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People & Print
Analysts’ and financial press conference
19 December 2013 at KBA-MetalPrint in Stuttgart
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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)
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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
* According to the figures published by the German Advertising Industry Association (ZAW).
Daily + weekly +Sunday newspapers
TV + radio + cinema
Magazines (popular + trade press magazines)
Direct mailing
Freesheets
4,9
3,4
2,9
2,1
2,01,7
3,1
2,9
6,1
4,8
1998 1999 2000 2001 2002 2003 2004
0
1
3
4
5
6
7
Advertising revenues* in Germany in €bn
2005
2
2006 2007 2008 2009 2010 2011
Online1,1
2012
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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
*) Not including toner-based technologies, digital and gravure printing systems, and others
Global press market (in €bn)
7.8
6.9
6.1
4.8
3.2 3.5 3.4 3.3 3.1 3.05 2.9
0
1
2
3
4
5
6
7
8
9
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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Market development of web and sheetfed offset presses
● Expectations of a sustained web offset
market recovery following an interim highin 2010 were not fulfilled
● Volume of new investments has shrunk
significantly, retrofits and consolidation
dominate
Web offset press market in €m
● The sheetfed offset market has been
stagnant since 2011 at a significantlyreduced level
● Mid-term market developments mainly
depend on the dynamics of structural
changes and the global economy
Sheetfed offset press market in €bn
500450
400
1900
1700
1100
600
800 700
630
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
2.62.5
4.4
4.8
5.3 5.5
5
4.4
3.7
2.6 2.7 2.7 2.7 2.6
0
1
2
3
4
5
6
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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R e s t r u c t u r i n g o f
w e b p r e s s b u s i n e s s f o r
n e w s p a p e r a n d
c o m m e r c ia l p r i n t i n g
L o n g - t e r m
s t r en g t h e n i n g o f f u t u r e
d e v e l o p m e n t p o t e n t i al
a n d p r o f i t a b i l i t y o f
c o r e b u s i n e s s O r g a n i s a t i o n a l
r e s t r u c t u r i n g /
O p t i m i s a t i o n o f
m a n a g e m e n t s t r u c t u r e
S t r e n g t h e n i n g
g r o w t h i n
s p e c i a l m a r k e ts
R e v is e d
m a n u f a c t u r i n g l o c a t i o n
c o n c e p t ,
affecting 1,100 to 1,500
jo b s
R e s t r u c t u r i n g o f
s h e e t f ed o f f s e t b u s i n e s s
Strategic realignment of the KBA Group
Fit@all
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Fit@all: Restructuring of web press business
Over 40% market share
in newspaper printing,
but market has shrunk
significantly
Profitable and growing
service business
New equipment
and service business reconfiguration
Business model with minimal fixed
costs for higher flexibility
Capacity and personnel adjustments
Own division with clear responsibility
for earnings
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Fit@all: Restructuring sheetfed offset press business
No. 2 in sheetfed offset
with a global marketshare of approx. 20%
Technological
frontrunner
Market leader in large-
format and folding
carton printing
Structural and process optimisation
Optimisation of product portfolio and
sales network
Capacity and personnel adjustments
Own division with clear responsibility
for earnings
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Fit@all: Revised manufacturing location concept
High quality and
flexibility when
manufacturing corecomponents
Reliable supply of time-
critical 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
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Reorganisation of
management structure
Establishment of clear
areas of responsibility
Establishment of autonomous units
for sheetfed, web, manufacturing and
special applications
Allocation of subsidiaries according
to market focus
Operative Group executive Board
members take over responsibility for
new units
Units with clear responsibility for
earnings
Fit@all: Organisational restructuring
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Fit@all: Supplementary package of measures
Areas Key measures
Overhead costs
Working capital
Locations
Segment reporting
Implementation of
restructuringconcept
Strengthening of growth areas
Reduction in administrative costs through personnel adjustments,process optimisation and outsourcing of auxiliary functions
Reduction in tied assets, also non-current assets
Solution to some under-performing locations
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 supportfrom professional implementation experts
Integration of new acquisitions Kammann und Flexotecnica, strategic
development and organisational bundling of promising activities
