Publicado 13/08/2020 08:53CET

Transformation of Heidelberg already showing effects in first quarter of 2020/2021 (1)

- As expected, sales and incoming orders still significantly impacted by COVID-19 pandemic, but steady signs of recovery discernible

- Earnings from restructuring the company pension plans deliver EBITDA excluding restructuring result of EUR 60 million

- Sale of Gallus Group and CERM N.V. expected to yield earnings in mid-double-digit million euro range later in the current financial year

- Early repayment of high-yield bond in September to result in sustainable improvement of the financial result

- Forecast for financial year 2020/21 unchanged

HEIDELBERG, Germany, Aug. 13, 2020 /PRNewswire/ -- In March of this year, Heidelberger Druckmaschinen AG (Heidelberg) launched a transformation program designed to boost profitability, enhance competitiveness, and secure the company's future. Thanks to the consistent and prompt implementation of key measures in this program, the company already generated positive results in the recently concluded first quarter of financial year 2020/2021 (April 1 to June 30, 2020). As a result, it was able to successfully counter the huge operational pressures brought by the COVID-19 pandemic.

Nonetheless, as anticipated, the consequences of the global economic crisis had a considerable impact on sales and incoming orders in the first quarter. For example, at approximately EUR 330 million, netsales were around a third lower than in the same quarter of the previous year (EUR 502 million). Incoming orders in the first three months dropped by a total of 44 percent to EUR 346 million (previous year: EUR 615 million), with a clear improvement recorded in June compared to the previous two months of the quarter. This upward trend also continued through July. Despite the challenging market development, Heidelberg achieved EBITDA excluding restructuring result of EUR 60 million (Q1 2019/2020: EUR 14 million), which was due to earnings of EUR 73 million generated by restructuring the company pension plans. Consequently, the net result after taxes in the quarter was positive, at EUR 5 million (previous year: EUR -31 million). Given that net financial debt has been reduced to EUR 122 million (previous year: EUR 391 million), Heidelberg is in a financially stable position.

Thanks to the comprehensive package of measures in the transformation program, which includes improvements to structures and organization, as well as the divestment of loss-generating business activities and peripheral elements of the portfolio, Heidelberg is on track to improve its profitability by some EUR 100 million in the medium term.

"As expected, and as across virtually all sectors and particularly the export-oriented mechanical engineering industry, the COVID-19 pandemic had a huge impact on the quarter. The consistent implementation of our transformation program is helping us maintain a stable course through the crisis. From a financial perspective, we are on a solid footing, are continuing to streamline our portfolio, and are already seeing the first positive effects of our cost-efficiency measures. At the same time, we are sensing a gradual recovery on the market and incoming orders are starting to increase again as a result. Our market initiatives are helping us consistently address our customers' requirements in these challenging times. We are confident we will continue to perform well by having the right offerings and solutions," says Heidelberg CEO Rainer Hundsdörfer.

The company anticipates further positive effects in the forthcoming quarters from its cost-efficiency measures, along with additional earnings in the mid-double-digit million euro range from its sale of the Gallus Group, which is to be completed in the current calendar year. Heidelberg also sold its Belgian subsidiary CERM N.V. at the end of July as part of a management buyout. CERM specializes in developing management information software for the narrow-web label market, a sector that Heidelberg has pulled out of with the sale of Gallus. This transaction is generating a gain on disposal of approximately EUR 8 million. Both portfolio measures are helping Heidelberg carry forward its consistent alignment on its profitable core business in sheetfed printing. At the same time, this is further strengthening the company's balance sheet and financial position, which is directly beneficial in the current market crisis.

Early repayment of high-yield bond in September to generate a sustainable improvement in financial result

Another important step Heidelberg announced a few weeks ago, as part of its moves to stabilize its financial position, is the early repayment of the high-yield bond (with a coupon of 8 percent p.a.), the term of which was due to run to 2022. The company will settle the remaining sum, amounting to EUR 150 million including accrued interest, from cash reserves as early as on September 9 this year. The planned early repayment will help the company unburden its financial result by approximately EUR 12 million per year.

"We are successfully working our way step by step through our transformation program. By focusing on our core business and our measures aimed at delivering added financial stability, we are laying foundations that will safeguard the future of Heidelberg. We have already considerably enhanced our financial stability and the anticipated high revenues from the sale of the Gallus Group and CERM will give us an additional boost. The early repayment of the high-yield bond frees us up from high interest burdens on a sustainable basis, makes us more financially independent, and gives us additional room for maneuver. This helps us in the current economic crisis and with the long-term alignment of Heidelberg," explains CFO Marcus A. Wassenberg.

Q1 2020/2021 - the financial figures in detail

Due to the economic consequences of the COVID-19 pandemic across all segments and regions, netsales in the first quarter of 2020/2021 (April 1 to June 30, 2020) amounted to approximately EUR 330 million, as announced earlier, down by around one-third on the same quarter of the previous year (EUR 502 million). During the first three months, incoming orders dropped by 44 percent to EUR 346 million (previous year: EUR 615 million). Besides the restrained investment activity caused largely by COVID-19, this disparity is also due to the high level of incoming orders in the previous year, which can be attributed to the China Print trade show. On June 30, the order backlog was EUR 605 million and therefore markedly down on the same quarter of the previous year (EUR 730 million). Clear signs of recovery from the effects of the COVID-19 pandemic emerged in the final month of the quarter under review. Compared to May, incoming orders rose by around 27 percent in June. This upward trend in new orders continued into the start of the second quarter in July, with incoming orders surpassing the total for June.

EBITDA excluding restructuring result was EUR 60 million (same quarter of previous year: EUR 14 million). Earnings of EUR 73 million from the reorganization of the company pension plans for employees in Germany and the use of short-time working helped to counteract the drop in sales. EBIT excluding restructuring result was EUR 40 million (same quarter of previous year: EUR -10 million). Planned provisions for the realignment of the Group resulted in a restructuring result of EUR -20 million. Due to a stable financial result and lower taxes, Heidelberg achieved a net profit after taxes of EUR 5 million in the first quarter of the year, compared to a net loss after taxes of EUR -31 million in the same quarter of the previous year.

Free cash flow improved, net financial debt low