As the International Monetary Fund aptly put it in October 2022, we are experiencing a fundamental change in the global economy. It is becoming more unpredictable, more volatile and more marked by geopolitical tensions. Europe is particularly affected by the consequences of the Russian attack on Ukraine, while high inflation is weighing on consumer confidence in the United States and the pandemic-related restrictions are continuing to place a damper on companies in China.
Metamorphosis – with “more”
Obviously, these fundamental changes have not left Koenig & Bauer unscathed and require it to constantly adapt to new circumstances and to engage in a metamorphosis with foresight and intellect. Once a focused, highly successful manufacturer of printing presses, the Company initiated a transformation some time ago to become an agile, fast and flexible technology group. In nature as in business, it is not the strongest or the loudest that survive, but the ones who are the most flexible and adaptable. Accordingly, the history of Koenig & Bauer, which now spans more than 200 years, can also be simply described as a “successful and steady metamorphosis”. It is perhaps no coincidence that the word “more” can be found, albeit somewhat concealed, in the word “metamorphosis”; the Company is constantly becoming “more”: More sustainable. More modular. More flexible. Yet, one thing hasn’t changed in over 200 years: our commitment to our customers and their success. Or, to put it perhaps a little more boldly: Koenig & Bauer has been constantly changing since its establishment. The Company has not stopped at newspaper printing, but has become a packaging printing Company with printing expertise on all substrates with all printing technologies. The Company has been constantly questioning, optimising and, wherever this makes sense, expanding its activities. Most recently, Koenig & Bauer significantly broadened its expertise in corrugated board, an impressive growth market, by acquiring Celmacch Group S.r.l. in July 2022. All in all and in just a few words, the Company is the product of a steady and successful metamorphosis – from a newspaper printer to a packaging printer.
And while we’re on the subject of change, the entire Koenig & Bauer Iberica team moved from its previous location in El Prat de Llobregat near Barcelona to Gavà, 15 km away, in March. At this new location, Koenig & Bauer Iberica plans to significantly expand its production. Within the Group, Iberica is responsible for medium- and large-format flatbed die-cutters for cardboard and corrugated cardboard packaging and, thus, for the extremely important postpress activities for packaging printing.
Like probably all manufacturing companies, the Company must contend with high order backlogs on the one hand and a number of challenges, especially with respect to skilled labour, energy prices and supply chains, on the other. However, Koenig & Bauer has repeatedly faced – and overcome – very different crises in its more than 200-year history. What was frequently decisive in this connection was that decision makers acted proactively, creatively and with foresight and always with the needs of the customers in mind and in awareness of their responsibility towards employees and shareholders. To give a specific and recent example: Koenig & Bauer adopted a variable approach to energy supplies years ago. It has also been working on becoming independent from pipeline gas ahead of the imminent gas shortage. As a result, the process gas previously required for production was completely substituted from the end of July 2022. In addition, supplies of fuel for heating energy were adjusted at the main production sites at the beginning of September in the light of the prevailing circumstances. This is just one of several examples of entrepreneurial foresight. Koenig & Bauer continued to benefit from this foresight in 2022. And once again, it became clear that the Company is not only very well positioned but also able to cope with challenges and remain consistently on its growth trajectory.
Sustainability as a brand core
Koenig & Bauer has been in existence as a company for over 200 years. Such a success story, an end of which is not in sight, can only be told if decisions are made with foresight and a sense of responsibility, or, in short, when a company operates sustainably. This is why ESG was part of Koenig & Bauer’s identity long before it was discovered by many investors and market participants. And here, too, the Company is working on steadily improving. In keeping with this, Koenig & Bauer assumed responsibility for greater climate protection in the year under review, taking significant steps on the road toward carbon-neutral production. Moving forward, the Company will be covering part of its own electricity requirements sustainably by means of on-site production. This will not only help to improve our climate footprint but also provide a self-sufficient source of energy. Under its “Exceeding Print” Group strategy, Koenig & Bauer is working on adopting fully carbon-neutral processes at its production plants by 2030. In October of the year under review, a photovoltaic system for producing power went into operation on the roof of the Customer Technology Centre at the Company’s headquarters in Würzburg. As a result, Koenig & Bauer is now producing around 200,000 kWh of electricity per year directly for the Würzburg plant. In the summer of 2022, a new water heating system with solar thermal modules went into operation at the Koenig & Bauer vocational school in Würzburg.
