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    Breaking News

    Heidelberg details realignment plan

    The short-term reduction in structural costs will provide long-term improvements in the company’s profitability.

    Heidelberg details realignment plan
    03.18.20
    The management board of Heidelberger Druckmaschinen AG (Heidelberg) has adopted a wide-ranging action package, as announced last year, for a short-term reduction in structural costs and long-term improvements in the company’s profitability.

    Focus on the profitable core business and systematic streamlining of the cost base are geared to delivering a €100 million improvement in EBITDA, excluding the restructuring result. At the same time, a return transfer of liquidity reserves from the trust fund will almost completely eliminate net debt, thereby significantly improving Heidelberg’s financial stability.

    “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 digitalization. Going forward, we will continue to provide our customers worldwide with technologically leading digital solutions and services across the board,” explains Rainer Hundsdörfer, Heidelberg’s chief executive officer.

    Heidelberg is improving its liquidity with a return transfer of part of the liquidity reserves in the amount of approximately €375 million from the trustfund managed by Heidelberg Pension-Trust e.V., which was established in 2005. In this way, the company plans to improve its financing structure by reducing debt – notably including the repurchase of a €150 million high-yield bond – and to systematically press ahead with its realignment.

    “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,” says Marcus Wassenberg, Heidelberg’s chief financial officer. “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.”

    Heidelberg is to implement a wide-ranging action package for the company’s realignment. In this, Heidelberg will be able to build on a strong brand and direct its future focus to the profitable core business with an average EBITDA margin of over 8%.

    Heidelberg will discontinue individual products that earn too little and significantly impact the company’s profitability with an annual loss totaling some €50 million. In digital printing, for example, the market for the Primefire 106 product has grown much more slowly than anticipated because of the difficult industry and market environment. Similarly, in sheetfed offset printing, the very-large-format product range has been falling well short of sales targets because of a fundamental change in the market structure for this subsegment. To improve overall profitability as soon as possible, production in both businesses is to be discontinued by the end of 2020 at the latest. The aim is to focus Heidelberg consistently on profitable activities in order to secure strong operational performance and profitability under its own power, also when times are difficult.

    As has already been announced, Heidelberg’s realignment is accompanied by comprehensive streamlining of production costs and structural costs. In total, the planned measures will affect up to 2,000 jobs worldwide. This may also include plant closures. This reduction in force is an essential part of the long-projected action package for Heidelberg’s realignment, quite independently of what is currently a very difficult business situation due to the coronavirus pandemic.
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