KBA presses on with restructure

German press manufacturer KBA will press on with its structural realignment after reporting no dividend last year and similar sales this year.

In his speech at this year’s annual general meeting Claus Bolza-Schünemann, president and chief executive at KBA, reported on the measures, goals and current status of the Fit@All programme for the restructuring of the group started at the beginning of the year. He also spoke about the group’s financial statements for 2013 and the figures for the first quarter of 2014.

He says, “Strengthening KBA’s lasting profitability and competitiveness are the focus and goals of Fit@All. It is clear that we must sustainably restructure our core business with web and sheetfed offset presses as well as realign capacities to new market conditions. The expansion of new growth areas is also a key aspect of our programme. We are convinced that we will be able to harvest the fruits of our realignment in 2015 and that the group will return to sustainable profitability by 2016 at the latest.”

In the coming months KBA will continue to work on lasting capacity and structural measures, the new site concept as well as reducing the depth of

added value by outsourcing more activities which lie outside of the group’s press-related core competences.

The company will cut 1100 and 1500 jobs from today’s figure of about 6200 staff. So far, voluntary cancellation and phased retirement agreements as well as social wage agreements and social compensation plans were agreed with union and workforce representatives for around 700 employees. The company says the, in spite of efforts to find socially acceptable solutions by all parties involved, operational layoffs are unavoidable. Personnel adjustments will take place in several steps until the end of 2015 given the periods of notice which must be observed and upcoming relocations.

Bolza-Schünemann, says, “We aim to achieve an overall cost base at which group sales of €1bn will lead to appropriate earnings. We do not want to go overboard with cost savings or shrink beyond recognition, which is why the expansion of potential growth areas is a further pillar of our realignment.”

KBA says it can expand its special applications such as banknote and digital printing, metal decorating and coding as well as to the new subsidiaries KBA-Flexotecnica and KBA-Kammann acquired last year. As the world’s second-largest press manufacturer integrates these companies into its international market presence, it says that growth markets have opened for flexible packaging and the direct decoration of hollow containers previously not served by KBA.

Bolza-Schünemann adds that we will see a new group and management structure with the goal of becoming a decentralised, highly flexible press manufacturing group. Units for production, sheetfed offset, web offset and special presses with clear responsibilities for earnings should carry out operational activities under the umbrella of KBA, which calls them product houses, KBA anticipates more transparency and strategic flexibility with the establishment of these distinct areas of responsibility.

In May, KBA took a first step towards defining the new organisational structure within the parent group, establishing a sheetfed product house (sheetfed offset in Radebeul) and a web product house (web offset in Würzburg, excluding special machines) was also established.

Looking back at 2013, Bolza-Schünemann says demand remained considerably below expectations for web presses for newspapers and commercial printing and for sheetfed offset presses

The lower level of investment in KBA’s traditional offset business compared to the drupa-year of 2012 contributed largely to a decrease in order intake of 9.3 per cent to over €1bn. Group sales stood at about €1.1bn. Despite sales which were approximatley €200m below targets, KBA posted an operating profit of €24.5m. Nevertheless, special effects of –€155.2m for provisions as part of the Fit@All programme and impairments of fixed assets were incurred in 2013. So, in effect, the KBA group generated a pre-tax loss (EBT) of €138.1m.

Bolza-Schünemann told shareholders, “Special expenses of €155.2m may seem very high, however with this, we have covered all foreseeable risks and expenses as far as possible and acceptable when drawing up our financial statements for 2013. This ensures that we be on the safe side financially and in terms of our balance sheet during the implementation of Fit@All in 2014 and 2015. Without these considerable special items we would have generated a group pre-tax profit of €17.1m. This is the first time since 2008 that we have posted a loss and therefore we are unable to submit a dividend proposal.”

2014 began far more successfully for the KBA group than in the weak first quarter of 2013 as announced in its first quarterly figures published on 9 May. New orders rose 20.8 per cent to €241.5m and sales increased by 11.9% to €213.4m. In addition, at –€10.2m the group’s operating result after three months was noticeably better than in the corresponding prior-year quarter (2013: –€16.9m). The sheetfed offset division generated an operating profit of €1.2m again after a prolonged period of time. Ultimately, group results before taxes (EBT) after three months came to –€12.1m compared to last year’s figure of –€18.8m.

Bolza-Schünemann says group sales of €1bn to €1.1bn and a positive operating result before special items remain as goals for 2014. He says, “Group earnings before taxes are very likely to be negative once again given limited special expenses. Nevertheless, we are convinced that we will be able to see the fruits of our realignment in 2015 and that the group will return to sustainable profitability by 2016 at the latest.”

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