People & Print Analysts and financial press conference 19 December 2013 at KBA-MetalPrint in Stuttgart
KBA accelerates drastic Group restructuring 1. Long-term strengthening of core business with consolidation - Market trend of substantial parts of today s core business lines is assessed as stagnant - Securing of core business with structural adjustments to changing markets - Optimisation and concentration of value creation at the various locations - Changes to organisational structures 2. Sustained growth in packaging and digital printing - Early diversification with own developments and acquisitions, important step in 1950s: entry into banknote printing - Further successful milestones in 2003/2006: entry and expansion in metal-decorating activities, positive developments at KBA-MetalPrint - Consistent exploitation of potential to expand portfolio in digital printing and packaging segments (Flexotecnica and Kammann) KBA 2
Structural changes have lasting impacts Shift in advertising revenues against print resulting from changes in media habits Internet, smartphones and reading devices reduce print volume Digital printing is gaining market share from offset primarily in the book, direct mail, advertising sectors Sustained market volume in our core business with web and sheetfed offset presses is significantly smaller than before the financial crisis, a lasting recovery is not likely 7 Advertising revenues* in Germany in bn 6,1 6 5 4,8 TV + radio + cinema 4,9 4 3 2 1 3,1 2,9 1,7 Direct mailing Daily + weekly + Sunday newspapers Magazines (popular + trade press magazines) Freesheets Online 3,4 2,9 2,1 2,0 1,1 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 KBA * According 3 to the figures published by the German Advertising Industry Association (ZAW).
Slump in demand for sheetfed and web offset Global market volume down by more than 50% Previous volume no longer attainable given media shift despite an annual growth in print volume worldwide of approx. 2% Enhanced productivity with higher performance presses and increased levels of automation as well as consolidation trends in the print industry reduce market potential additionally Global press market (in bn) 9 8 7.8 7 6 5 6.9 6.1 4.8 4 3 3.2 3.5 3.4 3.3 3.1 3.05 2.9 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 KBA *) Not including 4 toner-based technologies, digital and gravure printing systems, and others
Market development of web and sheetfed offset presses 2000 1800 1600 1400 1200 1000 Web offset press market in m 1900 1700 1100 6 5 4 3 Sheetfed offset press market in bn 5.3 5.5 5 4.8 4.4 4.4 3.7 800 600 400 200 600 800 700 630 500 450 400 2 1 2.6 2.7 2.7 2.7 2.6 2.6 2.5 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Expectations of a sustained web offset market recovery following an interim high in 2010 were not fulfilled Volume of new investments has shrunk significantly, retrofits and consolidation dominate The sheetfed offset market has been stagnant since 2011 at a significantly reduced level Mid-term market developments mainly depend on the dynamics of structural changes and the global economy KBA 5
Strategic realignment of the KBA Group Restructuring of sheetfed offset business Long-term strengthening of future development potential and profitability of core business Restructuring of web press business for newspaper and commercial printing Fit@all Organisational restructuring / Optimisation of management structure Revised manufacturing location concept, affecting 1,100 to 1,500 jobs Strengthening growth in special markets KBA 6
Fit@all: Restructuring of web press business New equipment and service business reconfiguration Over 40% market share in newspaper printing, but market has shrunk significantly Business model with minimal fixed costs for higher flexibility Profitable and growing service business Capacity and personnel adjustments Own division with clear responsibility for earnings KBA 7
Fit@all: Restructuring sheetfed offset press business Structural and process optimisation No. 2 in sheetfed offset with a global market share of approx. 20% Technological frontrunner Market leader in largeformat and folding carton printing Optimisation of product portfolio and sales network Capacity and personnel adjustments Own division with clear responsibility for earnings KBA 8
Fit@all: Revised manufacturing location concept High quality and flexibility when manufacturing core components Reliable supply of timecritical parts Revised location concept encompasses Würzburg, Radebeul, Frankenthal, Mödling, Dobruška Reduction and concentration of productive resources at the main locations Shift from value-added activities with personnel adjustments Closure or sale of sites not ruled out Own production division with clear responsibility for earnings KBA 9
