Heidelberg is on course to achieve profitability on annual sales of €1.9 billion by 2022, thanks to cost cutting measures that are underway across the group, and which will save €170 million from the bottom line in the next financial year. The company though is confident of achieving sales comfortably above this point.
With publication of its annual report, the company took the opportunity of an annual analysts and investors’ conference to present the story of its Covid year and plans for the continuing transformation of the business.
CEO Rainer Hundsdörfer told the meeting: “The comprehensive transformation Heidelberg initiated before the coronavirus pandemic hit has made the company leaner and more efficient. Given that demand is now also definitely picking up again in most key sales regions, we’re expecting to achieve a far better operating margin this year, including a slightly positive net result after taxes. The considerable growth potential offered by packaging printing, digital business models, business in China, and new technologies such as wallboxes is also making us confident about the years ahead.”
The bare figures are showing that transformation is possible. Sales in the 12 months until March this year dropped to €1.91 billion compared to €2.35 billion in the 2020 financial year while the pretax loss shrank from €321.8 million to €23.4 million. And a rise in orders in the final quarter of the year which has continued in recent months leads to confident predictions that sales will reach at least €2 billion in this year.
The new financial year has kicked off with a further internal reorganisation. There are now three reporting divisions: print solutions, packaging solutions and technology solutions, with a focus on growth areas in packaging, subscription and lifecycle revenues. Throughout the 190pp publication the company is stressing the importance of packaging print. Around 50% of its sheetfed presses are destined for packaging applications and the company claims to have the leading position in packaging. This is despite a decision taken before the year in review to cease production of press formats beyond the XL106.
Packaging enjoyed a strong pandemic with the result that revenue from packaging in March 2021 was 6% ahead of the same month in 2019. In contrast revenue from commercial print was down 8% in the same period.
Ahead of Covid-19, Heidelberg had agreed to the sale of its Gallus label and reelfed press division to Swiss company Benpac. This fell through with the result that Heidelberg is now claiming compensation of €50 million from Benpac and Gallus is no longer listed as for sale. Its Labelfire is currently Heidelberg’s only inkjet press, targeting a labels sector where 30% of the market is already digital and growing at 6% a year.
The agenda for packaging includes end to end optimisation of the production process, growth in data driven operation and tailoring of the portfolio to suit Asian markets, where growth rates are greatest thanks to increasing urbanisation. Ecommerce and a transition from plastics to board are other reasons for a 2% year on year growth across the carton market.
Heidelberg is investing strongly in its own China operations. It has agreed a joint venture with major shareholder Masterwork which will supply components to Heidelberg’s operation near Shanghai. This employs 400 and is exporting 19% of its production of standard configuration presses to 40 countries worldwide. It is adding a further 300 staff, representing a huge stride in capacity, calling on the HeiMaster Technology joint venture which is being built adjacent to the Masterwork factory in Tianjin.
There is an increasing emphasis on digital technologies, building on an agenda that has already been established. This accesses data, in an anonymous form, from around 60 million print jobs across 5,000 presses capable of providing that data. Artificial intelligence, Heidelberg says, is the key to greater competitiveness and adaptability to changes in the market. The first applications for AI in this way have resulted in a more accurate and less wasteful press wash up routine technology.
There are strong hopes for expansion of the Zaikio print ecosystem. It wants to switch 50% of the 25,000 Prinect modules to a recurring revenue cloud based subscription model. There are targets to expand pay per use contracts. Currently there are 700 print site contracts in place and 80 full subscription contracts signed.
Its digital print offering current resides on the Labelfire and on its partnership with Ricoh. Since this was formed in 2011, 1600 Versafires have been sold. Heidelberg’s decision to close the Primefire B1 inkjet press project has had an impact on its R&D expenditure. While this is close in proportionate terms to previous years, the decline in sales is matched by declines in research spending. What was €126 million in the 2019/20 financial year had become €87 million in 2020/21.
The amount invested in wall mounted charging points and growth in demand has resulted in a spin off company while investment in printed electronics has led to a €5 million line in the Wiesloch factory that will be printing sensors for the dental industry.
Hundsdörfer says: “Today we can say with some pride that Heidelberg stands on stable foundation – financially, structurally, and operationally.” It is not clear blue water however. “The new financial year will pose significant challenges once again.” The forecast is for a slight growth in consolidated sales, with a further improvement in operating revenues.
