Publicado 10/02/2021 08:48CET

Order levels recovering and transformation taking effect - Heidelberg raises target margin for 2020/21 (1)

- EBITDA excluding restructuring result increases after nine months to EUR 147 million (previous year: EUR 117 million)

- Demand recovers in China and Europe; incoming orders in December 2020 back up on the previous year for the first time

- Free cash flow in the third quarter clearly positive at EUR 42 million

- Company's transformation yielding tangible successes

- Earnings target raised for full financial year 2020/21 - EBITDA margin excluding restructuring result expected to be approximately 7 percent

HEIDELBERG, Germany, Feb. 10, 2021 /PRNewswire/ -- Due to the increasingly tangible successes yielded by the company's transformation, plus growing demand from China and, since the third quarter, from Europe, too, Heidelberger Druckmaschinen AG (Heidelberg) is raising its target operating return for financial year 2020/21 as a whole. Consequently, the company anticipates that its EBITDA margin excluding restructuring result will grow to approximately 7 percent, even though the coronavirus pandemic may lead to a sales decline of around EUR 450 million to EUR 500 million compared to the previous year (previous year's sales: EUR 2,349 million) for the year as a whole. Previously, Heidelberg had anticipated an EBITDA margin that would, at its lowest, equal that of the previous year at 4.3 percent. It is also an encouraging sign for the coming months that print volumes among Heidelberg customers have almost reached the levels of the previous year, with the print volume in the packaging sector even exceeding the previous year's level.

"The successful roll-out of the transformation measures has enabled Heidelberg to achieve a clearly positive operating result, despite the huge pressures caused by COVID-19. When it comes to both our finances and our balance sheet, we have done our homework. Signs of recovery are now emerging on the markets in China and Europe that are important to us. That is why our EBITDA target margin excluding restructuring result is being increased to around 7 percent. The growing interest in our contract business and strong demand for our electromobility charging stations are also grounds to be optimistic about the future," says Heidelberg CEO Rainer Hundsdörfer, commenting on the developments.

Again in the third quarter, the numerous measures of the transformation program launched in March of last year more than compensated for the negative effect on earnings caused by a significant drop in sales due to COVID-19. As a result, after nine months of financial year 2020/21 (April 1 to December 31, 2020), the operating result including effects from the measures that have been implemented was above that of the same period of the previous year. In addition, the period under review saw a slightly positive net result after taxes, and significantly reduced net financial debt.

Strategic milestones secure the future of Heidelberg

In the year under review, Heidelberg reached a number of milestones in its strategy to safeguard the company's future on a sustainable basis, including:

- Reorganizing the company pension scheme in Germany, which bolstered the result and shareholder's equity with earnings of EUR 73 million.

- Focusing on its core activities and selling the Belgian subsidiary CERM and the Belgian production site for printing chemicals, which made possible a total gain on disposal of EUR 19 million.

- Discontinuing unprofitable product lines that previously had an adverse effect on the result amounting to approximately EUR 50 million a year.

- Repaying the corporate bond early, which will disburden the financial result by EUR 12 million a year.

- Cutting approximately 1,600 jobs worldwide by 2023 (just under 1,000 of which will be cut during this financial year), a move that has been agreed with employee representatives and is being implemented on a socially acceptable basis. Together with additional sustainable savings in material and staff costs, this downsizing is to lead to savings of more than EUR 170 million for financial year 2022/23.

- Selling property in Wiesloch-Walldorf and the Print Media Academy in Heidelberg for a purchase price totaling more than EUR 60 million as part of a site and structural optimization strategy.

- Agreeing a production joint venture with Chinese company Masterwork Group, which is creating opportunities in Asia and is offering much better cost efficiency.

- Doubling the production capacity for Heidelberg Wallboxes - the charging stations for electric cars - by April 2021.

The sale of the Gallus Group, which did not go ahead at the end of January 2021 despite there being a valid purchase contract, is clouding the positive picture. However, this is not causing limitations with regard to the results forecast for the current financial year. CFO Marcus A. Wassenberg explains: "All in all, we have made much faster and more successful progress with our company's transformation than previously reported. We have raised more than EUR 450 million in liquidity, reduced debt by approximately EUR 260 million, moved away from loss-makers and will reduce costs by more than EUR 170 million a year on a sustainable basis. We are therefore confident we will return to attractive profitability in the medium term."

Figures for the first nine months of financial year 2020/21 - order levels looking increasingly good

Although the market environment is still challenging, there were further signs of recovery for Heidelberg during the third quarter. While the Chinese market had already reached almost pre-crisis levels, business started to get back to normal levels in Europe, too. After nine months of 2020/21 (April 1, 2020 to December 31, 2020), sales were at EUR 1,289 million and therefore still approximately 24 percent below the same period of the previous year (EUR 1,690 million). At EUR 1,421 million, incoming orders were 25 percent below the previous year (EUR 1,900 million). However, the shortfall was lower in the third quarter, at just 12 percent, and, in the month of December, incoming orders were back above the previous year's figure for the first time in this financial year. The order backlog rose by EUR 55 million compared with the previous quarter, reaching EUR 682 million.

In a year-on-year comparison, EBITDA excluding restructuring result increased from EUR 117 million to EUR 147 million, despite lower sales. On the one hand, the cost situation was improved by short-time working (which continued to drop in the quarter under review) and cost savings from the transformation measures that were implemented, which amounted to approximately EUR 60 million after three quarters. On the other hand, earnings of EUR 73 million from reorganizing the pension plans for employees in Germany as well as from the sale of the Belgian subsidiary CERM (approx. EUR 8 million) and the Belgian production site for printing chemicals (around EUR 11 million) also had a positive impact. In the third quarter, EBITDA excluding restructuring result was EUR 50 million and the EBITDA margin excluding restructuring result was 10.4 percent. After nine months, EBIT excluding restructuring result was EUR 88 million and therefore also substantially higher than the previous year (EUR 46 million). On the whole, expenses for transformation measures led to a restructuring result of EUR -38 million (previous year: EUR -8 million). After factoring in slightly higher financial expenses, Heidelberg achieved a slight net profit after taxes of EUR 3 million, having recorded a loss of EUR -10 million in the previous year.

Free cash flow in the third quarter clearly positive at EUR 42 million