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Koenig & Bauer earns record EBIT, targets 20% five year growth

Friday, 29 March 2019
By Wayne Robinson

Global figures reflected in Australia: Dave Lewis, managing director Koenig & Bauer ANZ with Sandra Duarte, general manager, Centrum Printing

Press giant Koenig & Bauer (formerly KBA) is seeing its realignment into the packaging world paying off, achieving a record EBIT of 7.1 per cent last year on revenue that was up a smidgen to €1.226bn.

Group EBIT climbed from €81.4m in the previous year to €87.4m despite some adverse circumstances in the availability of parts and market conditions. With the increase in its EBIT margin from 6.7 per cent to 7.1 per cent, Koenig & Bauer says it achieved the target defined for 2018 of around 7 per cent.

The increasingly bullish group is now targeting a €1.5bn sales revenue by 2023, as orders reach record levels. That is about half of the Heidelberg target.

Like its rival German press manufacturers Koenig & Bauer has had to instigate massive strategic changes following the GFC, with the bottom falling out of the commercial sheetfed and particularly web offset markets. And in common with manroland and Heidelberg packaging is the key area it is moving into.

Dave Lewis, managing director of Koenig & Bauer Australia New Zealand said, “The global figures are reflected here. We are seeing smaller packaging printers investing in new presses. In addition the Flexotechnica wide web flexo presses have also gone well, there are now four installed here.” Koenig & Bauer bought Flexotechnica in 2016.

Koenig & Bauer actually has the broadest product offering of any press manufacturer, it owns the banknote printing market with more than 90 per cent, it has co-developed digital presses for carton printing with HP, and now has a development with Durst inthe works, it is the major player in coding and marking, and has invested in buying finishing companies such as Iberica. It is also looking to related fields such as flooring and wall coverings for further growth.

Sheetfed sales revenue was down in 2018, although KBA says this is due to parts availability. The company also says there is a ferocious price war going on as press orders are few and far between. However flexible packaging press sales were up.

CEO Claus Bolza-Schünemann said, “Driven by a record order intake, we have been able to widen our share of the global flexible packaging printing market to 9 per cent. Revenue in marking and coding has risen by around 50 per cent in the last three years. Since the acquisition of flatbed die-cutter business in 2016, revenue in this business field has climbed by more than 50 per cent. The entry into the market for folder gluers and the planned joint venture with inkjet pioneer Durst for folding carton and corrugated printing are further milestones.”

CFO Mathias Dähn said, “Pleasing revenue and earnings potential can arise with our RotaJET digital printing platform for decor and flexible packaging printing following a greater substitution of the hitherto standard analogue printing processes and an increase in the internally-sourced production of decoration papers in the furniture and flooring industry. After a comprehensive evaluation process, the renowned packaging group Tetra Pak has opted for our large-format RotaJET for full-colour digital printing of beverage carton packaging. We have received two more RotaJET orders for digital decor printing.”

The previously announced shifts of machine deliveries into 2019 as a result of bottlenecks in the parts availability burdened the achievement of our revenue target. At €1,226m, group revenue was only slightly up on the previous year of €1,217.6m. Koenig & Bauer had been targeting organic revenue growth of around 4 per cent for 2018. With order intake coming to €1,222m (previous year: €1,266.3m), order backlog rose to €610.9m (previous year: €606.2m).

At €613m, order intake in the Sheetfed segment was below the previous year’s figure of €656.2m. Bottlenecks in the availability of parts dampened new business due to longer delivery times. The situation with regard to parts also caused revenue to drop to €647.4m, down on the previous year’s figure of €660.2m. This is also reflected in EBIT, which fell to €36.5m, compared with €37.5m in the previous year. With an EBIT margin of 5.6 per cent, Koenig & Bauer was able to maintain the level achieved (2017: 5.7 per cent) despite the continued price pressure being exerted by competitors. The lower order backlog of €199.1m compared with the previous year (€233.5m) was followed by good order intake at the start of 2019.

Orders in the Digital & Web segment rose from €139.6m to €167.6m, primarily due to the record order intake for flexible packaging printing, which reflects the initial success of the realignment of this business field. Whereas the demand for the HP press for digital pre-prints of corrugated liners was subdued, several presses were sold from the RotaJET digital printing platform for decor and flexible packaging printing, substantially exceeding the previous year’s figure. At €150.7m, revenue was slightly down on the previous year (€154.2m). Together with market-entry and growth-related expenses for digital, flexible packaging and corrugated board printing, the lower revenue exerted pressure on EBIT. Accordingly, EBIT fell to a loss of €10.5m, compared with a loss of €4.3m in the previous year. The order backlog widened from €61.5m to €78.4m at the end of 2018.

Given large orders and with project business remaining generally favourable, volatility remained high in security printing due to often lengthy order placement and the domination of large-scale projects. Further market share was gained in marking and coding, while the market position in the tobacco and tyre industry in particular was expanded significantly. Lower orders for metal and glass/hollow container decorating presses caused order intake in the Special segment to drop to €502.4m, down from €533.7m in the previous year. Revenue climbed from €467.9m to €490.5m thanks to growth in security printing, marking and coding and glass/hollow container decorating. EBIT came to €49.7m in 2018, down from €53.7m in the previous year. With the order backlog increasing to €344.6m (2017: €324m) at the end of December, good capacity utilisation is assured over the next few months.

Looking to this year CFO Mathias Dähn said, “The order backlog, which rose to €610.9m at the end of 2018, together with the good order development in January and February 2019 gives us good forward visibility across the entire group until the summer of 2019 and, in security printing with its good order situation, until 2020.

“The printing production output of our customers all around the world is growing, especially in packaging and banknote printing. With the exception of the packaging printers in China producing for export markets, our order intake has so far largely shrugged off the effects of the recent political and economic developments. In the absence of any material deterioration in the underlying conditions over the next few months, we target organic growth of up to 4 per cent in group revenue and an EBIT margin of around 6 per cent in 2019. This includes the annual 0.7 per cent improvement in margins on group projects to boost earnings as well as the margin impact from the growth offensive 2023, the cumulative costs of which we expect to reach around €50m for 2019 to 2021 with a heavier load in the first year. In the event of a slowdown in the economy, we cannot rule out an up to 2 percentage points lower EBIT.”

Looking at the medium term CEO Claus Bolza-Schünemann said, “With our growth offensive 2023, we want to actively exploit the currently available market opportunities in the cardboard, corrugated board, flexible packaging, 2-piece can, marking and coding, glass direct and decor printing as well as in postpress to achieve sustained profitable growth. The impact of volatile security printing will be reduced by higher packaging share of group revenue. For web offset presses for newspaper and commercial printing, we expect a further business decline. With all our initiatives and projects, we are targeting to increase group revenue to around €1.5bn with an EBIT margin of between 7 per cent and 10 per cent until 2023. All three segments are to contribute to the growth in revenue and earnings.

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