Heidelberg "FOCUS 2012" Program to Achieve Profitability Targets

As announced in November 2011, the Management Board of Heidelberger Druckmaschinen AG (Heidelberg) has agreed on the "FOCUS 2012" efficiency program to achieve the company's profitability targets. The aim is to ensure that the target operating result before special items of around EUR 150 million is still achieved in financial year 2013/14 and the company can independently continue to build on its leading position in the future.

"FOCUS 2012" - A comprehensive package of measures

The objective of the "FOCUS 2012" efficiency program is to help significantly reduce capacities and costs at Heidelberg over the next two years. This will lay the foundation for positive business developments in response to the volatile environment and changing market requirements. Most of the measures will be initiated and implemented quickly before the end of calendar year 2012. In addition, the program includes a number of medium- to long-term measures aimed at adapting the entire organization to the changed structures.

The target is to achieve total sustainable savings of around EUR 180 million in financial year 2013/14. Depending on the results of negotiations with employee representatives and other factors, the non-recurring expenditure required to do so is estimated at up to EUR 150 million.

"The ongoing economic uncertainties will continue to put a brake on the industry's recovery. We are seeing weaker demand in industrialized nations but stronger growth potential in emerging markets," said Heidelberg CEO Bernhard Schreier. "FOCUS 2012 will position Heidelberg accordingly, above all by significantly reducing production capacities and by adjusting sales activities to the regional market changes. This will create the basis and efficient structures needed for profitable business development," he added.

Among the short-term measures, production capacities will be reduced by around 15 percent and service capacities in the regions will be adapted in line with the expected medium-term level of sales.

Research and development expenditures will be cut by reducing capacities, further optimizing internal R&D processes, and reprioritizing projects.

Sales, marketing, and structural costs will also be reduced substantially by pooling sales and marketing activities and restructuring individual markets. Comprehensive support for the global customer base will still be ensured. The entire package of measures will have an impact on the global headcount of Heidelberg. Subject to talks with employee representatives, up to 2,000 jobs will be cut worldwide. Based on current plans, around 1,200 production, development, administrative, sales, and marketing jobs in Germany and around 800 jobs outside Germany will go. As of December 31, 2011, Heidelberg had 15,666 employees worldwide (incl. trainees).

Preliminary results for the third quarter

As expected, the economic uncertainties have made the industry more reluctant to invest and resulted in weaker demand. The interim insolvency of a competitor is exacerbating this situation.

Based on preliminary calculations, incoming orders in the third quarter of financial year 2011/12 (October 1 to December 31, 2011) totaled around EUR 640 million and sales around EUR 630 million, which is in line with the scaled-down expectations. Preliminary incoming orders at Heidelberg are down on the previous quarter's figure of EUR 668 million, while preliminary sales match the figure for the previous quarter (EUR 636 million). The third quarter's preliminary operating result (EBIT) excluding special items is just in the black again at around EUR 2 million (previous quarter: EUR 5 million). After nine months, despite sales falling slightly compared to the previous year, Heidelberg has succeeded in improving the operating result excluding special items to EUR -19 million (previous year: EUR -26 million). As a result, the company is still planning to achieve a noticeably better operating result excluding special items for financial year 2011/12 as a whole than in the previous year. The preliminary free cash flow in the third quarter almost broke even at EUR -4 million (previous quarter: EUR -12 million). This kept the net debt at a relatively low level and, at December 31, 2011, it was virtually unchanged from the previous quarter at around EUR 275 million.

Growth opportunities - Market trends at drupa 2012

Set against structural changes in the media and communication market, two clear developments are emerging. On the one hand, traditional print applications such as the newspaper and magazine segment are showing significant evidence of decline in the West while, on the other, marked growth is anticipated in areas such as the packaging market, short runs, print-on-demand, and web-to-print. Print production is also on the increase in the emerging markets. Heidelberg is focusing its portfolio directly on the key market trends in the printing industry. Although the total volume of print products is remaining stable, there are differences between developments in local markets and, increasingly, individual market segments. FOCUS 2012 and the company's range of products and services take this specifically into account.

"With our portfolio we are focusing on the growth areas of the print media industry. As the global technology and market leader, we will offer optimized business management processes and solutions for innovative business models at this year's drupa," concluded Schreier.

Heidelberg will publish further details and an explanation of the figures for the third quarter of financial year 2011/12 on February 8, 2012.

Heidelberg at drupa 2012

drupa 2012, the world's largest trade show for the print media and printing industry, is being held from May 3 to 16, 2012 in Düsseldorf. Since drupa first started in 1951, Heidelberg has traditionally been the largest exhibitor.

The trade show presentation, held under the banner "Discover HEI", will center on lean production (HEI Productivity), green printing (HEI Eco), web-to-print (HEI Integration), short-run printing (HEI Flexibility), differentiation through coatings and special effects (HEI Emotions), the future of packaging printing (HEI End), and gaining an edge through the latest know-how (HEI School). The company is exhibiting solutions that enable print shops and postpress businesses to meet the latest market requirements in full.