Orders continue to be slow as the chart below illustrates and per the trusted German VDMA report "sales of printing presses form German printing press manufacturers in the period from January to August 2013 were down 7% on the previous year. Incoming orders declined 12% in the same period". Well, of course 2012 was a DRUPA year, but still, it is not a pretty picture.
My back-of-the-envelope calculation suggests that, in order to achieve management's positive net income target, operating results in the next six months will have to improve by some €90 million, with the biggest swing being required in the equipment division.
The challenge is that the equipment division needs sales volumes significantly north of €400 million a quarter to contribute meaningful profits.
The division shipped €631 million in last fiscal year's fourth quarter (€379 million in this quarter) and generated a solid operating profit. However, today's equipment backlog is about €180 million below last year's September number, which makes it so much harder to achieve a blow-out fourth quarter.
With almost no change in headcount over the last two quarters, it appears that the organization is being maintained to support a strong fourth quarter in order to achieve its volume targets. Long-term this strategy will not work unless the offset equipment market grows again so that Heidelberg can be profitable four quarters a year.
If the market continues to shrink and Heidelberg struggles to become profitable it will eventually become even harder to make (and pay for) the headcount reductions necessary to be reasonably profitable at revenues below €2.5 billion.