Koenig & Bauer AG

Ad hoc: Orders up at KBA: black art innovator in the black

Koenig & Bauer AG /
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Ad hoc: Orders up at KBA: black art innovator in the black
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Notwithstanding the challenges arising from ongoing structural changes in the
print media market the KBA group met all its capital requirements from a healthy
operating cash flow of EUR83.9m, scaled back bank debts still further and
boosted liquid assets. The 195-year old enterprise bucked the industry trend in
disclosing a post-recession profit for the third year in succession.

Brisk demand for security, metal-decorating and coding equipment helped swell
the group order intake to EUR1,552.1m - its highest level since the record year
of 2006 and 20.8% up on 2010 (EUR1,284.9m). The backlog of unfilled orders
almost doubled from EUR440.8m to EUR825.7m. But at EUR1,167.2m group sales were
marginally below the prior-year figure of EUR1,179.1m due to shipping delays and
weak demand for sheetfed and web offset presses in the second half-year.

Flagging investment activities in the final four months led to an 8.3% drop in
new sheetfed contracts to EUR569.9m. Brisk demand for niche products, however,
sent the intake of new orders for web and special presses soaring by 48.1% to
EUR982.2m. Although the two divisions each posted sales worth EUR583.6m, this
represented an improvement of 5.9% over the prior year in sheetfed sales, but a
slide of 7.1% in sales of web and special presses following shipping delays.

The rising cost of raw materials, heavy investment in new products, wage
increases, unscheduled structural expenses and lower sales following external
delays in deliveries until the current year reduced the group operating profit
from EUR22.2m in 2010 to EUR9.9m. But despite unsatisfactory market pricing and
fluctuating levels of plant utilisation, KBA´s web and special press division
posted a profit of EUR28m (2010: EUR14m), with niche and service activities
playing a major role. In the sheetfed division, price erosion and the high up-
front expense associated with developing new products put paid to any operating
profit, even though restructuring measures delivered substantial cost savings.
The division therefore made an operating loss of EUR18.1m following a profit of
EUR8.2m the year before.

A group pre-tax profit of EUR3.3m and annual net income of EUR0.4m fell well
short of the corresponding figures for the previous year of EUR15.3m and
EUR12.5m. Earnings per share were just 2 cents (2010: 76 cents). In view of this
unsatisfactory performance, and the current challenging business environment,
the management and supervisory boards plan to dispense with a dividend for 2011.

Despite bigger inventories, cash flows from operating activities surged to
EUR83.9m (2010: EUR30.1m) following a jump in customer prepayments and a drop in
trade receivables. This covered higher outflows for investing activities and
boosted the free cash flow to EUR57.8m. Liquid assets soared to EUR145.6m while
bank loans were trimmed to EUR35.9m, giving a net financial position of
EUR109.7m at the end of the December, over twice the figure for 2010 (EUR47.9m).
A comfortable level of liquidity and access to adequate credit lines document
KBA´s solid financial profile, as does the high ratio of equity to the bigger
balance sheet total, which in 2011 was 38.2%.

Looking ahead, KBA management emphasised the higher risks that exporters face
from slowing growth in major emerging markets, the high oil price and ongoing
debt crisis in Europe. While the Drupa trade fair is expected to stimulate
sales, and management is confident that a raft of new products will boost the
order intake, particularly in the sheetfed offset division, there will be no
return to the high volumes of previous years. If market conditions remain stable
KBA is targeting a single-digit percentage increase in sales and a higher pre-
tax profit.

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Koenig & Bauer AG
Friedrich-Koenig-Straße 4 Würzburg Germany

WKN: 719350;ISIN: DE0007193500;Index:SDAX;
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