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● 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-double-
digit million euro range
● Sustained profitability in all areas by 2016 at the latest, with
a sales volume between €1bn and €1.1bn
2013 and outlook
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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)
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Sheetfed Web Banknote /
Security
Machinery
business
Project
business
System
business
Project
business
Solutions
business
Machinery
business
Machinery
business
• Small-,medium- andlarge-formatpresses for packaging,book, poster,display andcommercialprinters
• Substratesfrom light-
weight paper to corrugatedboard plusplastic
• Web offsetpresses for newspapers,inserts,magazines,catalogues,flyers, books,brochures inhigher printruns
• Specialprintingpresses withvaried printingprocesses,such asintaglio for printing banknotes
• Specialsecurity
technology andsystems for pre-press,quality control,post-press
• Bank notedesign service
• Solutionssupplier for printing,coating,drying andmetal sheetlogistics
• Systems for air purificationas part of drying
• Application inpackagingsegments:food,cosmetics,tobacco
• Inkjet, laser,hot stampingand thermaltransfer solutions for markingand coding
• Marking andcoding on veryvariedsubstrates,
such assynthetics,plastic film,glass, ceramic,board
• Packagingpresses for flexible, non-absorbentmaterials,such as foil
• Flexo pressesoffered byFlexotecnica
• Presses for decoratinghollowcontainersmade frompremium-quality glass,plastic andmetal
• Directlydecorated
glasscontainers aremainly usedfor luxurycosmetics,perfume andpremiumspirituousbeverages
Metal /
Coated Steel
Marking
and CodingFlexible
packaging Glass
Special solutions for packaging
Portfolio expanded in future markets
Digital
System
solution
• Digital webpresses(inkjet) for books, directmail,advertisingandnewspapersfrom 1 tomedium-sizedruns
• Interest alsofrom other applicationareas
N E W N E W N E W
http://www.kba-metronic.com/fileadmin/user_upload/Metronic/Prod_alphaJET/alphaJET_mondo_F002.jpg
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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
Global print market by process 2011-2015
Sources: Smithers PIRA, Jakoo Pöyry, Primir, Global Insight, own research
12%
38%
28%
12%10%
17%
36%
26%
12%
9%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Digital Sheetfed offset Web offset Flexo Other
2011
2015
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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
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5,5% 6,4%
10%
7,4%5%
29%
36,7%
4,6% 4,5%
9,3%
6,1%4,5%
34,7% 36,3%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Books Catalogues Magazines Newspapers Advertising Packaging Other
2008
2015
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 bookprinting
● 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
Global print market by product 2008-2015
Source: Smithers PIRA
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Global packaging volume: +25% by 2018
Source: Smithers PIRA, 2013
i n
$ b
n
2012
$800bn
2018$1,000bn
+25%
Worldwide Western EuropeAsia (without Middle East) & Oceania
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Carton/corrugated board and plastics dominate
Source: Smithers PIRA, 2013
Carton/
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80% of the growth expected comes from Asia
Source: Smithers PIRA, 2013 *including Middle East, Africa
Asia
Latin
America
Eastern
Europe
NorthAmerica
Western
Europe
Other*
144.3150.9
191.6
Worldwide
4.1%
6.9%
3.4%
3%
1.3%
0%
2.9%
11-17CAGR
Annual consumption in millions of
tonnes of folding carton, corrugated
board and flexible materials for
packaging worldwide
Other
Japan
India
China
66.1 72.1
105.2Asia
8.8%
8.8%
0%
5.5%
11-17CAGR
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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
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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
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Market structure container printing
Packaging
Packaging
Criterion
Relevant market
Addressable marketvolume in €m1
Press output(packaging items/minute)
Dominating printingtechnologies
Plasticpots
Glass containers /plastic bottles
Aerosol cans, alutubes, alu bottles
Plastictubes
Presses
€50m
Presses²
€30-35m³
Can manufactu-
ring lines
€110m
Presses, lines
€50m
600
Dry offset
80 (pt. 200)
Screen printing,pad printing
250
Dry offset
250
Dry offset,
screen / flexo
printing
100 €300m, glass containers and plastic bottles form own sub segment.
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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
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People & Print
Koenig & Bauer AGFriedrich-Koenig-Str. 497080 Würzburg
www.kba.com