Packaging industry report

8/19/2019 Packaging industry report

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People & Print

Analysts’ and financial press conference

19 December 2013 at KBA-MetalPrint in Stuttgart


2/25

© KBA 2

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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© KBA 3

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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© KBA 4

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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© KBA 5

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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© KBA 6

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


7/25© KBA 7

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


8/25© KBA 8

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


9/25© KBA 9

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


10/25© KBA 10

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


11/25© KBA 11

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


12/25© KBA 12

● 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


13/25© KBA 13

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)


14/25© KBA 14

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


15/25© KBA 15

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


16/25© KBA 16

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


17/25© KBA 17

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


18/25© KBA 18

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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© KBA 20

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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© KBA 21

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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© KBA 22

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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© KBA 23

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 24

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

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