In addition, around 8% of the gas consumption at the Company’s headquarters can be replaced by utilising the waste heat given off by the new melting furnace in the foundry.
Our customers are also benefiting from the fact that Koenig & Bauer is setting new standards in both digitisation and energy management. Since October 2022, the Company has been supporting its customers by offering them a digital, scalable solution to save energy and reduce costs: The Digital unit has developed an energy management system specially optimised for the printing and packaging industry. Energy consumption is recorded digitally and displayed in visual form, with savings potential simultaneously harnessed. The new energy management system consistently optimises these applications for the requirements of the printing and packaging industry.
However, Koenig & Bauer not only wants to be a sustainability pioneer itself but also motivate other market participants to follow it on this path. In 2022, the Company presented for the first time the Green Dot Award that it had specifically established for this purpose. In this way, Koenig & Bauer wants to honour each year a visionary leader with outstanding ideas who has made innovative contributions to sustainable printing in a special way. The first prize winner was Andres Kull, CEO of Kroonpress in Tartu, Estonia.
Koenig & Bauer also sees itself as having an inherent responsibility as a corporate citizen to look outside the box and, where necessary, to help the most vulnerable in society. In the last years, refugees have also been trained, lately also from Ukraine. With its global presence, Koenig & Bauer considers it be only natural that employees from different countries and cultures should be integrated. In this way, it is making an important contribution to tolerance, openness and integration.
Long-term and sustainable success with customers, employees and investors calls for constant questioning and adjustment. It was with this in mind that Koenig & Bauer took a number of steps in the year under review to enhance its operational footprint. To give an example, the number of counterfeit euro banknotes withdrawn from circulation has fallen to a historically low level. Among other things, this is due to the fact that banknotes are becoming increasingly counterfeit-proof. The partnership between Koenig & Bauer Banknote Solutions and the Institute for Industrial Information Technology (inIT) at the Ostwestfalen-Lippe University of Applied Sciences is making an important contribution to this, allowing new authentication solutions that work via smartphone. The coverno joint venture was integrated within Koenig & Bauer’s core business in spring 2022.
Need another example? Koenig & Bauer and System Brunner have had a close technology partnership for more than ten years. In the year under review, both sides agreed to extend and deepen this partnership for the benefit of sheetfed offset users. This means that System Brunner’s core colour management competence will continue to be incorporated in Koenig & Bauer’s sheetfed offset technology in all phases of printing and media production.
With the official approval of a foreign direct investment (FDI) in Italy, the partnership announced on 22 July and the acquisition of 49 percent of the capital of Italian company Celmacch Group S.r.l. by Koenig & Bauer was completed in the year under review.
By partnering with the Desenzano del Garda-based manufacturer of high-board line flexographic printing presses and rotary die cutters for the corrugated board industry, Koenig & Bauer is expanding its broad portfolio. The new partnership combines more than 40 years of experience in the market for corrugated board processing machines and more than 200 years of printing technology on different substrates.
Despite a challenging environment characterised by supply-chain constraints and an associated increase in material and energy costs, which it was not possible to pass on to customers in full, the EBIT of €22m exceeded the company’s own forecast of €15-20m. It was additionally spurred by the accelerated implementation of the P24x efficiency improvement programme. At €1,186m, Group revenue reached the upper end of the projected range of €1,160 – 1,190m.
For the 2023 financial year, Koenig & Bauer is planning Group sales of €1.3bn with an EBIT margin of around 3%, despite the challenging macroeconomic environment. In the medium term, we expect to achieve Group revenue of around €1.8bn and an EBIT margin of 8 – 9%. A further objective is to reduce net working capital to a maximum of 25% of annual revenue. Revenue of €1.5bn and a EBIT margin of 6 – 7% are to be achieved in 2025.
Vote of thanks:
As in the past 200 years, Koenig & Bauer will continue to create sustained added value for all its stakeholders – investors, customers, employees and service providers – over the coming years and decades. Bold and strategically correct decisions not only in the reporting year have created a solid basis for this. The Management Board thanks all the parties involved for this and their many years of loyalty.
Würzburg, 21 March 2023
The Management Board of Koenig & Bauer AG
Dr. Andreas Pleßke
Chief Executive Officer