 billion.
Packaging, he said, was growing at 8% a year and the opportunity for what Heidelberg calls 4D printing is “several billions of euros”. The entire addressable market that Heidelberg can attack adds up to €16 billion, comprising €8 billion in consumables, €1.3 billion in service, €2.4 billion in sheetfed litho and €2.5 billion in digital printing. As Heidelberg currently generates revenues of €2.5 billion, there is plenty of scope for growth.
“We are going to apply ourselves to maximum ‘share of pocket’,” he added, aiming to persuade customers to source as much as possible from their litho press supplier. It has meant a switch from supplying a technically advanced press and as he explained: “Whether or not the client ever had the appropriate orders or the management ability to enable the machine to turn itself into money, was not our problem.”
The focus will be on the printers that understand how to do this, the industrialised businesses that can buy into automation represented by the Simply Smart strategy. These types of customers, 15,000 worldwide, are growing at 8% a year and Heidelberg is already responsible for two out of every three presses in the sector.
It ties in with changes in the product portfolio. The old Heidelberg was categorised by a multiplicity of products which fell into the Run for Cash and Invest to Maintain areas. In 2011/12 there was nothing in the Invest to Grow segment, namely digital which has the potential to be worth as much as sheetfed litho.
“The company focused most of its capacity on products that were not performing well and in many cases consumed lots of money that had to be generated by other parts of the business,” Linzbach said.
That has completely changed with reviews to identify the potential for each product line and to allocate the right resources to it. Some products have been shed and others outsourced. Others may follow. Finishing and simple press types will be continued provided they generate enough cash. As soon as they fail to do this, they will be closed or sold.
Instead digital is the great opportunity and is taking 50% of the company’s R&D spend while Heidelberg is continuing to invest through acquisition to grow its consumables arm with an emphasis on further inks and plates sales.
There has been a cultural shift internally and a refocus for the traditional sales team roles. It is about setting the business for growth. The strong cash generation means reduced dependency on outside money and there is €700 million to fund acquisitions that may be possible.
Without providing details of sales Drupa 2016, he said, had been a great success. The Press to Stop concept had been show as the first step towards an autonomous printing press. Cameras have adopted a single button philosophy with internal controls to optimise the quality of any image; autonomous cars were coming closer and Heidelberg was developing the autonomous printing press.
However, he explained, this is not technology for technology’s sake, but technology “solely to maximise the benefit for our customers”.
Heidelberg has turned the corner and is now in a growth phase, CEO Gerold LInzbach told shareholders at the company’s AGM last week. He has announced his intention to leave the company at the end of his contract in August next year. The decision has been accepted “with regret” by the board.
