Statement by Bernhard Schreier

Bernhard Schreier, Chief Executive Officer of Heidelberger Druckmaschinen AG, on the occasion of the Annual Press Conference on June 7, 2005

The spoken word applies

Words of welcome

Highlights of financial year 2004/2005 - qualitative evaluation of the past business year

Ladies and Gentlemen,

One year ago when we met here I stated that the tide was changing for Heidelberger Druckmaschinen AG. As we present the financial accounts today, I am pleased to report that we have since made further progress. Following two years of losses in 2002/03 and 2003/04, we sharpened our competitive edge in financial year 2004/05 and achieved a turnaround in earnings.
 
This is particularly evident when comparing the following financial results with the figures for last year:

• We succeeded in doubling operating profit to 167 million Euro.
• The net profit climbed by around 750 million Euro to 61 million Euro.
• Equity ratio improved to 34 percent.
• The profit per share increased to 0.64 Euro per share and
• For the first time in three years - as proposed in the resolution to be put before the Annual General Meeting on July 20, 2005 - we plan to pay a dividend of 0.30 Euro per share.
• These figures show that the restructuring of the Heidelberg Group initiated in financial year 2003/04 and concluded in the financial year just closed has begun to bear fruit. By concentrating on sheetfed offset and the associated operations along the entire chain from data entry to finished print product, we have succeeded in turning around the company's earnings.

But we are looking to achieve more.

• Our revised portfolio of solutions containing over 50 product innovations was launched in May 2004 for drupa. It has strengthened our hand on the market and given us opportunities for renewed growth.
• At the same time we have placed our costs - and that includes both structural and manufacturing costs - on a more competitive footing.
• However, we still believe there is one major unknown - an area that is vital for our business success - namely the general economic climate expressed in terms of each country's GDP. While the global economy flourished in the year under review, with 2004 seeing the highest growth levels for several years, lower growth rates are predicted for the coming few years.
• Movements in exchange rates, particularly in the dollar and yen zones, coupled with increases in the price of raw materials and energy, are also having an impact.

General economic and market conditions

Ladies and Gentlemen,

We expect to see continued improvement in the global economic climate and further growth in the world economy in 2005 and 2006.

China and the USA are likely to remain the main pillars of global economic growth over this time.

The slight economic improvement in Europe is likely to continue - though growth rates here remain disappointing against the backdrop of the strong global economy and will be in the region of only one to two percent. Development in Germany is expected to be particularly unsatisfactory again.

What impact is the economic climate having on our industry?

The print media industry in the industrialized states is recovering slowly after three years of crisis. Production volumes for print media grew again for the first time in 2004. In the USA, volumes will continue to grow this year. The National Association of Printing Leadership (NAPL) predicts the growth of 4.1 percent achieved in 2004 will climb to 5.1 percent in 2005. We anticipate that other industrialized countries will also see a growth in production volume, even if not in these dimensions.

Since the economies of the threshold countries will continue to grow at higher than average levels, the demand for print products will increase accordingly. The degree of saturation for print products is still very low in these countries. What is more, print shops here tend to be more willing to invest.

We will profit from both the further revival of the industry in the industrialized states and the high growth experienced in the threshold countries.

In the industrialized states our strategy of offering integrated solutions will continue. Nevertheless, we will have strong Japanese competition on the US market in particular, just as we did this year.

The situation is further exacerbated by exchange rates, particularly in the dollar and yen regions, and movements in the prices of raw materials and energy. These factors have direct consequences for equipment manufacturers in the print media industry.

Our excellent service and sales network gives us distinct competitive advantages in the threshold countries. We are targeting the premium segment on these markets but are also looking to move into new market segments in China by deploying more attractively priced products developed specifically for this market.

All in all, the conditions facing the print media industry are improving. The progress made is slow but sustained.

Before we discuss the future any further I would like to look briefly at the most significant developments and key facts and figures from the last financial year. Dr. Meyer will later go on to explain the Annual Financial Statements for 2004/2005 in more detail...

Note: The complete statement of CEO Bernhard Schreier may be downloaded on the right-hand side of the page.