High order backlog of 739 million Euros points to strong Q4

Heidelberg significantly increases Q3 net results

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This expectation, or acceptance of lower numbers, for the first nine months is largely explained by what the company says are, “A large number of orders placed at drupa for innovative presses with longer delivery times that were presented at and ordered during the trade show will be supplied on schedule in the fourth quarter. The series launch of these products at the end of the financial year will also generate higher sales and a better result than in the previous year.” The implication is that the production and delivery of new software, technology, presses and consoles actually began in the second half of the financial year with substantial deliveries scheduled for Q4.

“The improvements in results in the third quarter show that Heidelberg is on the right course to achieve sustainable profitability,” said Rainer Hundsdörfer, the new chief executive officer of Heidelberger Druckmaschinen AG. “We anticipate we will further increase our annual profit with a strong final quarter.”

New organization for ‘Heidelberg goes digital’
Heidelberg says it is realigning its organization to accelerate the company’s digital transformation and thus ensure the correct business models are in place for the high-growth customer segments in the years ahead. In future, there will be a division that will develop, manufacture and supply appropriate digital technologies and products for new business models. Another division will devise and market these models. “Heidelberg goes digital. We are getting the company fit for the digital future,” added Hundsdörfer. “To do that, we will develop and roll out our own innovative business ideas. However, we will also be strengthening our position in this area through acquisitions.”

Compared to Q2, sales and the result showed further improvement in Q3. For example, sales rose from €586 million Q2 to €608 million (FY 2015-16 Q 3 was €640 million). After nine months, the total sales of €1.680 billion were still below the previous year’s level (€1.802 billion) due to the launch of series production of equipment incorporating drupa innovations at the end of the financial year.

Order backlog of €739 million up 26%
Over the same period, incoming orders at €1.990 billion were approximately 4.5% higher than the previous year’s value (€1.904 billion). At €739 million, the order backlog was around 26% up on the previous year’s figure (€586 million). As a result, Heidelberg says it has a good platform for achieving the significant sales growth planned in Q4.

Profitability, as expressed in EBITDA and EBIT, increased in the quarter under review compared to the previous year’s values. After nine months, these key indicators were still down on the previous year’s figures due to sales and a positive non-recurring effect of €19 million from the initial consolidation of PSG in the previous year and trade show costs of approximately €10 million.

EBITDA excluding special items improved to €49 million in the third quarter (previous year: €40 million). The total figure after nine months was €94 million (previous year: €119 million). At €-2 million, special items in the quarter under review equaled the figure for the same quarter of the previous year (€-2 million). The total figure after nine months was €-8 million (previous year: €-24 million).

The financial result for the period under review matched the previous year’s level at €-42 million. Consequently, the net result after taxes in the quarter under review increased substantially to €18 million (previous year: €7 million). At €-10 million for the nine-month period, it was on par with the corresponding period of the previous year (€-7 million).

Free cash flow in the third quarter was slightly negative at €-10 million, and overall, after nine months, it was also at €-10 million. Compared to the financial year-end on March 31, 2016, the equity of the Heidelberg Group dropped to €246 million as at December 31, 2016. This was due primarily to changes in the actuarial interest rates for pensions. Consequently, the equity ratio on the balance sheet date was around 11.4% (previous quarter: 6%). The net financial debt at €282 million remained stable (30 June 2016: €276 million), and the leverage continued to be below the target value of 2 at 1.7. “We have the financial strength to actively shape our route into the digital world,” said Dirk Kaliebe, chief financial officer. “The balanced financing framework also gives us the freedom to drive forward new business models through targeted acquisitions.”

Outlook: Sights still set on moderate YoY increase in net sales
Thanks to the solid incoming orders and the rise in the order backlog, Heidelberg remains focused on its targets for 2016/2017. Although planned acquisitions have not been implemented yet, the company is still striving for marginal sales growth in light of a strong final quarter of the year. Despite the inputs for the accelerated expansion of the digital and the service business, it also expects to achieve an EBITDA margin before special items on par with the previous year’s level in the 2016-17 financial year. At the same time, the financial result will improve further on account of declining interest expenses. Thus, Heidelberg is still aiming for a moderate year-on-year increase in its net result after taxes for the year as a whole.

As a final note, Heidelberg employed 11,868 persons worldwide including trainees as of 31 March 2016 of which 7,422 were in Germany. On 31 March 2015 the company employed 12,074 persons  worldwide including trainees with 7,422 employed in Germany. While there was a slight decrease in the previous financial year, we await the disclosure of the employee figures as of 31 March 2017.