10 November 2019 Business

Heidelberg takes further streamlining steps

The German supplier is increasing its efforts to digitise and streamline the business despite reporting an increase in sales at the six month point.

Heidelberg is continuing on a cost control path even though its second quarter allowed the company to recoup the ground lost in the first three months of the year.

However, the press manufacture continues to face headwinds and has confirmed its end of year forecasts to a post-tax break-even position, rather than a margin of 6.5-7%.

CEO Rainer Hundsdörfer says: “The solid progress in the second quarter means we’re confident of achieving the planned sales target for the financial year. The difficult economic climate worldwide is affecting both us and our customers though, so we’ll be taking a highly systematic approach to implementing the measures initiated to improve our net result and free cash flow in the coming months.”

The company says it has achieved a stable business volume, but with insufficient profitability; it continues to invest in its digital transformation and development of its Wiesloch site as a digital campus, but also has considerable structural costs, if it is to become more efficient. The focus is on cost efficiency and profitability.

It is aiming to save €20 million though cut investments, €50 million through reducing tied up capital in work in progress and accounts receivable, and will generate €30 million through structural optimisation in the near term. It does not spell out what it means by ‘optimising inventory levels’ and whether this will have an impact on customers.

Further efficiencies will involve cooperation, focus and further reorganisation according to Hundsdörfer. Heidelberg is conducting a review of the product portfolio to identify which lines are not profitable and which are non core activities. The production footprint will be optimised, though the it does not explain the implications of this process. The company offers three B2 press designs, for example.

Part of that reorganisation is the slimming down of the management board, with the result that Stephan Plenz will step down and leave the company at the end of his contract in June next year. He has been a board member for 11 years and his responsibilities will be divided among other board members. Reporting layers will also be removed.

It may also account for Jim Todd's decision to leave Heidelberg UK where he was sales director. It is understood that Heidelberg is using the same sort of digital tools that measure the performance of its equipment, to assess its human assets.

Despite improving orders from China and North America, the order intake in the first six months is down to €1.26 billion (€1.31 billion). This is blamed on worsening conditions in the core Western Europe market, where it says the UK is on the brink of a major recession.

The VDMA (German equivalent of Picon) has warned that production across all German press manufacturers will fall 2%. Heidelberg is forecasting that sales will be equal to the 2018/19 financial year.

Sales edged up to €1.12 billion (€1.11 billion) thanks to good business in North America and Asia-Pacific. In these territories ‘push to stop’ style digitisation is driving investment.

Overall, more than 10% of order backlog relates to its subscription business model which has grown to €756 million (€654 million).

By Gareth Ward

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Stephan Plenz

Stephan Plenz

Stephan Plenz has been closely involved in development of inkjet and push to stop at Heidelberg as main board member as well as in establishing a factory in China. Now he will leave the company at the end of June next year.

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