Fit@all: Organisational restructuring Establishment of autonomous units for sheetfed, web, manufacturing and special applications Reorganisation of management structure Allocation of subsidiaries according to market focus Establishment of clear areas of responsibility Operative Group executive Board members take over responsibility for new units Units with clear responsibility for earnings KBA 10
Fit@all: Supplementary package of measures Areas Overhead costs Key measures Reduction in administrative costs through personnel adjustments, process optimisation and outsourcing of auxiliary functions Working capital Reduction in tied assets, also non-current assets Locations Solution to some under-performing locations Segment reporting Implementation of restructuring concept Strengthening of growth areas Changes in segment reporting should occur at the latest after the implementation of a new management and Group structure Permanent monitoring of restructuring progress with external support from professional implementation experts Integration of new acquisitions Kammann und Flexotecnica, strategic development and organisational bundling of promising activities KBA 11
2013 and outlook Annual group sales of around 1.1bn expected, operating figures in the black at Group level before special influences Non-cash expenses for extraordinary depreciation in the mid-double-digit million euro range Additional provisions for capacity adjustments still effective in 2013, the amount of which is dependent on the results of negotiations with employee representatives Annual cost savings after restructuring in the mid-doubledigit million euro range Sustained profitability in all areas by 2016 at the latest, with a sales volume between 1bn and 1.1bn KBA 12
KBA accelerates drastic restructuring of Group 1. Long-term strengthening of core business with consolidation - Market trend of substantial parts of today s core business lines is assessed as stagnant - Securing of core business with structural adjustments to changing markets - Optimisation and concentration of value creation at the various locations - Changes to organisational structures 2. Sustained growth in packaging and digital printing - Early diversification with own developments and acquisitions, important step in 1950s: entry into banknote printing - Further successful milestones in 2003/2006: entry and expansion in metal-decorating segment, positive developments at KBA-MetalPrint - Consistent exploitation of potential to expand portfolio into digital printing and packaging segments (Flexotecnica and Kammann) KBA 13
Portfolio expanded in future markets Sheetfed Web Banknote / Security Digital Metal / Coated Steel Special solutions for packaging Marking and Coding Flexible packaging Glass Machinery business Project business System business System solution Project business Solutions business Machinery business Machinery business Small-, medium- and large-format presses for packaging, book, poster, display and commercial printers Substrates from lightweight paper to corrugated board plus plastic Web offset presses for newspapers, inserts, magazines, catalogues, flyers, books, brochures in higher print runs Special printing presses with varied printing processes, such as intaglio for printing bank notes Special security technology and systems for pre-press, quality control, post-press Bank note design service Digital web presses (inkjet) for books, direct mail, advertising and newspapers from 1 to medium-sized runs Interest also from other application areas Solutions supplier for printing, coating, drying and metal sheet logistics Systems for air purification as part of drying Application in packaging segments: food, cosmetics, tobacco Inkjet, laser, hot stamping and thermal transfer solutions for marking and coding Marking and coding on very varied substrates, such as synthetics, plastic film, glass, ceramic, board Packaging presses for flexible, nonabsorbent materials, such as foil Flexo presses offered by Flexotecnica Presses for decorating hollow containers made from premiumquality glass, plastic and metal Directly decorated glass containers are mainly used for luxury cosmetics, perfume and premium spirituous beverages N E W N E W N E W KBA 14
Above-average growth in digital printing Market share is expected to increase from 12% to 17% by 2015 High-volume digital presses are particularly popular in publication printing (due to personalisation, small runs), new options for newspaper printing (current market share: < 0.5%) However, offset remains the dominant printing process in the mid-term 40% 35% Global print market by process 2011-2015 38% 36% 30% 25% 28% 26% 20% 15% 10% 12% 17% 12% 12% 10% 9% 2011 2015 5% 0% Digital Sheetfed offset Web offset Flexo Other KBA Sources: 15 Smithers PIRA, Jakoo Pöyry, Primir, Global Insight, own research
