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KBA
Press ManufacturerKoenig & Bauer AG (KBA)
Albrecht Bolza-Schünemann, President and CEO
Deutsche Bank German Corporate Conference, 31 May
KBA
Printed products are used frequently every day
! Newspapers, supplements
! Magazines, catalogues
! Packaging
! Books
! Posters
! Metal decorating
! Banknotes
KBA
! At the beginning of the 19th century our founder, Friedrich Koenig, had the ingenious idea of guiding a paper web over a rotating cylinder
! In 1814 The Times became the first newspaper in history to be printed by machine – Koenig’s double-cylinder press
KBA: the world’s first press manufacturer
KBA
KBA: one of the world’s top press manufacturers
! An innovative, customer-driven partner to the print media
industry with...
! an outstanding reputation
! the broadest product range in the business
! the pole position in many fields of print technology
! an export level of 80 – 90%
! annual sales of €1.4* billion
! 7,800 employees worldwide (including KBA-Grafitec)
*Group figures in 2004
KBA
1,232
1,3541,304
1.087
950
822748
694688667654733
580
483455
185200
400
600
800
1,000
1,200
2002
in €m
0
IPO
200320012000199919981997199619951994199319921991199019891985 2004
1,423
*projected
2005*
Acquisitionof Grafitec,Dobruška,Czech Rep.
Sales growth
∼1,500
Acquisition of Albert-
Frankenthalcreates the KBA group
Acquisition of majority stake in KBA Planeta
Merger with Planeta and
re-adoption of name Koenig &
Bauer
Acquisition of security press
alliance partner De la Rue Giori
Acquisition of Bauer+Kunzi, manufacturer
of metal-decorating
presses
Acquisitionof Metronic,
manufacturerof industrial ID and UV offset
presses
1,400
1,600
KBA
KBA – WORLDWIDEExport level 85.9% in 2004
Europe
45.7%
Germany
14.1%7%
Africa/Latin America
17.8%
Asia/Pacific
USA/Canada
15.4%
2004
% of turnover
! Sales and service subsidiaries have been established in Europe and North America, our prime markets
! We have also set up sales and service subsidiaries in potential growth markets such as South-East Asia, Australia, Latin America and the CIS
! A global network of agencies guarantees on-the-spot customer care
Independent dealersSubsi-diaries
Productionplants
KBA
596.1 614.3 597.3
659.7 617.5
259.6
702.7 593.2706.8
756.4 716.2
299.8
893.0
1,423.01,459.1
856.9
1,231.81,255.8
0
200
400
600
800
1,000
1,200
1,400
1,600
Sheetfed offset pressesWeb and special presses
Order intake Sales Order backlog1.1. - 31.12. 1.1. - 31.12. End of year
€m
2003 2003 20032004 2004 2004
(+16.2%) (+15.5%)
(+4.2%)
Group performance 2004 (IFRS)
KBA
in €m 2003 2004Revenue 1,231.8 1,423.0Costs of sales -947.4 -1,089.2 Gross profit 284.4 333.8Research and development costs -57.6 -54.8 Distribution costs -114.8 -140.9 Administrative expenses -94.9 -87.7 Other operating income and expenses -19.0 -30.1 Pre-restr. operating profit/loss -1.9 20.3Restructuring expenses -45.1 - Post-restr. operating profit/loss -47.0 20.3Financial result -2.6 -4.4 Profit/loss from ordinary activities -49.6 15.9Income taxes 19.6 -4.0 Net profit/loss for the period -30.0 11.9
Group performance 2004 (IFRS)Income statement Jan-Dec
KBA
! Equity ratio 33.3%
! Cash flows from operating activities €39m
! Investment €57m (prior year: €45.3m)
! Depreciation €46.3m (prior year: €57.2m)
! Payroll on 31.12. 7,398* (prior year: 7,054)* including 290 Metronic, 50 Bauer+Kunzi,509 apprentices
! Earnings per share €0.74 (prior year: -€1.86)
! Projected dividend per share €0.25
Group performance 2004 (IFRS) Additional group figures
KBA
135.8 113.5
593.2173.8 144.4
299.8
143.2
588.5
138.5
375.6
168.1243.9
309.6 257.9
893.0
382.4 311.3
964.1
0
200
400
600
800
1,000
1,200
1,400 Sheetfed offset presses Web and special presses
Order intake Sales Order backlog1.1. - 31.03. 1.1. - 31.03. 31.12. / 31.03.2005
€m
2004 2004 20042005 2005 2005
