The company has published its half-yearly figures for the financial year 2011/2012 (April 1 to September 30, 2011) which shows that it has improved its operating result while recording stable sales.

Incoming orders for the first half-year totaled R14.5 billion (EUR 1.333 billion). After adjustment for exchange rate effects, this was around 5% below the high level for the same period the previous year R15 billion (EUR 1.436 billion), which was influenced by the IPEX and ExpoPrint trade shows. The Heidelberg Groups order backlog at the end of the second quarter amounted to R8 billion (EUR 731 million), which was slightly higher than the previous quarter R7.8 billion (EUR 718 million).

Sales for the first six months totaled R12 billion (EUR 1.180 billion), which was on a par with the previous years level of R13 billion (EUR 1.196 billion).

With stable sales, the continued consistent cost management that forms part of the reorganization and the associated efficiency gains have led to a significant improvement in profitability compared to the previous year. To achieve our medium-term earnings target, we will take action to counter the fact that the global economic situation has become more uncertain and the market is not recovering as expected, said Heidelberg Group CEO Bernhard Schreier.

The free cash flow for the first half-year was negative at -R207 million (EUR -19 million). This was partly due to the outflow of funds resulting from the plant expansion in China. The net financial debt for the first six months was comparatively low at R3 billion (EUR 279 million). At the beginning of the previous financial year, this debt was still as high as R7.6 billion (EUR 695 million). The equity ratio remained stable at around 30 percent during the period under review.

Successful refinancing and effective asset management enabled us to secure the companys financial stability and thereby significantly reduce our financing costs. Thanks to the further optimization of net working capital in the second quarter, the free cash flow was better than expected, which had a positive impact on our net debt, said Heidelberg CFO Dirk Kaliebe.

As at September 30, 2011, Heidelberg had a workforce of 15,782 worldwide (previous year: 16,228). The number of employees thus fell by 446 compared to the previous year.

In the Heidelberg Equipment division, incoming orders for the first half-year totaled R8.8 billion (EUR 810 million). This was 8% down on the previous year, which was boosted by the IPEX and ExpoPrint trade shows. Over the same period, the division saw sales grow by 4% (7% after adjustment for exchange rate effects) to R7.4 billion  (EUR 674 million). The Heidelberg Services division was still feeling the effects of the declining business with remarketed equipment. Incoming orders were 7% below the previous years figure at R5.6 billion (EUR 515 million). The divisions half-yearly sales fell by 7% (6% after adjustment for exchange rate effects) to R5.4 billion (EUR 498 million).

The order situation at Heidelberg continues to vary from region to region. While incoming orders for the first six months in the Europe, Middle East and Africa (EMEA) and the South America regions were down on the relevant figures for the previous year, which had been boosted by trade shows in these areas, the Asia/Pacific and Eastern Europe regions matched the previous years level (after adjustment for exchange rate effects) and the North America region saw a slight improvement on the previous years weak incoming orders. Sales were up on the previous years figure in the North America, South America, and Asia/Pacific regions after adjustment for exchange rate effects. In the Europe, Middle East and Africa and Eastern Europe regions, on the other hand, they were below the previous years figure after adjustment for exchange rate effects.

The company believes that economic uncertainties will have a restraining influence on investment behavior in the industry during the second half of the financial year. The distortions in the capital markets and the weaker overall economic momentum have once more clearly increased uncertainties respecting further cyclical trends compared with the first quarter 2011/2012. The order backlog for the company is highly differentiated internationally, and is influenced on the one hand by the continuing uncertainties in the US, Japan, and the Mediterranean countries, and on the other hand by the favorable business trend in China and South America.

Due to the economic outlook, it can be expected that demand will be weaker than anticipated during the second half of the financial year, and that sales and the operating result will not reach the level aimed at by the company. As a consequence, the goal of a balanced pre-tax result will probably not be attained. In an endeavor to increase operating profitability in the current financial year, measures relating to non-personnel costs and the human resources area that can be implemented quickly have been introduced. The company expects that the operating result excluding special items for financial year 2011/2012 will be noticeably better than that of the previous year.

Its medium-term profitability goals will continue in effect, even if the planned sales increase to over R30 billion (EUR 3 billion) is delayed due to weak demand. In order to attain these profitability targets, the company is working on a programme to ensure the already established target of an operating result of (EUR 150 million) within the next two financial years. Building on the reorganisation of the company that was implemented in 2010, the focus will be not only on further capacity and cost adjustments, but also on structural changes in order to create long-term profitability for this business model. In doing so, we closely examine all areas, products, and processes.

We will prepare ourselves to effectively satisfy the requirements of a changing and more volatile environment of the professional commercial and packaging printing market. As soon as we have completed our examination and measures have been approved, this will be announced promptly, said Schreier.