10 November 2019 Business

Koenig & Bauer to take action on cost control

Despite healthy sales, headwinds and an uncertain outlook means the company will focus on costs and will be looking to optimise its production estate.

Koenig & Bauer sales are running slightly ahead of this position in 2018, but higher costs, special items and changes to the product mix have hit the company’s results.

Prime among these is price competition from competitors, including Manroland, where owner Tony Langley has allowed his company to challenge its rivals on price. K&B comments: "Due to strict price discipline, the sometimes massive concessions from the competition led to weaker order intake in the third quarter of 2019, particularly in the sheetfed segment.”

Order intake by the end of the first nine months reached $843 million compared to €943.2 million, though this had been buoyed by a large security print order. Revenue was a shade higher at €798.2 million (€788.8 million), but EBIT earnings dropped to €5.2million (€28.6 million).

This is a result of expenses incurred for its 2023 growth offensive, with a high loading of costs in the first year. CEO Claus Bolza-Schünemann says: “In addition to a declining services business in newspaper printing, unexpected project expenses for a major order in security printing, unplanned quality costs and negative mixed effects burdened earnings. Also, in view of the considerable increase in economic risks, we have been working intensively in recent months on specific cost reduction programs. The optimisation of the group-wide production and assembly footprint is a focus in this regard.”

The company has main sites in Würzburg and near Dresden and multiple smaller sites across Germany and beyond. The cost savings are not as yet impacting developments like that for a digital carton press scheduled to be shown at Drupa.

The sheetfed business continues to perform well with incoming orders rising by 6.7% to €480 million (€413.3 million) with revenue at the same level as last year €407.4 million (€409.4 million).

The net effect is that the company is cautious about forecasts for the full year, even with just three months remaining. “The achievement of our annual targets 2019 – organic revenue growth in the group of around 4% and an EBIT margin of around 6% – has become significantly more challenging in this demanding market environment with weaker order intake in the third quarter. With the currently high capacity utilisation, target achievement is subject to the scheduled order processing, the booking of expected orders and the timely effect of the cost reduction measures that have been initiated.“

By Gareth Ward

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Koenig & Bauer has increased the order intake for sheetfed presses, but faces a market where price competition is rife. Sales are running slightly higher in 2019 than in 2018 in the sheetfed division the company says.

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