Drupa sales boost in second half-year

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- Trade fair surpasses all expectations
- Group sales in first five months short of target
- Board reaffirms forecast for 2008
- Dividend raised by 20%

At the 83rd AGM of German press manufacturer Koenig & Bauer AG (KBA), group president and CEO Albrecht Bolza-Schünemann revealed that Drupa, a 14-day print media trade fair recently held in Düsseldorf, had brought in orders worth more than €200m, surpassing the figure for the previous Drupa in 2004. Most of the contracts were for batch-produced sheetfed presses, sales of which had been badly hit in the first five months by a slump in the key US market. Judging by the response to KBA's product launches, post-Drupa business also promises to be brisk. The total volume of sales generated by the fair cannot be calculated with any degree of precision until the autumn, since financing for certain export markets must still be clarified, and this has become more complex and time-consuming in the wake of the credit crisis.

Technological pole position compellingly defended

There was a broad consensus among industry experts at Drupa that KBA compellingly defended its technological edge with a raft of innovations and unique features, not only in medium- and large-format sheetfed offset technology and processes, eg for packaging printing and environmentally responsible print production, but also in newspaper press technology with KBA's compact new high-automation models. A further focus of interest proved to be the workflow services demonstrated by KBA Complete, a consultancy established earlier this year in association with Hiflex, a provider of management information systems (MIS).

The new high-performance Rapida 106, which at Drupa vindicated KBA's claim that it is the world makeready champion in the B1 (41in) format, generated a high volume of sales, as did the new, versatile Rapida 105, which is especially popular in emerging economies. In large format and among packaging printers KBA underscored its position as the global market leader with a string of contracts, while the new Rapida 75 B2 (29in) press built by Czech subsidiary KBA-Grafitec also attracted a number of buyers. The web division sold several commercial offset presses to printers from Latin America and Denmark, along with two presses for printing newspapers and semi-commercials. Further orders are expected over the next few months, particularly for KBA's revolutionary Cortina and Commander CT compact web presses. Top of the sales rankings at Drupa 2008 were Germany, Russia, Ukraine, North and South America, China, the Arab states, Italy and Scandinavia.

Driving growth in new and niche markets

To stabilise earnings, diversify risk and reduce the group's dependence on more volatile print markets, Bolza-Schünemann stated that KBA will continue to pursue its successful strategy of driving growth in mainstream product lines - high-volume sheetfed, commercial web and newspaper presses - as well as in niche markets that are less exposed to economic and advertising cycles. These include securities, banknotes, decorated metal, plastic cards, data storage media and industrial ID systems. As ever, KBA is on the watch for opportunities to diversify through judicious acquisitions, and in addition to stepping up its service and consultancy activities does not exclude a move into consumables or non-print sectors such as environmental technology or other high-growth engineering applications. The group has already acquired expertise and patents on air purification through its Stuttgart subsidiary, KBA-MetalPrint.

Higher level of plant utilisation and sales in second half-year

The surge in orders booked at Drupa, along with anticipated post-Drupa business, will substantially improve capacity utilisation and sales at KBA's sheetfed production plants. Major web press contracts booked at the turn of the year, and a brisk inflow of orders over the past few months, will keep the group's web press facilities busy until the end of the year and materially boost sales in the third and fourth quarters. Following the divestment of KBA's rotogravure business in September 2007, an agreement has now been reached with staff representatives on personnel reductions at the relevant plants. In addition to natural attrition, which has already trimmed the payroll by 180, and other measures such as phased retirement, there will be around 100 redundancies at KBA's Frankenthal operation. While sales of metal-decorating presses and at subsidiary KBA-Metronic were on target at the end of May, the figures for security presses failed to equal the prior year's high level.

Bolza-Schünemann admitted that, with sales and profits flagging in the first five months, his €1.6bn end-of-March sales prognosis for 2008 represents something of a sporting challenge. However, in view of the major boost expected in the second half-year, he believes this to be a realistic figure. Notwithstanding the risks associated with market activities, currency exchange and the financial crisis, KBA is aiming for a pretax profit roughly on a par with 2007 (€63.2m), following a big increase in shipments in the third and fourth quarters.

Improvement in consolidated earnings

Looking back on 2007, Bolza-Schünemann noted that, while sales were marginally lower than in 2006, operating profit soared from €46.2m to €65.7m. Profit from web and special presses accounted for a full €64.1m of the total: under the dual impact of glacial demand in the US and relentless pricing pressures, the sheetfed division's operating profit shrank to a totally unsatisfactory €1.6m.

Dividend raised to 60 cents per share

Shareholders approved a motion tabled by the management and supervisory boards to utilise €9.8m of the parent's retained earnings of €10.8m under German accounting laws to increase the dividend from 50 cents the previous year to 60 cents, and to transfer the €1m balance to the parent's revenue reserves.