Equipment

Heidelberg is relying on the packaging industry to provide it with growth as it reported a fall-off in sales in its preliminary results for the first quarter of 2008/2009.

The German press manufacturer's sales fell to between €640m-€660m (£510m-£525m) to 30 June, from €742m in the same period in 2007. The company said this, coupled with higher costs, would produce a "negative quarterly result".

Heidelberg said the printing industry was facing a "prolonged period of sluggishness" and it did not expect to see any significant upturn "for the time-being", but its growth strategy would focus on packaging printing and services.

The firm demonstrated its commitment to the packaging industry by devoting a hall to large-format presses and finishing equipment at Drupa in Düsseldorf in May.

As well as "difficult cyclical parameters" and exchange rate movements, the company said it was also being affected by rising raw materials costs, particularly for steel and energy.

The firm said lower sales, the cost of attending the Drupa exhibition in June and May's purchase of Hi-Tech Coatings, the supplier of water-based and UV curable coatings, also meant that its cashflow was "clearly below" the previous year's level for the first quarter.

To counter rising costs, Heidelberg's management board has prepared a €100m package of cost-cutting measures by 2010-2011, with 75% of these savings to be made over the next 18 months.

Heidelberg chief executive Bernhard Schreier said the measures would take into account "all key areas".

These measures will involve reducing R&D expenditure, restructuring post-press packaging activities by consolidating production and transferring "certain" operations to Slovakia, and by increasing purchasing and production outside the "euro zone" from its current €40m to around €200m in the 2010/2011 financial year.

The firm aims to increase the operating result in its entire post-press business by €20m over the next three years.