Heidelberger Druckmaschinen AG exceeded its goals in the challenging fiscal year 2022/2023. The technology company generated sales of 2.435 million euros compared to 2.183 million euros the previous year, representing an increase of around 12 percent. The adjusted operating result went from 5,1 percent to 7,2 percent. Free cash flow was positive at 72 million euros, but this figure benefited from non-recurring effects.
"In the financial year that we have just closed, we have obtained good results in a difficult environment," says the Dr Ludwin Monz, CEO of HEIDELBERG. “Faced with further cost increases and a level of profitability that remains low, Heidelberger is embarking on a value creation program,” he adds. The goal is to further boost the company's financial strength and increase investments in growth areas.
The new business strategy will lay the foundations for future investments. With its dual strategy, Heidelberger proposes two key strategic focuses. First of all, the company seeks to generate security in the printing market, beyond its business with sheetfed offset equipment, especially in the packaging and digital printing market. And secondly, with its Wallbox business, Heidelberger will unlock new markets alongside its core business.
Scope for growth: target, higher cash flow
To deliver innovation and, in particular, to continue to grow, Heidelberger requires the necessary resources, whether it is to further strengthen its product portfolio in the packaging sector or to finance a development budget aimed at the successful expansion of print. digital. With this in mind, the company seeks to significantly increase its available cash flow in the medium term.
"We will provide and redistribute the resources for growth through our own internal efforts, in order to successfully implement our growth strategy," explains Heidelberger's CFO, Tanya von der Goltz. This makes particular sense in the current market environment, which remains challenging and will shape the outlook for 2024.
A good financial year 2022/2023 in a difficult economic environment
Thanks to a strong last quarter, sales in the 2022/2023 financial year were slightly above the forecast level of €2.300 billion, amounting to around €2.435 million (prior year: €2.183 million). Strong growth in the packaging solutions segment made a particular contribution to the result. The order book as of March 31, 2023 remained high, around €848 million (previous year €901 million).
The price adjustments and the positive evolution of sales had a particular impact on EBITDA. At 8,6 percent, the EBITDA margin exceeded the target of at least 8 percent. Adjusting the gains, effect of the sale of fixed assets, the EBITDA margin was 7,2 percent. Given the higher absolute level of EBITDA and the financial and tax results that benefited from non-recurring tax relief, the net result after tax amounted to 91 million euros. This result was much better than the slight improvement expected in the previous year's figure (33 million euros). It also exceeded market expectations, which had already exceeded the original forecast in the course of the year.
Free cash flow driven by non-recurring effects
At 72 million euros, free cash flow was lower than the previous year (88 million euros). As in previous years, cash flow benefited from non-recurring effects, such as land sales. Operating cash flow was boosted by the improving earnings situation, but suffered negatively, impacted by the volume-related increase in inventories.
The net financial position (cash minus financial liabilities) improved to €51 million at the end of the report (previous year: €11 million). Heidelberger is also making progress with its capital ratio, which rose to around 23 percent (previous year: 11 percent) at the end of the financial year. Together with the higher actuarial interest rate for pensions in Germany and the expected land appreciation, this is mainly due to the positive net result after tax.
Increased investment in growth markets for packaging and digital printing
As global demand for packaged goods continues to increase, label and packaging printing is experiencing particular growth, making it an important core segment for Heidelberger. The packaging solutions segment already accounts for around half of the company's sales.
This proportion has gradually increased in recent years, a development to which innovations have also contributed. The new generation of Speedmaster XL 106 sheetfed offset presses enables packaging manufacturers to increase their net output by up to 10 percent. The new Boardmaster flexo web printing system is a completely new piece of equipment, doubling the productivity of price-sensitive folding carton printing compared to the predecessor model.
Heidelberger intends to use this technology to support its strategy and growth. In line with its two-pronged strategy, it is also focusing on the growth of digital printing, a segment that is enjoying dynamic growth in the label market, with a rate of around 6 percent. The company seeks to consolidate its position in this market with Gallus One, the first fully digital and highly automated label printing system.
With its charging solutions for electric cars, HEIDELBERG has successfully positioned itself in the growing market for domestic electric mobility in Germany through its subsidiary Amperfied GmbH. In order to reach a broader customer base in the future, the company is further pushing its expansion into other European countries.
A wallbox with a solar function is also being added to the product portfolio to take advantage of the growing number of domestic photovoltaic installations.
Outlook for fiscal year 2023/2024
Fiscal year 2023/2024 will continue to be affected by challenging exceptional conditions, such as rising material costs, energy, and personnel expenses. HEIDELBERG intends to continue offsetting the negative impacts by increasing its selling prices.
Weighing the opportunities and risks, and assuming that the global economy does not experience weaker growth than forecast by the most relevant Institutions, or even, assuming that it enters a recession, Heidelberger expects sales for fiscal year 2023/2024 to be in line with the figure for the previous year (previous year: 2.435 million euros). Another assumption in this context is that there will be no substantial changes in exchange rates, a key element to maintain the commercial activities of the company.
Rising production costs are likely to have a particularly negative impact on results. Energy costs are also expected to be higher than in the previous year, which benefited from favorable hedging trades. To offset these effects, Heidelberger intends to further adjust the prices of its products. Therefore, the adjusted EBITDA margin is expected to remain at the prior year figure (prior year: 7,2 percent). Results in the Printing Solutions and Packaging Solutions segments are likely to develop in line with the trend in their respective markets, while the IT Solutions segment's profit contribution is expected to be slightly better than in the year. former.
