A slowdown in sales in China has hit Q3 results at Heidelberg, and while operating performance has improved, restructuring costs have propelled the group’s bottom-line loss to €95m (£71m).
In the nine months to 31 December 2014 sales fell 7.8% to €1.6bn, which the German press manufacturer attributed to weak demand from the Asia Pacific region, in particular China which is its largest single market.
It said all other regions were performing “in line with expectations” and singled out the UK as a bright spot in its financial statement: “The UK market recorded particularly positive developments in terms of both incoming orders and sales,” the firm said.
Incoming orders rose by €21m in Q3, but were down overall for the nine months, from €1.85bn to €1.8bn.
Heidelberg is now predicting that its sales will be around 5% lower for the full year.
The period was notable for major restructuring initiatives, most recently Heidelberg’s decision to exit some areas of the post-press market.
This resulted in one-off costs of €72m, despite the gains made from the sale of selected post-press operations and assets to Muller Martini and Chinese manufacturer Masterwork Machinery.
Heidelberg also ceased production of the venerable GTO sheetfed press model and streamlined production of other presses as part of moves to increase the profitability of its core equipment business, which accounts for 56% of sales.
It boosted its consumables business with the acquisition of Belgian supplier Blueprint, and also acquired German software developer Neo7even.
Restructuring, together with higher interest charges, resulted in a near three-fold increase in pre-tax losses to €92m (prior year loss: €32m). The bottom-line loss was €95m.
The group said restructuring had now been completed.
EBITDA excluding exceptional costs improved to €80m from €67m, boosted in part by Heidelberg’s takeover of Gallus, which resulted in income of just over €18m.
Heidelberg plans to continue its policy of reducing low-margin business and chief executive Gerold Linzbach said he remained confident of hitting the firm’s EBITDA margin target of 8%: “We have geared our portfolio toward profitability and growth and adjusted resources accordingly,” he said.
“I am confident that our strategic restructuring will enable us to achieve and maintain our target margin from next financial year onward and return to growth in the future.”
In Q3 equipment sales fell from €359m to €320m, and were €107m lower for the nine months. Its services business posted a slight increase in sales from €227m to €234m in Q3; while financial services sales were flat at €2m.
In terms of future outlook, Heidelberg said it still expected sales to increase “substantially” in the second half of the year but was not predicting growth in the overall market volumes for sheetfed presses “in light of the economic risks and ongoing consolidation of print shops in many industrialised nations.”
Heidelberg’s share price fell by 7.54% to €1.99 on the news. (52-week high: €3.01, low: €1.85).
