Heidelberg to keep Gallus Group

Payment by benpac not made on 29 January 2021

Heidelberg to keep Gallus Group

The Gallus Group’s sale by Heidelberger Druckmaschinen AG (Heidelberg) to the Swiss company benpac holding ag has not been completed. In a press release dated 29 January 2021, Heidelberg states that benpac holding ag did not make the purchase price payment of Euro 120 million agreed at the day’s closing, although all the necessary conditions were met from its side. Heidelberg says it had to assume until the very end that the transaction would be completed successfully. “Heidelberg will assert its rights,” says the release.

The five sites and around 430 employees of the Gallus Group will remain with Heidelberg. Nothing will change for Gallus customers. Heidelberg will continue to handle sales and service for the Gallus portfolio, and their personal contacts will remain the same. Heidelberg will now be examining various options for the corporate future of Gallus. In any case, Gallus will continue on its path to boosting operating performance. With an independent setup and specific focus on its flexographic printing market, Gallus
made good operational progress last year under the Heidelberg umbrella.

Transformation program reduced debt and improved liquidity

Irrespective of the Gallus transaction, which has not been completed and now seems to be off, Heidelberg says it is already benefiting considerably from the transformation program launched in the current 2020/21 financial year. The plan to stabilize the company financially in the challenging Covid-19 environment and align it in a future-proof manner in its profitable core business seems to be working.

Since March 2020, net debt is reduced by more than Euro 250 million from a peak of Euro 390 million, and liquidity has been improved by around Euro 450 million. As a result of the accelerated M&A program, Heidelberg will generate proceeds in the mid-double-digit million Euro range from the transactions completed in December 2020 alone.

Market challenged by worsening Covid-19 situation in Europe

The market remains challenging due to the currently worsening Covid-19 situation, especially in Europe, North and South America, and Africa. Heidelberg says it is systematically continuing its transformation course with the measures initiated to create further financial scope. In operational terms, the third quarter of the current financial year saw a continuation of the upward trend in sales and incoming orders that has been ongoing since May 2020. Heidelberg continues to expect to achieve its targets for the financial year
2020-21, which ends on 31 March 2021.

Our view

The sale of the Gallus Group by Heidelberg merely revealed how seriously the Heidelberg management was taking the Covid-19 pandemic and its transformation into a leaner and more focused company. The sales, service, and supply of spare parts in many if not most parts of the world were to be continued by Heidelberg – including most likely India.

Customers were asking about the new ownership. It’s good that the uncertainty is over for them. The Gallus Group’s renewed focus as a somewhat independent entity within the Heidelberg group should work well for both existing and potential customers. The synergy in terms of agility, responsiveness, and promoting of each other’s machines by the Gallus and Heidelberg teams in India could eventually be an example for the group as a whole.

At the time of the deal, we interviewed Ferdinand Rueesch as a member of the Heidelberg board, wherein he said that one of the factors in the transaction was the need for investment in new developments by Gallus. Now, it seems that this need for cash will have to come out of the Heidelberg kitty again.

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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