(+23.5%)
(+20.7%)
(+8.0%)
Group performance in 1st quarter 2005 (IFRS)
KBA
in €m 2004 2005
Revenue 257.9 311.3Cost of sales -195.7 -245.6
Gross profit 62.2 65.7Distribution costs -31.6 -34.2 Administrative expenses -22.3 -21.4 Other operating expenses -11.9 -14.3
Loss from operations -3.6 -4.2 Financial result -0.7 -1.6
Loss before taxes (EBT) -4.3 -5.8 Taxes 0.6 1.0Profit attributable to minority interests -0.2
Net loss less minority interests -3.9 -4.8
Group performance in 1st quarter 2005 (IFRS)Income statement Jan-March
KBA
Global communications market 2003
€1,820bn in total*
Internet€50bn TV
€185bn
Print€500bn
Radio€35bn
Telecommunications€1,050bn
*projected
Packaging 27%
Commercials 36%
Magazines 15%
Newspapers 15%
Other 7%
KBA
Dire
ctor
ies
Map
s
Bus
ines
s re
port
s
Boo
ks
Dire
ct m
ail
Supp
lem
ents
New
spap
ers
Cat
alog
ues
Adv
ertis
ing
Mag
azin
es
Pack
agin
g
New
slet
ters
Form
s
Gre
etin
gs c
ards
Man
uals
Cal
enda
rs/p
oste
rs
-5
0
5
10
15
20
25
30
Global print market
Key print products are expected to grow by 2-5% p.a.! E-media complement print media, expanding demand! Paper still offers many advantages as a vehicle of information ! Global paper consumption rose in the last few years, despite the internet ! Huge pent-up demand for print in emerging markets
Projected future market growth in %
KBA
World printing press market 2005
! Modest recovery, perceptible since summer 2003, is still fragile and subject to geographical and segmental fluctuations
! German market remains a cause for concern, although domestic demand for KBA sheetfed and newspaper presses has improved
! Demand in pre-accession EU has picked up at a moderate pace
! Good growth prospects in the east European EU accession states,parts of Asia (especially China), in the oil-producing countries of theMiddle East and in North Africa
Total market volume* approx. €9bn
Newspaper €1.1bn
Commercial web€1.1bn
Sheetfed offset€5bn
Flexo, gravure, other €1.8bn
*excluding toner-based technologies, digital print and office print
KBA
KBA’s strategy in sheetfed offsetBiggest single press market with a volume of €5bn
! Double-digit growth rates almost continuously for more than ten years, despite an industry downturn caused by the recent economic recession
! Current global market share of around 15% puts KBA in second place behind Heidelberg
! Targets:- Maintain dynamic growth in sheetfed offset - Consolidate second place behind Heidelberg
MAN Roland14%
Heidelberg42%
Other9%
Mitsu-bishi
6%
KBA15%
Komori14%
KBA
KBA sheetfed offset sales over the past ten years
€m
Figures since 2001 as per IFRS
716
618
185211
248283
334
619
552
492
399
0
100
200
300
400
500
600
700
800
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
KBA
! Acquisition of Grafitec, a Czech
manufacturer of small-format sheetfed
offset presses, in March 2005
! 400 employees, €20m sales in 2004
! Complements existing KBA presses,
which address high end of market
! Targets more price-conscious users
in small-scale printshops and threshold
markets
KBA’s strategy in sheetfed offsetExpansion drive in small-format market (volume €2bn)
KBA
KBA’s strategy in sheetfed offsetExpand share of medium-format market
! KBA market share in B1 (700 x 1,000mm), the largest sheetfed offset sector, worth €2.5bn: ∼ 13%
! Dynamic growth in sales of medium-format KBA presses:- rapid transition to serial production of a new Rapida 105 version (18,000 sheets per hour) launched in March 2004
- raft of features unique to our presses- market recognition of our
initiatives in advancing process technology(example: cost-effective hybrid coating)
KBA
KBA’s strategy in sheetfed offsetDefend pole position in large-format market
! KBA market share 2004 in large formats up to 1,510 x 2,050mm: ∼ 60% (market volume: €0.5bn)
