“We have some non-core business lines or products in which we will no longer invest,” he stated. “We will look for ways to make them more profitable and operate them primarily to generate cash. Why would you allocate large resources to a business that is clearly not as attractive as your core business? Just for size or volume of sales?”
Linzbach has now answered his rhetorical question, in part at least, by implementing the biggest single restructuring move since Heidelberg offloaded its web and digital divisions in 2004. A radical re-shaping of its post-press operations will see an entire factory closed in Germany, the loss of 650 jobs worldwide and the outsourcing of the manufacturing of packaging post-press products including the Diana folder-gluer to Chinese OEM partner Masterwork Machinery.
And, having battled against arch-rival Muller Martini for years in the saddlestitching and perfect binding markets, Heidelberg will now exit those markets entirely, with Muller Martini picking up the ongoing service business on Heidelberg’s installed kit as a result.
Stuart Bamford, national sales manager at Friedheim International, views it as a valuable lesson, in that firms should focus on their core business. “I believe that manufacturers should always stick to what they are good at, and in Heidelberg’s case obviously that is printing presses. All businesses want to grow and find extra revenue streams, but in my experience investing in R&D – as MBO has continually done with folding technology – and not straying into the risky temptation of trying to ‘please all’ is wise as this only dilutes focus and puts additional strains on any business no matter what its size,” he says.
The details of the transition are still to be ironed out. Heidelberg can’t say, yet, how much it will all cost by way of further restructuring charges. But Linzbach is adamant that it’s the way forward and “an important step” in achieving his target of EBITDA margins of at least 8%.
In the commercial post-press space Heidelberg will still sell folders and cutting kit and its partnership with Polar is unchanged. It’s also worth noting that these remaining product lines, along with the packaging post-press sales and service, will mean that it still retains “the majority” of circa €240m (£190m) in sales that was derived from post-press.
A decision based on a global business picture is unfortunate news for Heidelberg’s UK operation, which had actually been very successful with the stitching and binding lines, with some 350 installs. Customers such as Bishops Printers in Portsmouth, which bought a new Stitchmaster ST450 just a few months ago, are taking a pragmatic approach. “For me, it’s a reminder of how fragile the whole industry is. Not just printers, the people who feed us. How difficult it is for manufacturers to invest all the R&D needed to create products to sell to companies, some of whom are not making money,” says managing director Gareth Roberts.
“It’s sad, but it doesn’t make me particularly anxious and I don’t regret buying our third stitching line earlier this year. There will be a way to get our machine serviced and to get replacement parts. I understand the business imperative.”
For Heidelberg, the dynamics of its customer conversations and “solution sell” will inevitably change. Then there is also the question of ongoing service revenues.
“We spend an average of £20,000 a month on service and parts, and an element of that is going to drop away,” notes Roberts.
And the change at Heidelberg is not done yet. Linzbach was equally forthright about wanting to take advantage of “concrete options” to acquire, and a consumables purchase could well be next on his ‘to do’ list. “Selling products and services in the future must focus on anticipating needs. We have to learn to develop what we can sell, which is different from trying to sell what we could develop.”