The press manufacturer has posted its results for the first nine months of the year. Order intake was €843m (£726.8m), €100m down on the prior year which was boosted by a huge order for security printing presses.
“The challenging market environment with sometimes massive concessions from the competition was reflected in order intake in the third quarter as a result of our strict price discipline,” said president and CEO Claus Bolza-Schünemann.
“The economic framework conditions also mean that individual customer projects are being postponed.”
Schünemann had previously spoken out critically about pricing at competitors Heidelberg, Komori and Bobst.
Sales in the period nudged up from €788.8m to €798.2m, while the order backlog at 30 September was €655.7m (2018: €769.3m). Net profit was just €1m, compared to €20.4m in the prior year.
Koenig & Bauer is investing €50m in its 2023 growth offensive between 2019 and 2021 with costs weighted in the first year of the plan, and these expenses contributed to a big drop in group EBIT, which fell from €28.6m to €5.2m.
A host of other factors dampened the results, including a drop-off in servicing revenues for newspaper and web offset customers as the number of installations falls in that part of the market, due to declining demand and company closures. Orders for flexible packaging presses were down, as well.
K&B is targeting organic revenue growth of 4% and an EBIT margin of around 6% for the full year.
Investment at the Radebeul demo centre, its Würzburg plant, a new facility for the Kammann business, SAP implementation and other projects burned through €48.1m, and a CHF30m (£23.5m) payment over historical corruption at banknote subsidiary KBA-NotaSys also burdened cashflow.
Unexpected project expenses for a big security press order as well as “unplanned quality costs” also impacted the figures.
A spokesman clarified the situation: “Koenig & Bauer has a huge expertise in managing such giant projects in security printing. In Q3 we had higher project expenses compared to our planning, this is a little bit normal in such big projects. We are very confident we will offset this in the next few quarters. Project completion is scheduled in Q3 2020.”
He said the quality costs related to rework costs on a machine component, and added: “We have already solved this issue.”
As part of an “intensive” cost reduction exercise in the face of the challenging conditions, K&B is also in the process of looking at how it can optimise its production and assembly footprint. The group currently has seven production sites in Germany, one in Austria, one in the Czech Republic, one in Italy and one in Spain.
Further details were unavailable at the time of writing as the project is ongoing.
There was better news in emerging business areas: pilot customer Klingele has approved the first sheetfed flexo CorruCut press after “demanding factory acceptance tests” with the press going into production imminently. K&B also sees “great revenue and earnings potential” for its RotaJet digital press range in décor printing and drinks carton production on the back of a landmark order with Tetra Pak.
Like Heidelberg, the group’s figures have been impacted by the implementation of accounting standard IFRS 16.
The group also announced that KBA NotaSys – the former De La Rue Giori business acquired in 2001 – will be rebranded as Koenig & Bauer Banknote Solutions from June 2020.
Shares in the group slipped from €31.74 to €30.34 on the news, but then rebounded to €31.66.