! KBA is the acknowledged international market leader in large format, the KBA Rapida 205 is the world’s largest sheetfed offset press
! Ongoing demand for modern KBA technology
KBA
! KBA market share 2004: ∼ 29% (market volume: €1.1bn)
! KBA is one of the top two manufacturers of newspaper presses,market leadership alternates with MAN Roland
! KBA is a driver of technological and process innovation (6/2 configuration) aimed at making high-quality newspaper production more economical
! Stimulate investment withlandmark innovations (e.g. KBA Cortina)
KBA’s strategy in coldset web offset (newspaper)Extend technology lead and grow market share
MAN Roland42%*
KBA29%
Other8%
Wifag9%Goss
12%
* special effect in 2004 because of News International order
KBA
KBA’s strategy in commercial web offsetMedium-term expansion of market share to 15%
! KBA market share 2004: ∼ 11% (market volume: €1.1bn)
! Broad range of commercial presses for 16 to 72 pages offers a choice
of performance levels and formats
! A number of unique features
(eg variable format folders)
and technology transfers
from gravure support
future growth
MAN Roland30%
Goss International32%
KBA11%
Other4%Komori
12%Mitsubishi11%
KBA
KBA’s successful engagement in niche markets Publication rotogravure presses
! Market and technology leader in high-performance presses for web widths of more than 2.65m (market share: ∼ 70%)
! Niche market with limited number of major players currently investing heavily (sales average €35m-€50m; in 2005 approx. €90m)
! New TR 12B for a web width of 4.32m is the broadest rotogravure pressworldwide, with anoutput of 8.2 million full-colour A4 pages per hour
KBA
KBA’s successful engagement in niche markets Metal-decorating presses
! Bauer+Kunzi, our subsidiary
since 2003, is the technology
and market leader in large-
format, multicolour metal-
decorating offset presses
(based on Rapidas)
! Annual sales potential
of €25m - €30m
! A small niche market with good
prospects
KBA
KBA’s successful engagement in niche markets UV offset and industrial ID systems
! Metronic, our subsidiary since 2004,has a well-established customer basein the market for industrial ID technology (inkjet, laser)
! Strong position in market for UV offset on smart cards and digital data storage devices (CD, DVD etc.)
! Current sales potential €35m - €40m, with good medium-term growth prospects
KBA
KBA’s successful engagement in niche markets Banknote and security presses
! KBA is the global leader in this sector and has an unparalleled systems competence embracing a broad choice of peripherals
! More than 90% of all banknotes worldwide are printed on presses marketed by our specialist subsidiary, KBA-GIORI
! A highly profitable niche market with annual sales potential of around €120m - €150m
KBA
Source: VDMA, KBA; figures from 1996 onwards estimated due to change in statistical database *incl. finishing
€m
Exports of printing presses*
2373
4024
2999
4068
3457
4164
4661
37123814
3518
2598
2246
25412428
27172776
1639
940
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
1980 1985 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
KBA
! Projected increase in Group sales to around €1.5bn
(2004: €1,423m)
! High level of plant utilisation at our web press division
! Huge backlog of orders for sheetfed offset presses
! Popularity of our new products has laid the foundations for
sustained growth
! Future growth will also be supported by our new Czech
subsidiary KBA-Grafitec, with its entry-level presses
KBA targets for 2005
KBA
KBA targets for 2005
! Further improvement in pre-tax Group earnings (2004: €15.9m)
! Gains are delivered by
- cost-cutting initiatives (now completed) at our web press
production facilities
- more flexible labour agreements at all our German operations
! Negative impacts on profit
- continued pricing pressures
- uncertainty in currency markets
- higher prices for steel