Heidelberg customers face a further 5% rise in press prices when the company increases prices to compensate for higher input costs in the next financial year.
The company is bracing for increased energy, raw material and labour costs in the second half of the financial year, but thanks to a strong first half the company is confident of hitting its targets for the financial year that ends in March.
It can point to a strong sales performance with an increase to €1120 million (€983 million) in the first six months. New orders, boosted last year by business conducted at the China Print trade show, slipped to €1229 million (€1245 million). This is enough as these orders translate into sales to see the company achieve the €2.3 billion it it as a target.
The first half performance included achieving an Ebitda rising to €104 million (€75 million) and pretax profit of €51 million (€20 million). The improvement in margin comes through better utilisation of assets as well as a 5% price increase already this year. It is aiming for an operating margin of 9% for the year.
“We have had a really successful second quarter,” new CEO Ludwin Monz told a call with analysts. “Though we expect costs to increase, the orders will feed through to increased sales.”
The growth in sales has been higher in the Packaging Solutions division than in Print Solutions, partly because of subdued sales a year ago. New orders in both divisions are effectively unchanged from a year ago with Print Solutions remaining the larger. The order backlog in this division increased to €533 million (€475 million) thanks to new orders of €682 million (€689 million). Sales rose to €566 million (€547 million). The backlog for the Packaging Solutions division reached €461 million (€411 million), with new orders of €531 million (€535 million). Sales rose to €538 million (€415 million).
Heidelberg anticipates that packaging will become the larger sector. Packaging services, food and FMCG packaging which is not only relatively immune from the economic cycle, but will grow in step with population and development of cities.
It has launched the Gallus One as an entry level inkjet label press. Digital printing already accounts for 30% of labels printed and is reckoned to be growing at 8% a year. It is also fed with inks that Heidelberg has developed itself, a source of recurring revenue for the company.
“There are three main points for the Gallus One,” says Monz. “There is a shortage of qualified workers; this is highly automated so doesn’t need many workers. Second is the cost of energy; the Gallus One requires significantly less energy which helps reduce the cost of operation. Third is sustainability; digital doesn’t need printing plates, and reduces waste.”
The push on subscriptions revenue has paused while final checks and details on its underwriting deal with MunichRe are carried out by financial authorities. “This will be in place soon,” he adds.
