Drupa orders brighten poor Q1 for Heidelberg

Following a strong showing at Drupa 2012, incoming orders surged to €890m (£698m) - their highest level since the €1.2bn recorded in Q1 2008/09 following the last Drupa exhibition.

However, the Düsseldorf-based event proved a double-edged sword as Heidelberg blamed it for its worst sales and operating result in almost three years.

Sales for the three months to 30 June 2012 came in at €520m, down 4.4% on the previous year and at the lowest level since Q2 2009/10 when Heidelberg posted net sales of €499m. The manufacturer attributed the poor result in what is almost always its slowest sales quarter to "customers' reluctance to invest in the run-up to Drupa".

The operating result excluding exceptional items came in at a loss of €58m, ending three consecutive quarters of profit and representing the worst return since the €65m loss recorded in Q2 2009/10.

In its preliminary results announcement, the company said: "As expected, lower profit contributions resulting from the lower sales in the first quarter and the costs of preparing for Drupa and launching new products had a negative impact."

Free cash flow was stated as between -€105m and -€115m due to the increase in inventories resulting from the incoming orders received and payments made for Heidelberg's Focus 2012 cost reduction programme.

Despite the negatives, the Drupa-induced boom in incoming orders, which at €890m were more than €100m higher than the next best result since Drupa 2008, was cause for some optimism.

"As a result of the trade show, Heidelberg is expecting sales to show a distinct shift to the second half of the financial year with a corresponding improvement in profit contributions," said the manufacturer.

"The company implemented the main measures of the Focus 2012 efficiency program before Drupa, which means up to a third of the planned annual savings of €180m will take effect during the current financial year."

As a result of the rise in orders and the cost savings of Focus 2012, Heidelberg said it was still on track to achieve a "clearly positive result of operating activities excluding special items" in the current financial year, followed by an operating result excluding exceptional items of around €150m and a net profit in the 2013/14 financial year.

Further details will be published together with the management's presentation of the first quarter results on 8 August.