Heidelberg Fiscal Year 2003/2004: Back on Track for Improved Return – Realignment Complete

•  Sales totaled 3.661 billion Euro
• Positive operating result of 20 million Euro
• Free cash flow 114 million Euro
• No dividend planned
• Better results expected for fiscal year 2004/2005

The Management Board of Heidelberger Druckmaschinen AG (Heidelberg) presented its 2003/2004 Annual Report at today's Annual Press Conference and also confirmed and explained more details relating to the preliminary figures for the previous fiscal year (April 1, 2003 to March 31, 2004) published in May this year.
 
The Heidelberg Group recorded sales of 3.661 billion Euro (previous year: 4.1 billion Euro), down by around 11 percent on the previous year, which was in line with expectations. After adjustments for exchange rate movements, sales were down six percent. Incoming orders in the fiscal year just closed were around 3.8 billion Euro (previous year: 4 billion Euro). In the fourth quarter alone, orders were in the region of 1.0 billion Euro. "After three weak years, the print media industry is set for a perceptible revival," said Bernhard Schreier, Chief Executive Officer at Heidelberg. "The improved economic conditions and commitment to our profitable sheetfed offset operations will clearly make their mark in the current fiscal year." He believes that Heidelberg has turned the corner.

In the period under review, the operating result was 20 million Euro (previous year: 102 million Euro) and therefore exceeded the break-even result that had been forecast. This was primarily the result of the implemented cost-cutting measures which saved 240 million Euro. In the fourth quarter alone, the operating result improved considerably to 110 million Euro (previous year: 54 million Euro).

Despite high non-recurring costs for measures to increase efficiency and for restructuring, free cash flow in 2003/2004 totaled 114 million Euro, a positive result achieved thanks to firm asset management. The net result in the past fiscal year was -695 million Euro (previous year: -138 million Euro). This includes non-recurring expenditures of 569 million Euro - first and foremost depreciation on book values - for restructuring costs and expenditures in connection with the discontinued operations in the Digital and Web Systems divisions. "By divesting unprofitable operations and reducing fixed costs over the long term, we were able to significantly reduce our break-even threshold," said Dr. Herbert Meyer, the Company's CFO. "We have thus laid the groundwork for a return to our usual high profits in the medium term."

In view of the negative result, the Management Board and Supervisory Board will propose at the Annual General Meeting on July 21, 2004 that no dividend be paid for the year under review.

As of March 31, 2004, the Heidelberg Group had a workforce of some 22,782 worldwide (previous year: 24,181). The planned cutback of 3,200 jobs worldwide in the past two fiscal years has been implemented. A further reduction of 1,000 jobs will take place by the end of the current fiscal year as planned. As a result of the divestment of the Digital and Web Systems divisions, Heidelberg will in future have a global workforce of around 18,500.

Development by region
Sales for fiscal year 2003/2004 in North America, Latin America, Europe and the Middle East were affected by the industry's low propensity to invest. Only in the fourth quarter were there signs of a slight improvement in business in these regions. Business in Eastern Europe and Asia/Pacific was pleasing, with sales either slightly improving or remaining at a high level.

Promising start into the 2004/2005 fiscal year
Given the global economic recovery and the resulting improved outlook for the industry, the Company is cautiously optimistic for the current fiscal year 2004/2005. At the drupa trade show in May in Düsseldorf, incoming orders to a value of around 1 billion Euro were achieved.

With effect from May 1, 2004, the agreement with Eastman Kodak Co. regarding the sale of the Digital Division came into force.

Agreement with Goss International ready for signing
The agreement with Goss International regarding the transfer of the Web Systems operations is ready for signing and will thereafter come into effect - subject to approval by the various national antitrust authorities - in the next few weeks.

The transaction with Goss includes Heidelberg's commercial web and newspaper press operations as well as finishing equipment for web presses in the USA. Heidelberg will have a 15 percent holding in Goss International.

A non-disclosure agreement was made as to the financial details of the transaction.

2004/2005 result will be significantly better In the current fiscal year, Heidelberg is aiming for a total increase in sales of at least 5 percent over the previous year on a comparable basis. The result is expected to show a marked improvement over 2003/2004. The Company's goal is to achieve an operating return on sales of between 4 and 5 percent for the current fiscal year without the Digital and Web Systems divisions. However, the current fiscal year will be burdened by the costs of drupa and the cost of introducing numerous new products onto the market. All in all, the Management Board is projecting net profit in at least the mid-double-digit million euro range.

Free float of Heidelberg increased from 22 to 57 percent
Due to the placement of RWE AG's 50.02 percent share in Heidelberg with international institutional investors at the start of May, the free float of Heidelberg increased to around 57 percent. The exchangeable bond in Heidelberg shares will raise the free float to 72 percent by 2007 at the latest. Until then, RWE will hold a 15 percent share of Heidelberg. Further major shareholders which remain unchanged are Allianz (12 percent), Commerzbank (10 percent) and Munich Re (6 percent).

Modified reporting in the 2004/2005 fiscal year Starting from the first quarter of the current fiscal year, Heidelberg will report on the newly defined divisions Press, Postpress and Financial Services. Up until the deconsolidation, the Web Systems and Digital divisions will appear in the accounts as discontinuing operations.

The table with the figures can be downloaded from the Press Lounge at www.journalist.heidelberg.com.

For further information:
Heidelberger Druckmaschinen AG
Corporate Communication
Thomas Fichtl
Tel.: +49 (0)6221 92 47 47
Fax: +49 (0)6221 92 50 69
E-mail: thomas.fichtl@heidelberg.com

Important note:
This Press Information contains statements about future development that are based on assumptions and estimates by the management of Heidelberger Druckmaschinen Aktiengesellschaft. Even if the management is of the opinion that these assumptions and estimates are accurate, future actual developments and future actual results may differ significantly from these assumptions and estimates due to a variety of factors. These factors can include changes to the overall economic climate, changes to exchange rates and interest rates and changes in the graphic arts industry. Heidelberger Druckmaschinen Aktiengesellschaft provides no guarantee that future developments and the results actually achieved in the future will agree with the assumptions and estimates set out in this press release and assumes no liability for such.