The K&B (Koenig & Bauer) group reports on 24 March 2021 that it achieved a revenue of € 1.0 billion in 2020 (2019: € 1.2 billion) despite the challenges posed by the Covid-19 pandemic. The 17.4% decline in revenue reflects the measures adopted by governments worldwide in 2020 to halt the spread of the Covid-19 pandemic.
Travel restrictions in particular hampered international sales activities as well as order and project execution. Service business accounted for about 30% of the group’s revenue in 2020 against the pandemic’s backdrop. This means that the target of 30% was reached, albeit based on lower new press business than in the previous year. The 14.6% decline in order intake to € 975 million (2019: € 1.1 billion) is also due to Covid-19-related constraints on global economic activity and customers’ reluctance to invest given reduced planning visibility.
However, the decline in Koenig & Bauer’s revenue and order intake in 2020 was less pronounced than for the printing press industry as a whole (24.2% decline in revenue; 21.9% decline in order intake) according to figures released by industry association VDMA (German Machinery and Plant Manufacturers’ Association). Koenig & Bauer’s order backlog as of 31 December 2020 was valued at € 632 million, down 7.9% on the previous year (31 December 2019: € 686 million).
Earnings before interest and taxes (EBIT) amounted to € -68 million in 2020, compared to € 70 million in the previous year. In addition to the Covid 19-related decline in revenue, EBIT was adversely affected by non-recurring expenses of €58m in connection with the expanded “P24x” efficiency program announced in autumn 2020. However, non-recurring income from the successful outcome of a legal dispute (€ 4 million) and the sale of a real estate asset in Frankenthal (€ 5 million) positively affected EBIT.
Adjusted for these non-recurring effects, EBIT came to € -19 million in 2020. Despite the pandemic’s effects, an apparent quarterly recovery emerged. After € -17 million in the first quarter, EBIT operating loss before exceptionals was only in the single digits (€ -7 million) in the second quarter. In the third quarter, it came close to reaching the break-even threshold (€ -1 million). In comparison, a slightly positive EBIT before non-recurring effects of € 6 million was achieved in the final quarter.
After net interest expense of around € 6 million (2019: € 6 million), K&B achieved earnings before taxes (EBIT) of € -73 million in 2020, compared with € 64 million in the previous year. Tax expense came to € 30 million in 2020 (previous year: € 12 million). The higher tax expense in the year under review is primarily due to impairments of deferred tax assets on unused tax losses, which were not considered to be recoverable for the purposes of the preparation of a new integrated five-year plan. The group net loss of € 103 million (2019: Group net profit of € 52 million) translates into a loss per share of € 6.27 (2019: earnings per share of € 3.15).
Dr Andreas Pleßke, chief executive officer of K&B, explains, “Looking at order intake, we can see that the Koenig & Bauer Group held up better in the difficult year of 2020 than our industry as a whole. Despite all due caution given the still very uncertain economic conditions, we take this as a sign that we are focusing on the right end and future markets with our range of presses and services. For example, corrugated-board printing could experience a significant boost in the coming years given the growth in eCommerce. Packaging printing for food, cosmetics, and pharmaceutical products, for example, is also proving to be an intact and growing market.
“Koenig & Bauer has expanded its Radebeul facility, turning it into a global customer experience center to demonstrate the performance of our presses to customers in these sectors as effectively as possible. The customer experience center presents networked solutions for packaging production featuring innovative printing technology, flatbed and rotary die cutters, folding-box gluers, and fully automated material flows. We are convinced that we will strengthen and further expand our market position not only in the area of packaging printing.”
Covid-19 leaves clear traces on individual segments
At the level of the individual segments, the Covid 19-related burdens and the provisions recognized for the measures defined in the “P24x” efficiency program were also clearly evident in the decline in order intake, revenue, and EBIT in 2020. That said, order intake in the Sheetfed segment declined by only a moderate 5.5%.
In 2020, this segment achieved growth in the medium and large-format sheetfed offset presses and folding-box gluers, which were primarily ordered by customers in the packaging printing sector. The sheetfed segment recorded an order intake of € 178 million in the fourth quarter, thus exceeding the previous year’s figure (Q4 2019: € 166 million).
In the final quarter of 2020, the digital and webfed segment successfully commissioned the first CorruFLEX system to produce high-quality printed packaging at corrugated cardboard printing company THIMM’s plant in Romania. This means that all three Corru models for direct corrugated-board printing have now been successfully placed on the market.
In the special segment, Banknote Solutions, Kammann, and Coding reported lower order intake in 2020 in view of the coronavirus pandemic’s effects. MetalPrint, on the other hand, recorded an increase in order intake in 2020.
Positive operating cash flow, solid equity base
The K&B group’s cash flow from operating activities turned positive in 2020, coming to € 12 million (2019: € -8 million). The decline in inventories was the main reason for this positive performance. Net working capital fell from € 349 million in the previous year to € 344 million. Free cash flow improved significantly from € -52 million during the last year to € -24 million in 2020. With an equity base of € 342 million (end of 2019: € 433 million), the Koenig & Bauer Group achieved a solid equity ratio of 25.9% (end of 2019: 30.6%).
Slight organic revenue growth & break-even in EBIT expected for 2021
Despite the still limited forward visibility for the impact of the Covid-19 pandemic on the Koenig & Bauer Group’s business environment and the travel restrictions currently in place in this connection, the company anticipates slight growth in business in 2021. This projection assumes that progress made in vaccinations that also protect from the Covid-19 virus mutations will allow the restrictions to be lifted.
Against this backdrop, Koenig & Bauer projects slight organic revenue growth of around 4% to € 1.07 billion in 2021. On the earnings side, it expects to break even at the EBIT level in 2021 following the successful launch of the ‘P24x’ efficiency program and the planned savings effects. Implementation of the “P24x” program will leave traces on free cash flow in 2021, resulting in a negative free cash flow in the mid-double-digit millions.
Dr Stephen Kimmich, CFO of Koenig & Bauer, states, “The order backlog of more than € 630 million provides solid underpinnings for our forecast for the Koenig & Bauer Group in 2021. With the efficiency measures under ‘P24x,’ we have also laid important foundations for improving our profitability. In 2021, this should already allow us to break even at the EBIT level. After the completion of the four-year efficiency program, we hope – as stated in autumn 2020 – to achieve revenue of € 1.3 billion and an EBIT margin of at least 7% and to reduce net working capital to a maximum of 25% of annual revenue.”
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