Koenig & Bauer publishes its Q1 report 2020

Revenue and earnings impacted by coronavirus pandemic

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revenue
Remote maintenance and modern communication channels are becoming increasingly important in the current environment

Koenig & Bauer was able to achieve a sound group order intake of €271.5m in the first quarter of 2020, the coronavirus pandemic, which has been spreading rapidly since January, has already had a considerable impact on revenue and earnings. With group revenue 25.3% lower than in the prior year at €172.4m, EBIT was –€34.9m. Restrictions especially in traveling initially imposed in China and then gradually in many parts of the world are having a significant impact on order and project processing for the delivery, assembly, and installation of the machines at our international customers. The effects are also being felt in the services area. At –€36.6m, group net earnings in the first quarter of 2020 translate into earnings per share of –€2.22.

Despite the significant drop in trade receivables and increased customer prepayments, substantially higher inventories as a result of pandemic-related delivery delays had a major impact on cash flows from operating activities of –€15m (2019: –€30.6m). Free cash flow improved from –€51.2m in the previous year to –€31.3m. The equity ratio stood at 32.3% at the end of March 2020.

K&B’s president and chief executive officer, Claus Bolza-Schünemann says, “The economic consequences of the corona crisis pose major challenges for our group. Our broad product portfolio with a significant share of revenue in system relevant packaging printing, the robust, increasingly digital service business, and our sound balance sheet with a high equity ratio limits the risk potential. With the corona crisis management established in March, we are working to actively counter this extraordinary situation. The health and safety of our employees, customers, and suppliers is our top priority. Our action plan focuses on reliable customer support, cost and investment discipline, and securing liquidity. Short-time working has been in place at different locations since 1 April 2020 due to capacity utilization.”

Segment performance

In the Sheetfed segment, primarily increased orders in large format as well as pleasing sales of folder gluer systems contributed to the solid order intake of €160.1m (2019: €174.2m). For reasons related to delivery and the pandemic, revenue of €68.2m was well below the prior-year figure of €113.7m. With a book-to-bill ratio of 2.35, the order backlog increased from €250.5m to €275.3m. EBIT of –€18.6m was below the prior-year figure (–€3m) as a result of the substantial drop in revenue.

Despite declining service business with web offset presses, order intake at Digital & Web of €43.6m was significantly higher than the prior-year figure of €31.9m. In addition to increased orders in flexible packaging printing, follow-up orders received in corrugated board and digital decor printing were the main reason for this growth. Mainly as a result of corona-related restrictions at the Italian subsidiary Flexotecnica, the revenue of €28.1m was lower than in the previous year (€32.4m). The order backlog decreased from €85.4m to €81.6m. The low revenue level had a significant impact on the EBIT of –€5.5m (2019: –€5.4m).

Lower orders in security, coding, and glass direct printing contributed to the decline in order intake in the Special segment from €80.4m to €73.5m. New business in metal decorating was stable compared with the prior-year quarter. Revenue decreased to €81.4m (2019: €93.6m). The order backlog at the end of March was €279.6m compared with €332.3m at the same time last year. After a segment profit of €2.1m in the prior year, EBIT of –€7.6m was reported in the first quarter of 2020.

Guidance for 2020

Koenig & Bauer’s chief financial officer, Stephen Kimmich says, “Given the uncertainty regarding future developments and the serious concern about a deep global recession, many of our customers are reluctant to make new investments, even though packaging printers for food, beverages, and pharmaceuticals as well as for online retailing are currently operating at particularly high capacity utilization. Considering the high volatility and the tremendous uncertainty about the severity and duration of the coronavirus pandemic as well as the success of health and economic policies, the impact on revenue and earnings in the 2020 financial year cannot yet be quantified. Because of the drastic effects that are already apparent, our planning for 2020 is no longer achievable. Accordingly, corona crisis management currently has the highest priority so that we can master the challenges that lie ahead and be prepared for the period after the Covid-19 pandemic. In addition to the Performance 2024 efficiency program, the strategic focus on packaging printing and digital services is to be stepped up again afterward.”

The Covid-19 pandemic led to the country-wide lockdown on 25 March 2020. It will be two years tomorrow as I write this. What have we learned in this time? Maybe the meaning of resilience since small companies like us have had to rely on our resources and the forbearance of our employees as we have struggled to produce our trade platforms.

The print and packaging industries have been fortunate, although the commercial printing industry is still to recover. We have learned more about the digital transformation that affects commercial printing and packaging. Ultimately digital will help print grow in a country where we are still far behind in our paper and print consumption and where digital is a leapfrog technology that will only increase the demand for print in the foreseeable future.

Web analytics show that we now have readership in North America and Europe amongst the 90 countries where our five platforms reach. Our traffic which more than doubled in 2020, has at times gone up by another 50% in 2021. And advertising which had fallen to pieces in 2020 and 2021, has started its return since January 2022.

As the economy approaches real growth with unevenness and shortages a given, we are looking forward to the PrintPack India exhibition in Greater Noida. We are again appointed to produce the Show Daily on all five days of the show from 26 to 30 May 2022.

It is the right time to support our high-impact reporting and authoritative and technical information with some of the best correspondents in the industry. Readers can power Indian Printer and Publisher’s balanced industry journalism and help sustain us by subscribing.

– Naresh Khanna

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