Financial Year 2010/11: Heidelberg Publishes First-Quarter Figures

• Incoming orders with 43 percent considerably up on previous year at EUR 786 million
• Sales slightly higher at EUR 563 million
• Order backlog of EUR 810 million, the highest level for 18 months
• Operating result considerably improved but at EUR -35 million excluding special items still negative
• Positive free cash flow of EUR 62 million
• Further increases in Asia and Latin America

Heidelberger Druckmaschinen AG (Heidelberg) is publishing its results for the first quarter of financial year 2010/11 (April 1 to June 30, 2010). The overall improvement in the underlying economic conditions has had a positive impact on business. Heidelberg customers showed greater readiness to invest in the period under review, thus continuing the previous quarters' upward trend in incoming orders.

At EUR 786 million, incoming orders in the first quarter of financial year 2010/11 were 43 percent up on the previous year's figure (EUR 550 million) and 16 percent higher than the previous quarter (EUR 678 million). Contributory factors included positive exchange rate movements equivalent to around EUR 45 million, the high level of orders placed at the IPEX trade show in May 2010, and encouraging business developments - especially in China and Brazil.

As a result of the healthy incoming order situation, the Heidelberg Group's order backlog improved significantly to EUR 810 million at the end of the first quarter. This is the highest level for six quarters.

In the first three months of the current financial year, Heidelberg recorded sales of EUR 563 million, around EUR 36 million of which are linked to exchange rate movements. After adjusting for these movements, sales were 3 percent up on the previous year's figure of EUR 514 million.

"The market recovery continued in the first quarter, thus helping to maintain the upward trend in incoming orders and sales," said Heidelberg CEO Bernhard Schreier. "Together with the cost-cutting measures initiated, this has substantially reduced our operating loss," he added.

The operating result excluding special items improved considerably from the previous year's figure of EUR -63 million to EUR -35 million. Key factors in this improvement were slightly higher sales, the savings achieved by the cost-cutting program, and the greater efficiency resulting from the reorganization. Following the agreement reached between the company and employee representatives, parts of the provisions formed in the previous year to improve efficiency could be released. As a result, the income from special items was EUR 15 million. This produced an operating result, including special items, of EUR -20 million. Higher financing costs led to a financial result of EUR -35 million (previous year: EUR -22 million). The profit before taxes for the first quarter improved to EUR -56 million (previous year: EUR -86 million), while net loss in the period under review was EUR -52 million (previous year: EUR -69 million).

Heidelberg recorded a positive free cash flow of EUR 62 million in the first quarter, a significant improvement on the figure of EUR -29 million for the same quarter the previous year. Key factors in this positive development are the further improvement in net working capital and tight asset management.

"The further improvement in our operating result and the increase in our free cash flow prove that we are on the right track to ensure a stable and profitable future for Heidelberg," said the company's CFO Dirk Kaliebe. "Due to the capital increase approved by the Annual General Meeting at the end of July, Heidelberg can expand its scope with regard to other refinancing measures, and can thus boost its flexibility. Shareholders, customers, and employees will all benefit equally from this," he added.

Headcount fell by a further 278 in the first quarter of financial year 2010/11. As at June 30, 2010, the Heidelberg Group thus had a workforce of 16,218 worldwide.

Business results in the divisions
Since April 1, 2010, the Heidelberg Group has been split into the Heidelberg Equipment, Heidelberg Services, and Heidelberg Financial Services divisions. This new corporate structure will enable more targeted marketing and efficient delivery of customer services. There is to be greater focus on services and consumables alongside the traditionally strong new equipment business.

In the period under review, the Heidelberg Equipment division benefited in particular from the company's success at the IPEX industry trade show. After adjustment for exchange rate movements, incoming orders for the quarter increased by 57 percent on the same quarter of the previous year to EUR 501 million (previous year: EUR 301 million). Sales were 7 percent up on the previous year (1 percent after adjustment for exchange rate movements) at EUR 297 million. The operating result excluding special items for the first quarter was still negative at EUR -48 million (previous year: EUR -53 million), but the savings resulting from the program of cost-cutting measures and the reorganization had a positive impact.

The Heidelberg Services division is less closely tied to economic cycles than the Heidelberg Equipment division and has therefore been less affected when orders have fallen off. Even so, this division recorded higher incoming orders and sales than in the same quarter the previous year. Incoming orders were 15 percent up (8 percent after adjustment for exchange rate movements) at EUR 280 million, while sales were 13 percent higher (5 percent after adjustment for exchange rate movements) at EUR 261 million. At EUR 10 million, the operating result excluding special items was much better than the previous year's figure of EUR -11 million. This was the result of a more favorable sales mix, the increase in sales, and a lower cost base.

