COVID-19 pandemic and measures to boost profitability impact FY 19-20 figures

Net financial debt considerably reduced from € 250 million to € 43 million

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Heidelberg
The Heidelberg office and plant in Wiesloch, Germany

During a challenging FY 2019-20, business operations at Heidelberg was impacted by the increasingly deteriorating economic environment caused by the Covid-19 pandemic. Based on preliminary figures yet to be audited, the group sales amounted to € 2,349 million, some 6% down on the previous year. Restrained investment activity caused by the economic circumstances had a negative impact on business, first and foremost in Europe. During the fourth quarter, macroeconomic conditions worsened considerably and unexpectedly due to the Covid-19 pandemic and this was clearly reflected in sales, which at € 659 million were significantly lower than in the same quarter of the previous year (€ 797 million).

The preliminary operating result (EBITDA) excluding the effects of restructuring was € 102 million, after being € 180 million in the previous year. The EBITDA margin excluding the effects of restructuring thus reached 4.3 percent and was below the previous year’s figure of 7.2 percent due to volume and product mix effects. Furthermore, the non-recurring expenditure for the company’s realignment (€ 275 million) impacted the result for the financial year under review as planned. The provisional net result after taxes was thus € –343 million (previous year: € 21 million).

“Financial year 2019/20 was shaped by a significant downturn in the global economic climate, and that affected our customers and Heidelberg itself, too. Through our package of measures which we have announced in March, we have paved the way for Heidelberg to achieve stability, improve our liquidity and increase profitability step by step for the long term. The Covid-19 pandemic poses significant challenges for Heidelberg and the entire industry, which we will master alongside our customers and using what Heidelberg has to offer as a technology leader in the printing industry. By joining forces, we will emerge stronger from the crisis,” says Rainer Hundsdörfer, chief executive officer of Heidelberg.

Liquidity considerably improved

To counteract the downturn in underlying conditions over the year and increase financial stability, Heidelberg had already agreed a comprehensive package of measures in mid-March 2020. On the one hand, it includes an increase in liquidity and a significant reduction in net debt due to the almost complete retransfer of around € 380 million from the trust assets of Heidelberg Pension-Trust e.V., which was established in 2005. As a result, net debt was significantly reduced to € 43 million at the end of March 2020 (previous year: € 250 million). On the other hand, profitability is being increased on a sustainable basis by lowering production and structural costs. This involves ensuring a consistent focus on profitable core business – including ending the production of Primefire and large-format presses – and the planned reduction in personnel.

“This considerable improvement in our liquidity gives us essential room for maneuver in these difficult times. Heidelberg is going to implement the announced measures consistently and quickly. We are all aware that the cuts are a significant blow, particularly in the current situation. However, they are absolutely essential to safeguarding the future of Heidelberg,” says Heidelberg chief financial officer Marcus A. Wassenberg, who is responsible for implementing the package of measures.

The negotiations on the implementation of the package of measures have largely been concluded with the employee representatives. Agreement has been reached in particular on the instruments of partial retirement and the establishment of a transfer company. The final consultations will focus on further detailing the implementation of the measures for all German sites and on concluding the agreements shortly.

The company will publish its financial statements and the Annual Report for FY 2019-20 on 9 June 2020.

2023 promises an interesting ride for print in India

Indian Printer and Publisher founded in 1979 is the oldest B2B trade publication in the multi-platform and multi-channel IPPGroup. While the print and packaging industries have been resilient in the past 33 months since the pandemic lockdown of 25 March 2020, the commercial printing and newspaper industries have yet to recover their pre-Covid trajectory.

The fragmented commercial printing industry faces substantial challenges as does the newspaper industry. While digital short-run printing and the signage industry seem to be recovering a bit faster, ultimately their growth will also be moderated by the progress of the overall economy. On the other hand book printing exports are doing well but they too face several supply-chain and logistics challenges.

The price of publication papers including newsprint has been high in the past year while availability is diminished by several mills shutting down their publication paper and newsprint machines in the past four years. Indian paper mills are also exporting many types of paper and have raised prices for Indian printers. To some extent, this has helped in the recovery of the digital printing industry with its on-demand short-run and low-wastage paradigm.

Ultimately digital print and other digital channels 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. For instance, there is no alternative to a rise in textbook consumption but this segment will only reach normality in the next financial year beginning on 1 April 2023.

Thus while the new normal is a moving target and many commercial printers look to diversification, we believe that our target audiences may shift and change. Like them, we will also have to adapt with agility to keep up with their business and technical information needs.

Our 2023 media kit is ready, and it is the right time to take stock and reconnect with your potential markets and customers. Print is the glue for the growth of liberal education, new industry, and an emerging economy. We seek your participation in what promises to be an interesting ride.

– Naresh Khanna

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