The Heidelberg Group finds itself in the most difficult circumstances of its recent corporate history. As the owners of the Company, this situation affects you to a significant degree. Heidelberg’s shareholders’ equity suffered considerably from the operating losses of the financial year as well as from the restructuring measures that are necessary to cope with the impact of the global economic crisis. In order to secure Heidelberg’s liquidity, the Management Board had to act decisively and undertake numerous measures. The latest assessment assumes that the reorientation of the financing structure can be implemented successfully in the near future.
Let us recall: In June last year, Heidelberg was able to impressively demonstrate its primacy at the world’s largest trade show for the print media industry. Heidelberg was a magnet for visitors to drupa in Duesseldorf, and was also successful in signing numerous sales contracts. The results of the trade show slightly bettered our own forecast. The further developments in the financial year appeared to be potentially promising and calculable. However, instead of that, back in the summer of 2008 the financial crisis spilled over into the real economy and resulted in increasingly restrained investment activity by our customers, who are also keenly suffering from the economic crisis, as well as in a rapid downturn in business.
The Management Board reacted gradually to the increasingly escalating crisis as soon as the consequences began to take on concrete form. Some see this as cause for reproach. Occasionally one even has the impression that ‘responding’ to certain developments is somehow negative because the development was not foreseen and no proactive action was taken. Let us stick to the facts. No one was able to predict the course and extent of this crisis – not in the past, and not today. And there will come a time when Heidelberg will again be an efficient, solidly established company. Corporate management is guided by this leitmotif when reacting to events – and they are right to do so. The first package of measures was tied up in July 2008 and subsequently considerably expanded, first in October 2008 and then once again at our financial year-end in March 2009. Since November 2008, in view of our need to increasingly take advantage of the opportunities offered by short-time work, it became ever more clear that Heidelberg would be forced to let go of around a quarter of its highly qualified employees. Furthermore, investments were rigorously cancelled, projects were deferred, and various cost-saving measures were introduced in order to achieve the intended annual cost reductions totaling € 400 million. The reaction was therefore comprehensive, long-term in outlook, and balanced. The Management Board will respond with additional measures should the situation demand it.
This is an extremely difficult situation, particularly for the employees who are losing their jobs. Those who remain face considerably lower salaries because of short-time work and other cost reductions. It is primarily our employees who, with their experience and creativity, are to bring Heidelberg back on the track to success afterwards. The crisis necessitates a considerable willingness to make sacrifices and simultaneously to be prepared to make a commitment and remain engaged. The Supervisory Board therefore wishes to express its particular thanks to the employees and their representatives!
It became necessary to lend significant support to the Management Board during the financial year. We did so at meetings of the Supervisory Board and committees as well as at meetings with shareholders and staff representatives. All current topics and measures were intensively discussed together. Shareholders and staff representatives frequently also met separately in order to address the situation from their respective viewpoints and to develop their own proposals.
We fulfilled all the responsibilities incumbent on us under legal provisions and the Articles of Association, extensively advising and monitoring the Management Board in the management of the Company and its transactions. The close cooperation between the Management Board and the Supervisory Board also in the currently strained situation was not limited to the four ordinary meetings of the Supervisory Board, at which the Management Board informed us in detail about current developments and the Company’s business development in detail. We were always quickly and extensively informed concerning all significant decision-making procedures. We also passed resolutions in writing for projects that necessitated a quick decision. My contacts with the Management Board have been especially close during the financial year. I was always informed promptly and in detail concerning significant decisions and developments, as a result of which I was able to examine possible actions for the Company together with the Chairman of the Management Board and his colleagues and we were able to represent the Company and its interests together.
The newly selected Supervisory Board was constituted immediately following the Annual General Meeting held on July 18, 2008. Furthermore, the Human Resources Committee met three times and passed two resolutions by circulation. The Management Committee also held three meetings and the Audit Committee met five times. The newly formed Nomination Committee did not meet, and there also was no need to convene the Mediation Committee in accordance with Article 27 (3) of the Codetermination Act. No member of the Supervisory Board took part in fewer than half of the meetings of the Supervisory Board during the financial year.
Our discussions during the financial year focused increasingly on the Company’s financial performance during the year as well as on the securing of its liquidity and the restructuring that is necessary in order to cope with the impact of the financial and economic crisis. The development of sales and earnings, Heidelberg’s financial position, and the development of the price of the Heidelberg share, which caused us some concern, were the regular focus of discussions in the Supervisory Board during the financial year.
We view the strategic expansion of the consumables business favorably in order to reduce the Group’s dependence on cyclical fluctuations. We therefore agreed to the acquisition of the Hi-Tech Coatings corporate group, which is based in the UK and the Netherlands, following completion of the negotiations by circulation in writing. We had held extensive discussions concerning this transaction on the Supervisory Board already in advance.
In our meeting held on March 30, 2009, we focused on the planning process for the current and future financial years and discussed several possible scenarios in this regard. The planning process included all the measures undertaken for overcoming the current crisis as well as all significant aspects of markets and products. Our discussions focusing on the planning process and its premises were intensive and also, quite frankly, contentious, with various assessments expressed concerning future developments. The Management Board and the Supervisory Board were in agreement that, if necessary, the planning process must be reorganized if the planning assumptions change.