24 January 2020 Business

Heidelberg feels pinch as printers hesitate

Heidelberg suffers as printers hesitate to reinvest.

Heidelberg has issued a second profit warning for the financial year ahead of publication of its Q3 trading in February.

It says that because sales and operating profit declined in the last three months of 2019, the company will now not report a break even figure for the financial year that ends in March. The share price dropped from €1.07 to less than €1 on the news, ending the week on €.92.

The company has noticed a reluctance to invest from printers in Germany, the UK and the rest of Central Europe, while order volume from the US and China increased as the quarter brought in sales of €567 million, less than expected and lower than the €579 million reported in the equivalent three months in 2019.

In the first nine months the order level is fractionally below last year’s equivalent at €1,900 million (€1,912 million). There was a one time gain of some €25 million thanks to the sale of Hi Tech Coatings, helping the Ebitda to increase €47 million (€39 million). The company points to lower sales volumes, “pressure on margins in the trading business with consumables and regional shifts with a less favourable product mix which had a particularly negative impact”.

The rate of decline has been faster than Heidelberg's attempt to reduce costs. “In order to adapt Heidelberg to these increasingly difficult market conditions in the long term, we are working at full speed, as announced, to finalise a package of measures to adjust our structures and achieve a sustained increase in profitability,” says CEO Rainer Hundsdörfer. “At the same time, we are continuing to consistently implement the measures already initiated to improve the result and free cash flow.”

The measures will cover a streamlining of the product portfolio, sell more of the non core businesses, shake up the international production network and significantly reduce the overall cost base. The planning for the package of measures is underway and will be put to the relevant committees once completed.

Employees are aware that change is necessary, but according to representatives speaking to regional press in Germany, “It must not be at the expense of the employees”. Short time working and flexible hours arrangements have already been implemented and are likely to continue. And while there seems to be accepted that some of the 5,000 employees at Wiesloch may lose their jobs, unions want office workers to share the pain. Already, the company has slimmed the size of the main board as Stephan Plenz departs.

The company has received mixed responses from the analyst community. Of those issuing assessments following the latest announcement, three are recommending investors to sell their shares, three to hold and one has issued a buy recommendation with the prediction that shares should rise to €1.35 each.

By Gareth Ward

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Heidelberg factory

Heidelberg factory

Business has slowed for Heidelberg as orders have become harder to come by in the UK, Germany and its central Europe region. The company has sold non core activities, but will not hit the target it had expected to for this financial year.

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