14 June 2020 Business

Heidelberg prepares for torrid year to come

Heidelberg's annual report has a join the dots theme, indicating that the work of reorganising the press supplier is far from finished.

Heidelberg's 2020 report and accounts publication has a join the dots theme. It is meant to represent the idea that the reorganisation of the business has not finished yet, but might also be interpreted as saying that mistakes may be made by joining the wrong dots.

The 168pp document comes at the end of a turbulent year and predicts another as the impact of the Covid-19 pandemic is felt. Heidelberg, having recorded a significant loss in the last financial year, will again be in the red. The question is to what extent. The company itself has set aside a further €50-60 million to cover these unexpected costs.

At the end of the year it had reported a €343 million loss, €275 million spent on restructuring, compared to a net profit of €21 million a year earlier. Without the influx of cash from the pensions trust, free cash flow would have been €100 million in deficit.

The report reiterates that the Primefire 106 project and VLF models have had to be shut down. They had achieved sales of €50 million, but with losses of a similar amount. If this development is closed off to Heidelberg, it declares that R&D efforts and future investment as focused on end to end digitisation of customer value creation, from order acceptance and printing through to post press activities”.

There is little to suggest how this will happen. Indeed the purchase of Crispy Mountain is nowhere mentioned. It was intended to devise the means to deliver the software applications to achieve this. Heidelberg itself would concentrate on retrieving whatever data is needed from its presses and other equipment. Big data is a central component of the future success of the established Heidelberg Smart Print Shop, the company says.

The 2020 edition of the Speedmaster XL106 brims with sensors to measure and provide this information, both to internal teams via the Heidelberg Assistant and also as anonymised data to deliver a central registry of all job related data, used to improve technology. Data collected from 5,000 presses has been used to show how customers around the world have been affected by the pandemic and lockdowns.

Heidelberg has not been exempt. Its sales have dropped since the start of the year when running at the same rate as last year. Consequently, incoming orders fell from €2,559 million last year to €2,362 million at the end of March. The current year, beginning in April, will bear the brunt of the decline. Even if machine sales are simply delayed, Heidelberg cannot recoup revenue lost on the consumables and maintenance side.

Outside the impact of the pandemic, the company had already agreed 1,600 redundancies in order to reshape the business for the future. This includes a shift of more production to China where it employs 850 and exports 13% of what is produced at the Qingpu plant. This will grow to more than 1,000 employees in the near term. In Europe, Heidelberg is shifting production of Gallus machines to the main Wiesloch factory to reduce costs. It has a new model of its wall charger for electric vehicles on the way, having sold 35,000 of the current models.

It is also setting up a dedicated business unit in Wiesloch to print electronics, needed to meet an anticipated demand for seniors not least from autonomous electric vehicles. “Our printing technology also gives us access to production of printed organic electronics, a future market with great potential,” the company states. This will be production on an industrial scale under clean room conditions.

In the UK the reshaping of the business will lead to a 20% reduction in the workforce. Most of this will be achieved through voluntary reductions, as it is proving attractive to those nearing retirement, explains UK managing director Ryan Miles. “A lot of people would like to retire and we have made it possible for them to do so. It means there will be very few compulsory redundancies.”

The company is reorganising its sales approach so that each customer has a single sales executive dealing with capital equipment, software and consumables in a ‘single face of Heidelberg’ approach rather than dealing with calls from each part of the group.

“And as part of a review of the business we are looking at where the spares warehouse should be located: should we move it to a more central location? We have told staff that we are conducting this exercise and there’s a possibility we might move at some point in future,” he says.

The area has become congested and it can take an hour or more for any kind of delivery to move from the warehouse on to the M25. Heidelberg’s customer base also shows a greater geographic spread than when focused on London with other sites in Leeds and Tamworth. The warehouse handles 50% of the requirement, the remaining 50% is shipped overnight from the World Logistics Centre in Wiesloch.

Heidelberg UK owns a large site in Brentford, one end at Brentford High Street and at the other fronting the River Thames. Development sites, especially with river frontage are at a premium, though currently prices are depressed, and until Heidelberg can obtain full value, nothing will happen.

When it does the company will need to find a new location for its UK showroom. There is no question of getting rid of this, says Miles, indeed the difficulties and reluctance to engage in international travel, post Covid-19 or post Brexit, makes a UK showroom even more relevant.

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Heidelberg UK is examining the suitability of its Brentford warehouse for the way that the UK printing industry is spread and operates. This may result in a move to more suitable premises, which will be more efficient for the business.

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