REALIGNING: Heidelberg in radical action package

The world's biggest offset press manufacturer Heidelberg is instigating a wide-ranging action package to realign the business, which it says is a 'radical step' that will involve some 'painful' changes, to secure the long-term future of the company.

The action plan will see the Heidelberg become virtually debt-free, and with a clear focus on its profitable core business, centred on its sheetfed presses, which will be closely aligned with the €400bn a year global print industry, which it says will be growing slightly in the years to come.

The painful changes will include 2000 job losses around the world, possible closure of manufacturing plants, and the end of the company's Primefire digital sheetfed B1 press project. In addition, all VLF (very large format) press manufacturing will cease.

The Heidelberg ANZ business is likely to be largely unaffected by the cuts, there are no Primefire or VLF presses here, nor any in the local order book, and staffing levels are currently aligned with the market. Richard Timson, managing director of Heidelberg ANZ said, "The company has realigned its product portfolio, and will take the unprofitable parts out of its business. Our sheetfed offset presses account for the majority of sales, and will remain our core product, with the company focused on optimising productivity gains for its customers."

The company says its vision is to create a cross-industry IoT-based platform to automate all customer-supplier relationships. It says this solution will enable print shops to secure a significant gain in productivity.

The action plan comes as a further downturn in its business this year, even without the impact of the coronavirus, means the annual results will see the sales revenue significantly down on last year's €2.49bn, and the forecast 5-6 per cent Ebitda will turn into a loss, with another loss predicted for next year. The company says its action plan will see a return to profitability in 2021-2022.

The action package will cost Heidelberg around €300m with plant closures, project closures and redundancy costs. The company says a focus on the profitable core business, and systematic streamlining of the cost base, are geared to delivering a €100m improvement in Ebitda.

Heidelberg says with its integrated solutions portfolio and new digital business models such as subscription, the company “will continue to expand its leading technological role with the aim of even better driving its customers’ success going forward and consequently returning to sustainable growth.”

Future investment spending will focus on full end-to-end digitalisation of customer value creation, which primarily means integrated system solutions for machines, software, consumer goods and performance services.

Rainer Hundsdörfer, CEO at Heidelberg said, “Heidelberg’s realignment is a radical step for our company that also involves some painful changes. As hard as it was for us to make this decision, it is necessary in order to put our company back on track for success. Discontinuing unprofitable products enables us to focus on our strong, profitable core. This is where we will further extend Heidelberg’s leading market position by leveraging the opportunities of digitalisation. Going forward, we will continue to provide our customers worldwide with technologically leading digital solutions and services across the board.”

Heidelberg says sales for its digital B1 Primefire 106 have been slower than anticipated, and with no significant upturn anticipated the project will be closed by the end of the year. Heidelberg co-developed Primefire with Fujifilm, and it became the world's first digital B1 press when it was launched at drupa in 2016. Since then it has seen around a dozen go into the field. 

All VLF press manufacturing will also cease by the end of the year at the latest, meaning Heidelberg's biggest press will be the B1 size machines.

“The top priority following Heidelberg’s realignment will be profitability,” said chief financial officer Marcus Wassenberg.

Heidelberg is significantly improving its liquidity with a return transfer of part of the liquidity reserves in the amount of approximately €375m from the trust fund managed by Heidelberg Pension-Trust, which was established in 2005. The company says that in this way it will significantly improve its financing structure by reducing debt – notably including the repurchase of a €150m high-yield bond – and to systematically press ahead with its realignment. Richard Timnson said, "Paying out its debt is a great move."

“This marks a milestone for Heidelberg. At a single stroke, we are freeing ourselves from the severe debt burden and, at the same time, can systematically implement the requisite operational realignment within the next 18 months,” said CFO Wassenberg, “This will make us crisis-proof in the short term and significantly improve profitability, so that we can press ahead with our digital realignment. We are pleased that this financial plan of action has the support of the employee representatives and the trade union as well as all the lending banks.”