Koenig & Bauer shares rise on results
Thursday, March 19, 2020
Press manufacturer Koenig & Bauer has described its core markets as “fundamentally intact” in year-end results that have understandably been overshadowed by the ongoing coronavirus crisis.
Dealing with the possible consequences of the coronavirus situation is currently “a top priority” for the group, which is proposing to suspend the payment of its dividend for the 2019 financial year due to the uncertainty caused by the virus, with the retained profit carried forward.
K&B’s share price rose by 6.63% to €16.89 (£15.70) on its results announcement.
Chief executive Claus Bolza-Schünemann stated: “The end markets we address are fundamentally intact with packaging printing showing good structural growth. However, growth requires normal business years.
“Due to the increasing economic uncertainty, we decided to invest significantly in reducing manufacturing costs and to join forces more strongly within the group. With these measures, we aim to position ourselves to a greater extent independent of the economy and more competitively for the future,” he said.
The group will spend between €30m-€40m on its ‘Performance 2024’ programme aimed at reducing costs by more than €70m by that year. This will include a “considerable” reduction in manufacturing costs and the increasing use in shared services.
Last November K&B said that it planned to optimise its production and assembly footprint. Its Kammann business completed its move to a new plant in Löhne at the end of February.
Group sales were effectively flat at €1.22bn, while EBIT fell from €87.4m to €56m giving a margin of 4.6%. K&B had already warned that its results would be below previous targets but the margin achieved was actually slightly higher than anticipated.
Net profit was down 40% at €38.4m.
Order intake of €1.14bn and order backlog of €533.7m were lower than the prior year after some big security printing and metal decorating orders didn’t come through as expected. The prior year was also boosted by a massive Egyptian order for banknote printing presses that is also tying up €18.3m in cash. This installation is set to be completed in Q3 2020.
At its Sheetfed division, K&B’s biggest business unit, order intake jumped by nearly 9% on the back of orders for large- and medium-format presses. Sales were up 2.6% to €631.8m but EBIT fell by 45% to €19.4m due to the “product and regional mix and higher order processing costs”.
In Digital & Web, some flexible packaging orders were affected by environmental concerns around plastic packaging while web offset continues to decline. Order intake was down 18% at €144.9m, and sales increased by 7.4% to €164.6m. Order backlog fell by nearly €20m to €66.1m. EBIT losses increased from €10.2m to €16.5m, in part due to losses at the flexible packaging wing.
However, K&B also booked some significant orders for digital presses after the year-end. German firm Interprint has ordered a third RotaJet for digital décor printing.
“After the sixth press sale for digital decor printing and the key order from Tetra Pak for digital full-colour beverage carton printing, the RotaJet digital printing platform is particularly successful in the market,” K&B stated.
The group also said that its joint venture with Durst, which includes the K&B’s CorruJet 170 and Durst’s SPC130 had created a “unique portfolio for digital direct printing on corrugated board”.
“No other manufacturer is in a position to offer digital systems for both format classes,” K&B stated.
The coming B1 sheetfed VariJet 106 inkjet press will also be part of the joint venture.
At the Special presses division, which includes security printing and metal decorating, order intake fell from €505.1m to €406.7m, while sales were down from €491.5m to €463.9m. EBIT reduced by €4.3m to €43.9m due in part to additional project expenses related to the Egyptian order.
K&B also said its service initiative launched four years ago was “bearing fruit” with service revenues increasing from 25.9% of sales to 28.2%.
Regarding guidance for this year, CFO Mathias Dähn said the situation was “completely open” due to the unfolding events around the Covid-19 pandemic.
“Even before the outbreak of the coronavirus, global economic conditions were demanding. Given the daily worsening global economic situation due to the coronavirus, the impacts on our company and the achievement of our planning are currently completely open.
Nevertheless, he said the group aimed to achieve largely stable sales this year. “Managing the possible consequences of the corona crisis is currently a top priority.”