People & Print

Analysts and financial press conference

19 December 2013 at KBA-MetalPrint in Stuttgart

KBA accelerates drastic Group restructuring

1. Long-term strengthening of core business with consolidation
- Market trend of substantial parts of todays 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)

KBA

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
Advertising revenues* in Germany in bn
7
6,1
6

TV + radio + cinema

4,8

4,9

Daily + weekly +
Sunday newspapers

3,4

Direct mailing

3,1

2,9

3
2,9

Magazines (popular + trade press magazines)

2,1

2,0

Freesheets

1,7
1

1,1
Online

0
1998

KBA

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

* According to the figures published by the German Advertising Industry Association (ZAW).

2009

2010

2011

2012

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
Global press market (in bn)
9
8

7.8

6.9
6.1

6
4.8

5
4

3.2

3.5

2009

2010

3.4

3.3

3.1

3.05

2.9

2013

2014

2015

2
1
0
2005
KBA

2006

2007

2008

2011

2012

*) Not including toner-based technologies, digital and gravure printing systems, and others

Market development of web and sheetfed offset presses

Sheetfed offset press market in bn

Web offset press market in m

6

2000
1900

5.3

1800
1700

1600

5.5

4.8

4.4

4.4

1400

3.7

1200
1100

1000
800

800

700

2.6

630
600

2.7

2.7

2.6 2.6

2.5

2
500

600

2.7

450

400

400

200
0
2006

0
2007

2008

2009

2010

2011

2012

2013

2014

2015

Expectations of a sustained web offset

market recovery following an interim high
in 2010 were not fulfilled

Volume of new investments has shrunk

significantly, retrofits and consolidation
dominate

KBA

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

The sheetfed offset market has been

stagnant since 2011 at a significantly
reduced level

Mid-term market developments mainly

depend on the dynamics of structural
changes and the global economy

Strategic realignment of the KBA Group

Restructuring of
sheetfed offset business

Restructuring of
web press business for
newspaper and
commercial printing

Revised
manufacturing location
concept,
affecting 1,100 to 1,500
jobs

Fit@all
Long-term
strengthening of future
development potential
and profitability of
core business

KBA

Organisational
restructuring /
Optimisation of
management structure

Strengthening
growth in
special markets

Fit@all: Restructuring of web press business

New equipment
and service business reconfiguration

Over 40% market share

in newspaper printing,
but market has shrunk
significantly

Profitable and growing

service business

Business model with minimal fixed

costs for higher flexibility

Capacity and personnel adjustments

Own division with clear responsibility

for earnings

KBA

Fit@all: Restructuring sheetfed offset press business

Structural and process optimisation

No. 2 in sheetfed offset

with a global market
share of approx. 20%

Technological

Optimisation of product portfolio and

sales network

frontrunner

Market leader in largeformat and folding

carton printing

Capacity and personnel adjustments

Own division with clear responsibility

for earnings

KBA

Fit@all: Revised manufacturing location concept

High quality and

flexibility when
manufacturing core
components

Reliable supply of time-

Reduction and concentration of

productive resources at the main
locations

Shift from value-added activities with

personnel adjustments

critical parts

Revised location
concept encompasses
Wrzburg, Radebeul,
Frankenthal, Mdling,
Dobruka

Closure or sale of sites not ruled out

Own production division with clear

responsibility for earnings

KBA

Fit@all: Organisational restructuring

Establishment of autonomous units

for sheetfed, web, manufacturing and
special applications

Reorganisation of

Allocation of subsidiaries according

to market focus

management structure

Establishment of clear
areas of responsibility

Operative Group executive Board

members take over responsibility for
new units

Units with clear responsibility for

earnings

KBA

10

Fit@all: Supplementary package of measures

Areas

Key measures

Overhead costs

Reduction in administrative costs through personnel adjustments,

process optimisation and outsourcing of auxiliary functions

Working capital

Reduction in tied assets, also non-current assets

Locations

Solution to some under-performing locations

Segment reporting

Changes in segment reporting should occur at the latest after the

implementation of a new management and Group structure

Implementation of
restructuring
concept

Permanent monitoring of restructuring progress with external support

from professional implementation experts

Strengthening of
growth areas

Integration of new acquisitions Kammann und Flexotecnica, strategic

development and organisational bundling of promising activities

KBA

11

2013 and outlook

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-doubledigit million euro range

Sustained profitability in all areas by 2016 at the latest, with

a sales volume between 1bn and 1.1bn

KBA

12

KBA accelerates drastic restructuring of Group

1. Long-term strengthening of core business with consolidation
- Market trend of substantial parts of todays 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)

