Heidelberg have adopted a wide-ranging action package, as announced last year, for a short-term reduction in structural costs and long-term improvements in the company’s profitability. Focus on the profitable core business and systematic streamlining of the cost base are geared to delivering a €100m improvement in EBITDA, excluding the restructuring result. At the same time, a return transfer of liquidity reserves from the trust fund will almost completely eliminate net debt, thereby significantly improving Heidelberg’s financial stability.
Heidelberg is to implement a wide-ranging action package for the company’s realignment, which it hopes will allow them to build on a strong brand and direct its future focus to the profitable core business with an average EBITDA margin of over 8%.
Heidelberg will discontinue individual products that earn too little and significantly impact the Company’s profitability with an annual loss totaling some €50m. In digital printing, the market for the Primefire 106 product has grown slower than anticipated because of the difficult industry and market environment. Similarly, in sheetfed offset printing, the very-large-format product range has been falling well short of sales targets because of a fundamental change in the market structure for this subsegment. To improve overall profitability as soon as possible, production in both businesses is to be discontinued by the end of 2020 at the latest.
The realignment is accompanied by comprehensive streamlining of production costs and structural costs. In total, the planned measures will affect up to 2,000 jobs worldwide. This may also include plant closures. This reduction in force is an essential part of the long-projected action package for Heidelberg’s realignment, quite independently of what is currently a difficult business situation due to Coronavirus. However, in view of current circumstances, Heidelberg is conscious of its responsibility to the workforce and will work with the employee representatives to ensure that the reduction in force is made as socially responsibly as possible. Depending on the outcome of negotiations with the employee representatives as well as accounting charges in the financial year 2019/2020, the non-recurring expenses necessary to implement the action package are estimated to total about €300m.
“Heidelberg’s realignment is a radical step for our company that also involves some painful changes. As hard as it was for us to make this decision, it is necessary in order to put our company back on track for success. Discontinuing unprofitable products enables us to focus on our strong, profitable core. This is where we will further extend Heidelberg’s market position by leveraging the opportunities of digitalisation. Going forward, we will continue to provide our customers worldwide with technologically leading digital solutions and services across the board,” said Heidelberg’s Chief Executive Officer, Rainer Hundsdörfer.