Heidelberg has announced a massive restructuring package that will leave the company focusing on its core business and ending its Primefire 106 project and further involvement in the VLF press sector.
The restructuring, which will fall in the 2020/2021 financial year, may also lead to plant closures and will reduce the workforce by 2,000 worldwide. At the end of the year the company will have spent €200 million on the measures, and will also have repurchased a high yield bond of €150 million to leave the press manufacturer without net debt.
The reorganisation is being funded through €375 million released by the trust fund managed by Heidelberg Pension Trust eV. This is the form of a liquidity transfer of part of the liquidity reserves held by the trust. The move has been endorsed by Prof Rupert Felder, chief executive of Heidelberg Pension Trust. “The sounder the company’s financial base, the better it is for pension beneficiaries,” he says.
Heidelberg CEO Rainer Hundsdörfer, who has been engaged for several months in putting the plan together, calls the realignment “a radical step for our company”. He adds: “As hard as it was for us to make this decision, it is necessary in order to put our company back on track for success. Discontinuing unprofitable products enables us to focus on our strong, profitable core.
“This is where we will further extend Heidelberg's leading market position by leveraging the opportunities of digitalisation. Going forward, we will continue to provide our customers worldwide with technologically leading digital solutions and services across the board.”
The company has ten installations of the Primefire B1 inkjet press that was launched at Drupa four years ago. While producing high quality print, the Primefire had been criticised for its speed and size. The market for this product has “grown much more slowly than anticipated because of the difficult industry and market environment”.
Likewise, it says the VLF product range “has been falling well short of sales targets because of a fundamental change in the market sector for the sub segment”.
“Production in both businesses is to be discontinued by the end of 2020 at the latest,” the company states. The move will also result in 2,000 job losses worldwide. How these will be allocated will be decided by negotiations set to begin in the near future.
The change will leave Heidelberg with sheetfed presses topping out at B1 with a strong focus on automation and targeting a market sector that is valued at €400 billion, in commercial and packaging print.
The litho press operation is reckoned to generate an Ebitda of 8% currently, making Heidelberg secure even in uncertain times as now. The company anticipates difficulties caused by the coronavirus outbreak, but points to a recovery in consumable sales in China and the first press order from that country.
Marcus Wassenberg, CFO, adds: “This marks a milestone for Heidelberg. At a single stroke, we are freeing ourselves from the severe debt burden and, at the same time, can systematically implement the requisite operational realignment within the next 18 months.
“This will make us crisis proof in the short term and significantly improve profitability so that we can press ahead with our digital realignment. We are pleased that this financial plan of action has the support of the employee representatives and the trade union as well as all the lending banks.”