Heidelberg relies on less-is-more

The share of Heidelberger Druckmaschinen AG is still in the basement as a penny stock, but rose from € 0.567 in June 2020 to € 0.724 - as of midday today. The reason: CFO Marcus A. Wassenberg's plan currently seems to be working. Tight financial management is paramount and there is no alternative. (See analysis "Heidelberg's need for money" by Morten B. Reitoft via INKISH.NEWS). 

In the presentation of the results for Q1 2020/2021 today, Wassenberg named the number one priority: drastic debt reduction, followed by the skillful handling of short-time working and working hours as well as portfolio streamlining. This led to an EBITDA of 60 million (excluding the restructuring result and thanks to the income from the reorganization of the company pension scheme). At around € 330 million, sales were around a third below the same quarter of the previous year (€ 502 million). Incoming orders fell by a total of 44 percent to EUR 346 million in the first three months (previous year: EUR 615 million). 

With up to 80 percent short-time work due to the COVID-19 crisis, there is little room for maneuver. It should be noted: Without manufacturing, without deliveries / installations at the customer, no billable sales. And it is almost beneficial that compared to the same quarter of the previous year, sales (minus 30%) and incoming orders (minus 44%) have deteriorated dramatically. Incidentally, Heidelberg is worse than competitors such as Koenig & Bauer or BOBST in terms of sales decline and order intake, but both of which, however, have to report losses for the first half of 2020. 

Wassenberg compensates for this unfortunate situation with sales of Gallus and CERN and the closure of company divisions. All in all, this should save around € 100 million over the next three years. The retrieval of pension funds serves to offset debts and saves around 12 million interest payments. 

Is a shrinking cure inevitable? 

Wassenberg names € 2.0 billion to € 2.1 billion as the future revenue target. That is around half a billion euros less than in recent years. “We keep our word”, emphasized Wassenberg, and at the same time praised the “terrific team performance”, not only in the financial sector, but everywhere in the company. 

He speaks of a recovery at a “low level”, “more freedom to invest” and a “gradual recovery”. The downside at Heidelberg is the (low) equity and cash flow, which is still negative, but has improved. 

In this situation, CEO Rainer Hundsdörfer can only be optimistic. He emphasizes that the aim is to make Heidelberg “weatherproof”, to take “overdue and indispensable” measures in order to “earn money successfully and sustainably” and to “strategically develop the core business”. 

While Wassenberg is getting very specific, Hundsdörfer is ultimately drawing a vague picture of the future of Heidelberg, on the one hand based on the preservation of the status quo business ("We track the situation of our offset printing customers online in real time worldwide and adjust to it exactly") and on the other is based on innovations in the form of delicate plants that have nothing to do with the core business: According to Hundsdörfer, around € 5 million was invested in a production line at the Wiesloch plant in order to use innovative printed electronics to manufacture high-quality sensors predominantly for the medical sector. 

Where is the journey going? 

Well then. For the moment, Heidelberg is doing reasonably well in times of the pandemic. But will it stay that way? For the rest of the final year and the next three quarters, it will be fateful whether the sale of Gallus can last and whether the high purchase price will be paid. 

There are doubts about this and CFO Wassenberg no longer spoke of the purchase price in cash of € 120 million, but “only” of a “considerable amount”. The sale of Gallus is important for Heidelberg not only to compensate for losses, but above all to get around 450 employees off the cost list. 

Let's see. It remains exciting! 

PS: By the way, I think the interest of the German press in the Heidelberg webcast on the quarterly results today was surprisingly low. Just like the questions to CEO Hundsdörfer and CFO Wassenberg, which only came from the regional press and not from FAZ, Handelsblatt, Reuters or DPA.