The Heidelberg Financial Services division is still responsible for all the company's sales financing activities. In the quarter under review, the division once again recorded a positive operating result of EUR 3 million, an improvement on the figure for the same quarter the previous year (EUR 1 million).

Further increases in Asia and Latin America
In the first quarter, incoming orders increased in all regions. The regional markets referred to in external reporting have been adapted to the company's internal sales structure. The Baltic markets and Finland have been moved from Europe, Middle East and Africa to Eastern Europe, and Mexico has been transferred from Latin America to North America. The figures for the previous year have been adapted accordingly.

At EUR 316 million, incoming orders in the Europe, Middle East and Africa region were 39 percent up on the previous year's figure of EUR 227 million. They actually doubled in the U.K. thanks to the company's successful showing at IPEX. German customers also rediscovered their willingness to invest. At EUR 84 million, incoming orders in the Eastern Europe region were up 59 percent on the previous year's figure of EUR 53 million. In the Latin America region, they more than doubled to EUR 44 million (previous year: EUR 19 million). This is a result of the positive development on the Brazilian market, which received a further boost from the orders placed at ExpoPrint Latin America 2010 in Sao Paulo. After adjustment for exchange rate movements, incoming orders in the North America region were merely up 7 percent at EUR 80 million (previous year: EUR 66 million). Especially high was the increase in the Asia/Pacific region. Incoming orders here totaled EUR 262 million, the highest level for five years and 42 percent up on the previous year's figure of EUR 185 million. The continued positive development in China played a key role in this, but significant increases were also recorded on many smaller markets such as India.

"The Chinese economy is still booming, with double-digit growth rates in some areas. China and Brazil are very attractive growth markets for us and we intend to further increase our share of sales there in the coming years," said Bernhard Schreier.

Outlook
For the current financial year 2010/11, Heidelberg is projecting a modest growth in sales. The result of operating activities will benefit from the increasing profit contributions as well as from the already achieved cost-reduction measures. Assuming stable economic developments, the company is still striving for a break-even operating result for the current financial year. The company's forecast of economic developments reflected in its financial year planning takes into account the respective product mix prevalent in the single markets. Nevertheless, the enormous growth in financing costs will place a heavy burden on the financial result. During the current financial year, Heidelberg therefore anticipates a marked net loss again.

For further information:
Heidelberger Druckmaschinen AG
Investor Relations
Andreas Trösch
Tel: +49 (0)6221- 92 6020
Fax: +49 (0)6221- 92 5189
E-mail: Andreas.Troesch@Heidelberg.com



Heidelberger Druckmaschinen

A technology provider and partner in the print media industry

Heidelberger Druckmaschinen AG (Heidelberg) is with its sheetfed offset printing machines one of the leading solution providers for the print media industry. All over the world, the name Heidelberg is synonymous with state-of-the art technology, top quality, and closeness to the customer. The core business of this technology group covers the whole value-added and process chain for the 35 x 50 cm (13.78 x 19.69 in) to 121 x 162 cm (47.64 x 63.78 in) format classes in the sheetfed offset sector.

Heidelberg develops and produces precision printing presses, platesetters, postpress equipment, and software for integrating all the printshop processes. Environmental protection has an enduring importance in this regard. Solutions for the development, production, and utilization of presses help to conserve resources, reduce emissions, and cut wastage. The Heidelberg portfolio also provides general and consulting services ranging from spare parts and consumables to the sale of remarketed equipment, and training at the Print Media Academy.

Based in Heidelberg, Germany, with development and production sites in seven countries and around 250 sales offices across the globe, the company supports around 200,000 customers worldwide. All Heidelberg presses destined for the world market are manufactured at the Wiesloch-Walldorf site in line with strict quality standards. Standardized presses in all standard format classes and folding machines for the Chinese market are produced by Heidelberg in Qingpu near Shanghai.

Heidelberg presses worldwide produce high-quality print products such as business cards, brochures, posters, and folding cartons.

In financial year 2009/2010, Heidelberg recorded sales of EUR 2.306 billion. As at March 31, 2010, the Heidelberg Group had a workforce of 16,496 worldwide, including 700 trainees.


Important Note
This press release contains forward-looking statements based on assumptions and estimations by the Management Board of Heidelberger Druckmaschinen Aktiengesellschaft. Even though the Management Board is of the opinion that those assumptions and estimations are realistic, the actual future development and results may deviate substantially from these forward-looking statements due to various factors, such as changes in the macro-economic situation, in the exchange rates, in the interest rates and in the print media industry. Heidelberger Druckmaschinen Aktiengesellschaft gives no warranty and does not assume liability for any damages in case the future development and the projected results do not correspond with the forward-looking statements contained in this press release.