10 February 2019 Business

Heidelberg's new cylinders are starting to power growth

A growth in subscriptions, the 1,000th Wallbox charging point, ongoing digital transformation and deeper links with Masterwork are platforms for a strong future for Heidelberg.

Heidelberg needs eight new subscription contracts to achieve its goal of 30 signed up customers by the end of the year. At the end of Q3 the company had signed 22 of the five-year deals. Four more have since been signed.

These provide a press, consultancy, service and consumables to push up productivity at the customer and to bring in around €1 million a year per customer. With 30 deals in place, the sales potential is €150 million over the duration of the deal. The customer pays a basic monthly fee for a negotiated volume with an additional variable component should this volume be exceeded.

It is one plank in the future strategy for the press manufacturer under CEO Rainer Hundsdörfer. Another is the opportunity around the Primefire 106 B1 inkjet press, which was first seen at Drupa 2016. The beta period has come to an end and serial production is underway with machines installed at carton printers in Germany, Switzerland, the US and China.

Outstanding business is the takeover of the MBO group. This has been referred to the German competition authorities because of the dominant position it would give Heidelberg in the supply of folders to the German printing industry. A ruling is expected before the end of Heidelberg's financial year at the end of March.

At that point Heidelberg “intends to further expand its offerings in the growing market of post press operations for digitally printed products” it says. The move would also give Heidelberg a substantial stake in the pharmaceutical sector, already served by its Anicolor presses.

The third quarter of the year was also marked by the opening of the innovation centre in the Walldorf-Wiesloch factory where what had previously been located in a building in the centre of Heidelberg, now occupies a former production hall at the factory.

This went live in December, bringing developers and engineers closer to the production teams. This will accelerate the digital transformation that Heidelberg is undergoing at the same times as its customers.

Its Q3 was marked by continuing uncertainty over the impact of Brexit and trade wars between Germany and China. Year to date sales show an increase to €1.69 billion (€1.66 billion) putting the company on track to meet its financial forecasts.

The three-month period was also hit by supply bottlenecks which led to a number of cancelled orders and a decline in Italy where a subsidy programme has come to an end. There was also a slight decline in sales from the US, but without affecting the year to date levels of business.

After the year end Heidelberg announced an increase in shares which would be sold to Masterwork to give its Chinese parter an 8.5% equity stake in the overall business and further opportunities to expand business in the Chinese packaging sector.

After nine months an increase in the cost of materials and in staff costs helped push the operating profit from €53 mill to €40 million and the pretax profit from €17 million to #1 million.

The order backlog of €804 million points to a strong final quarter and expectations that the full year target. This year has been described as one for stabilising the balance sheet for the long term.

“We have reached important strategic milestones in financial year 2018/2019. The enhanced partnership with Masterwork opens up a great deal of potential for us in the growing packaging sector and on the huge Chinese market,” says Hundsdörfer. “There is strong demand for the subscription model, our digital presses have now entered series production, and we are leveraging our skills for e-mobility. This progress makes us very optimistic about the future development of Heidelberg.”

By Gareth Ward

« »
New dawn for company

New dawn for company

The supertanker that is Heidelberg is slowly turning to find new sources of revenue, in subscriptions, in non print areas and in China. And a healthy order book means the company is on track for financial forecasts.

Explore more...

Heidelberg shifts to growth gear

Subscriptions start to roll in