KBA

13

Portfolio expanded in future markets

Sheetfed

Web

Banknote /
Security

Machinery
business

Project
business

System
business

Small-,
medium- and
large-format
presses for
packaging,
book, poster,
display and
commercial
printers

Substrates
from lightweight paper
to corrugated
board plus
plastic

Web offset
presses for
newspapers,
inserts,
magazines,
catalogues,
flyers, books,
brochures in
higher print
runs

Special

Special solutions for packaging

printing
presses with
varied printing
processes,
such as
intaglio for
printing bank
notes

Special
security
technology and
systems for
pre-press,
quality control,
post-press

Digital

Metal /
Coated Steel

Marking
and Coding

Flexible
packaging

Glass

System
solution

Project
business

Solutions
business

Machinery
business

Machinery
business

Solutions
supplier for
printing,
coating,
drying and
metal sheet
logistics

Inkjet, laser,

Systems for
air purification
as part of
drying

Marking and

Digital web
presses
(inkjet) for
books, direct
mail,
advertising
and
newspapers
from 1 to
medium-sized
runs

Interest also
from other
application
areas

Bank note

Application in
packaging
segments:
food,
cosmetics,
tobacco

hot stamping
and thermal
transfer
solutions for
marking
and coding
coding on very
varied
substrates,
such as
synthetics,
plastic film,
glass, ceramic,
board

Packaging
presses for
flexible, nonabsorbent
materials,
such as foil
Flexo presses
offered by
Flexotecnica

KBA

decorating
hollow
containers
made from
premiumquality glass,
plastic and
metal

Directly
decorated
glass
containers are
mainly used
for luxury
cosmetics,
perfume and
premium
spirituous
beverages

design service

NEW

Presses for

NEW

NEW
14

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
40%

38%

36%

35%
30%

28% 26%

25%
2011

20%
17%
15%

2015

12%

12% 12%
10%

10%

9%

5%
0%
Digital
KBA

Sheetfed offset

Web offset

Sources: Smithers PIRA, Jakoo Pyry, Primir, Global Insight, own research

Flexo

Other
15

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 KBAs know-how and experience
in high-tech press engineering

KBA

16

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 book
printing

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
40%

Global print market by product 2008-2015

34,7%

35%

36,7%36,3%

29%

30%
25%

2008

20%

2015
15%
10%9,3%

10%
5%

5,5%4,6%

6,4%
4,5%

Books

Catalogues

7,4%
6,1%

5% 4,5%

0%
KBA

Source: Smithers PIRA

Magazines

Newspapers

Advertising

Packaging

Other
17

Global packaging volume: +25% by 2018

2018
$1,000bn

in $bn

2012
$800bn

+25%

Worldwide

KBA

Source: Smithers PIRA, 2013

Asia (without Middle East) & Oceania

Western Europe

18

Carton/corrugated board and plastics dominate

Carton/

KBA

Source: Smithers PIRA, 2013

19

80% of the growth expected comes from Asia

191.6

4.1%
105.2
Asia

150.9
Worldwide

66.1

144.3
6.9%

72.1

China
India
Japan

Asia

8.8%

Other

8.8%
0%
5.5%
11-17
CAGR

3.4%

Latin
America
Eastern
Europe
North
America

3%
1.3%

Annual consumption in millions of

tonnes of folding carton, corrugated
board and flexible materials for

Western
Europe

0%

Other*

2.9%

packaging worldwide

11-17
CAGR
KBA

Source: Smithers PIRA, 2013

*including Middle East, Africa

20

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 KBAs global sales

and service network open up growth prospects

KBA

21

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

KBA

22

Market structure container printing

With the acquisition of Kammann KBA entered the promising market for container printing
presses. Market volume > 300m, glass containers and plastic bottles form own sub segment.
Packaging

Beverage
cans

Criterion

Aerosol cans, alu

tubes, alu bottles

Plastic
tubes

Plastic
pots

Glass containers /
plastic bottles

Packaging

Number of packaging
directly printed (bn p.a.)

280

20

12

100

<10

Press output
(packaging items/minute)

2,200

250

250

600

80 (pt. 200)

Dominating printing
technologies

Dry offset

Dry offset

Dry offset,
screen / flexo
printing

Dry offset

Screen printing,
pad printing

Relevant market

Printing / coating
machines

Can manufacturing lines

Presses, lines

Presses

Presses

Addressable market
volume in m1

60m

110m

50m

50m

30-35m

1 Rough
2 Not

estimation for presses

including presses from Chinese, Taiwanese and Korean manufacturers, only relevant press types for KBA

Kammann volume of new presses for glass decorating approx. 15m in 2011
KBA

23

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. Todays 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

KBA

24

People & Print

Koenig & Bauer AG

Friedrich-Koenig-Str. 4
97080 Wrzburg
www.kba.com