Ad hoc: Koenig & Bauer AG: Koenig & Bauer AG: High restructuring charge impacts on earnings

Koenig & Bauer AG / Annual accounts / Ad hoc: Koenig & Bauer AG: High
restructuring charge impacts on earnings

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German press manufacturer Koenig & Bauer AG (KBA) published its 2008
financial statements on 30 April following preliminary disclosures on
26 March.

The global economic downturn had a disproportionately severe impact
on the inflow of orders for batch-produced sheetfed presses, which
plunged 22.6% to EUR598.5m (2007: EUR773.5m). The web and special
press division, where multi-unit installations with lengthy
production times dominate the schedule, exerted a stabilising
influence, with new orders totalling EUR643m (16.9% below the
prior-year figure of EUR773.4m). Group orders therefore shrank 19.7%
to EUR1,241.5m (2007: EUR1,546.9m). Weak demand resulted in a 16.7%
drop in sheetfed sales to EUR714.2m (2007: EUR856.9m), and their
contribution to group sales consequently fell from 50.3% to 46.6%.
With sales of web and special presses relatively steady at EUR817.7m
(2007: EUR846.8m), group sales sank 10.1% to EUR1,531.9m (2007:
EUR1,703.7m). The drop in the volume of orders on hand was much
greater, from EUR791.9m to just EUR501.5m at year's end.

The impact on profits of a EUR170m slide in sales was exacerbated by
provisions and write-downs totalling EUR93.3m, primarily relating to
the approved restructuring and consolidation of sheetfed facilities.
This gave rise to an operating loss of EUR79.9m, as opposed to an
operating profit of EUR65.7m in 2007.

A higher service turnover and solid earnings in niche markets less
affected by the recession pushed up the profit generated by the web
and special press division from a healthy EUR63.1m in 2007 to
EUR108.5m. This contrasted with a heavy loss of EUR188.4m (2007:
EUR2.6m profit) in the sheetfed division due to capacity
underutilisation and substantial one-off expenses in preparation for
the proposed realignment. The outcome was a financial loss of
EUR7.2m, pre-tax earnings of EUR-87.1m (2007: EUR63.2m profit) and a
group loss of EUR101m (2007: EUR49m profit). Net earnings per share
came to EUR-6.18 (2007: EUR3.00). At the AGM on 18 June the
management and supervisory boards will therefore table a motion to
dispense with a dividend.

Cash flows from operating activities swelled from EUR21.3m to
EUR34.6m, primarily due to higher provisions and a reduction in
receivables and inventories. The KBA group's cash flow is materially
influenced by the customer prepayments commonly made in the heavy
plant sector, which despite softer sales in the second half-year came
to EUR140.5m (2007: EUR199.3m). The free cash flow improved from
EUR-17.1m in 2007 to EUR-9.9m. At the end of December liquid assets
stood at EUR85.8m (31.12.2007: EUR123.2m). With bank loans down
EUR20.3m at EUR63.2m, the group's net financial position remained
strong at EUR22.6m. Additional credit lines totalling EUR160m have
been extended by domestic banks. Although the net loss reduced total
equity from EUR515.1m to EUR411.1m, an equity ratio of 34.8% (2007:
37.7%) reveals a solid capital base.

In view of weak global demand, unfavourable economic indicators in
the ad-dependent printing industry and a drop of more than 36% in the
group order backlog, KBA expects sales to be some 20% lower than in
2008. Management is hopeful that the timely implementation of the
restructuring measures, which will mainly focus on sheetfed
activities, will rapidly bring capacities and costs in line with the
smaller global market anticipated in the medium term. The group
payroll will be reduced to around 7,000 by the end of the year.

Since provision was made in last year's accounts for the necessary
personnel cuts, write-downs and other remedial action, KBA is
targeting a balanced pre-tax result (EBT) for 2009, provided global
demand does not deteriorate any further.

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Koenig & Bauer AG
Friedrich-Koenig-Straße 4 Würzburg Germany

WKN:
719350; ISIN: DE0007193500; Index: SDAX;
Listed: Freiverkehr in Börse Stuttgart, Freiverkehr in Hanseatische
Wertpapierbörse zu Hamburg,
Freiverkehr in Börse Berlin, Prime Standard in Frankfurter
Wertpapierbörse,
Freiverkehr in Börse Düsseldorf, Regulierter Markt in Bayerische
Börse München,
Regulierter Markt in Frankfurter Wertpapierbörse;
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