The bumper result was struck on a 12 per cent gain in sales to €3.59b.
Heidelberger Druckmaschinen is emerging from a round of cost cuts in time to benefit from a recovery in demand for printers for pamphlets and advertising. After slashing 4,000 jobs, CEO Bernhard Schreier forecast a third year of profit growth for fiscal 2007, boosted by expansion in China, where the German company is adding a factory.
“The worldwide economic boom has stabilised over the past year,” stated Bernhard Schreier, CEO of Heidelberger Druckmaschinen AG. “This development has proved of great benefit to us over the past financial year. Moreover, it looks like the positive trend in the print media industry is set to continue throughout the current financial year.”
In the period under review, the Heidelberg Group increased its preliminary operating profit to €277m, 31.28 per cent up on the previous year’s result of €211m. This produced an EBIT yield of 7.7 per cent of sales. Adjustments for exchange rate movements, the sales structure, high levels of R&D expenditure and increased product launch and material costs had a negative impact on the preliminary operating profit.
The latest profit corresponds to a return on sales after tax of 3.8 per cent. At €143m, free cash flow was well above expectations, says Schreier.
“In the last financial year we increased our earnings and financial power even further”, stated Heidelberg’s CFO, Dr. Herbert Meyer. “Thanks to the stability in the industry and improved cost structures at the Heidelberg Group there is potential to take this even further. Economic risks such as exchange rate movements and raw material and energy prices are still very much a factor though.”
Heidelberger’s shares have advanced 47 per cent in the past six months, boosting the company’s market value to €3.4b, while shares of smaller rival Koenig & Bauer AG have gained 19 per cent in that time.
The company last year extended its employee working hours by five per cent at no extra pay, part of a program to save a total €100m by 2008. Cuts are ongoing, with Schreier planning to standardise production lines and improve efficiency at a systems unit.
A greater emphasis is being placed on Asia, where the printer maker gets one-quarter of revenue. A new Chinese factory will begin to deliver folding machines this year, with production of printing machines starting next year.
The company already has a Chinese distribution unit employing 500 people, with a further 100 workers at a plant in India. Selling more post-printing products such as cutting and binding machines will help US market share, Schreier said in February.
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