As the world market leader in the printing press industry, Heidelberg is one of the biggest exporters in the German engineering sector. Due to the global financial crisis and the recession in major economies, print shops held back on their investments worldwide – which we felt directly and painfully. The two halves of the financial year could not have been more different in nature. Whereas in the first half-year, favored by the success at the drupa trade show, we were successful in obtaining incoming orders of nearly 1.9 billion euros, during the second half-year orders plunged by nearly half.
Our decision to considerably further expand our cost-saving measures once again makes clear the seriousness of the situation. In March, we announced that we will reduce human resource capacity throughout the Group by a quarter. Two years ago, we had purposely extended an agreement with our employees on safeguarding the future because we wanted to hold on to valued employees and their expertise in the Company. We had to terminate this contract. There was no alternative to this difficult measure, because no short-term improvement in the situation was, and is, foreseeable so far. The world economic crisis continues to have a stranglehold on our key markets. The capacity utilization of print shops in the industrialized countries has fallen to an extremely low level, consolidations are occurring regularly here, and print shops primarily in the emerging markets are having considerable difficulties in financing investment projects. Our competitors are also suffering from the crisis. The figures for the printing press industry that have been disclosed up to now speak for themselves.
Internationally, the market turbulence in the stock markets and the weak order backlog of companies have resulted in enormous price declines. The world economic crisis is hitting especially export-oriented companies. During the first quarter of 2009, the incoming orders of the German engineering industry fell by 42 percent from the previous year. Cyclic shares like Heidelberg’s were especially heavily hit by declines.
The important task now is to conduct crisis management. The protection of the Group’s financial stability is the highest priority here. The banks have meanwhile fundamentally assured us of long-term and adequate financing, although a final commitment is still pending. We must reduce the structural costs of the Group while simultaneously not neglecting the service we provide for customers. We are therefore focusing on the following priorities:
We are confident of achieving this, since we have already been successful with these kinds of measures during the financial year. Early on – in July 2008 – we responded to worsening underlying conditions and then expanded our measures in October 2008 and in March 2009. Following substantial losses for the first six-month reporting period, we were able to again reach a nearly break-even operating result beginning in the third quarter – excluding the special items that were initially required for our Heidelberg 2010 program. By contrast to the sales downturns in the printing press area, our absolute sales figures in the service and consumables area continued to grow – which, however, has so far only been able to somewhat moderate the declines in the equipment area. Our position as the world market leader in sheetfed offset printing has remained undisputed, even during the current crisis, and our new large format packaging printing solutions are meeting with growing interest worldwide. The ‘Heidelberg’ brand name continues to stand for innovation, reliability, and quality. At this point, I would like to extend my thanks to our employees and the members of senior management, who ensure this even under unfavorable work-time conditions!
Our ‘startup position’ for the period following the crisis, when the economy picks up again, is excellent. This is especially so in such promising emerging markets as China and India. With our sizeable reduction in structural costs and a further considerable expansion in the share of sales accounted for by the more non-cyclical divisions, we are better prepared for future periods of global economic weakness.
However, at present, at least initially, we are still facing a difficult year. We hope the economic research institutes are right in their forecast that the global economy will recover beginning in 2010. Until that time, we will gather all our resources in order to guide Heidelberg safely through the crisis.