New business line: inkjet digital printing High-volume KBA RotaJET 76 digital press Direct entry into future market with an own product Digital flexibility with industrial performance and a high quality Focus on applications for books, direct mail, advertising and newspapers Interest also from other areas Target groups: medium to large print operations Two presses sold, further projects in the pipeline Digital printers value KBA s know-how and experience in high-tech press engineering KBA 16
Growth segment packaging printing Internet is reducing print and advertising volumes in the newspaper, magazine and catalogue sectors The trend to reading devices, such as ipads and others, is responsible for the decline in book printing Packaging, film and label printing are classic growth markets Only marginally affected by the internet and digital printing (apart from labels) KBA is very well positioned in packaging printing on board, paper and metal 40% 35% Global print market by product 2008-2015 34,7% 36,7% 36,3% 30% 29% 25% 20% 15% 10% 5% 5,5% 6,4% 4,6% 4,5% 10% 9,3% 7,4% 6,1% 5% 4,5% 2008 2015 0% Books Catalogues Magazines Newspapers Advertising Packaging Other KBA Source: 17Smithers PIRA
Global packaging volume: +25% by 2018 2012 $800bn +25% 2018 $1,000bn in $bn Worldwide Asia (without Middle East) & Oceania Western Europe KBA Source: 18 Smithers PIRA, 2013
Carton/corrugated board and plastics dominate Carton/ KBA Source: 19 Smithers PIRA, 2013
80% of the growth expected comes from Asia 191.6 4.1% Asia 105.2 Worldwide 144.3 150.9 66.1 72.1 8.8% 6.9% China Asia India Japan Other 8.8% 0% 5.5% Latin America Eastern Europe North America 3.4% 3% 1.3% Annual consumption in millions of tonnes of folding carton, corrugated 11-17 CAGR Western Europe 0% board and flexible materials for packaging worldwide Other* 2.9% KBA Source: 20 Smithers PIRA, 2013 *including Middle East, Africa 11-17 CAGR
New business line: Flexible packaging Majority takeover of Italian press manufacturer Flexotecnica completed at the beginning of December Entry into previously not addresses growth market for flexible packaging materials (film) 100 employees, manufacturing outsourced to a large extent Pre-tax profit in 2012 with annual sales of approx. 36m Integration into the Group and KBA s global sales and service network open up growth prospects KBA 21
New business line: direct decoration of hollow containers Majority acquisition of Kammann Maschinenbau at the beginning of September 2013 Entry into growth market for directly decorating luxury glass packaging and hollow containers Profitable global market leader in screen printing systems for directly decorating glass Sales of over 30m in 2012 with 175 employees Containers are mainly used for cosmetics, perfume and spirituous beverages in the top price class First digital solution was launched at K, the trade show for plastics and rubber KBA 22
Market structure container printing With the acquisition of Kammann KBA entered the promising market for container printing presses². Market volume > 300m, glass containers and plastic bottles form own sub segment. Packaging Beverage cans Criterion Aerosol cans, alu tubes, alu bottles Plastic tubes Plastic pots Glass containers / plastic bottles Packaging Number of packaging directly printed (bn p.a.) 280 20 12 100 <10 Press output (packaging items/minute) 2,200 250 250 600 80 (pt. 200) Dominating printing technologies Dry offset Dry offset Dry offset, screen / flexo printing Dry offset Screen printing, pad printing Relevant market Printing / coating machines Can manufacturing lines Presses, lines Presses Presses² Addressable market volume in m1 60m 110m 50m 50m 30-35m³ 1 Rough 2 Not estimation for presses including presses from Chinese, Taiwanese and Korean manufacturers, only relevant press types for KBA ³ Kammann volume of new presses for glass decorating approx. 15m in 2011 KBA 23
KBA: Summary 1. KBA is restructuring the Group proactively and consistently, its financial power enables the implementation of an extensive programme for the consolidation of the core business 2. Today s existing solutions for niche markets, cutting-edge developments in digital printing technology and acquisitions in the packaging segment offer good opportunities for growth 3. De-centrally organised and highly flexible press manufacturing company paves the way for promising future prospects by consolidating the core business and focusing on growing special markets KBA 24
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