08. June 2009

Fiscal 2008: One-off special factors cause sales to contract slightly by 2.0% to 202.8 million euros / High depreciation after massive investments squeezes annual surplus / Adhesive material grows despite shrinking market / Aggressive price war impedes labels' progress / Record result with labelling machines

HERMA remains on course despite an extremely difficult environment. The group of companies specialised in self-adhesive technology and based in Filderstadt near Stuttgart, saw its sales fall slightly in 2008, by 2.0 % to 202.8 million euros. Two reasons for this were the sale of the Multo stationery brand in the Netherlands and the deliberate decision to withdraw from the less profitable low-volume label business. Without these special factors, the total sales would have been marginally higher than in the previous year (206.9 million euros). In this connection, HERMA profited both from the start-up of its ultra-modern coating plant at the beginning of the year, and from the commencement of labelling machine production at Deizisau in mid-2008. High depreciation following the massive investments in preceding years, as well as the dramatic fall in value of the pound sterling in the key foreign market of Great Britain, pushed the annual surplus down significantly on the previous year's. "In view of the unprecedented turn of economic events from the 4th quarter onwards, we are satisfied on balance with what we have achieved," stated HERMA managing director Sven Schneller. He said that the structure, with its three divisions – adhesive material, labels and labelling machines – each serving very different target groups, had once again had a stabilising effect on the company as a whole. The export ratio remained practically unchanged at 52.5 %, following 52.4 % in 2008. The number of employees fell slightly, from 792 to 784; the company increased the number of trainees from 29 to 37.

Adhesive material grows amid predatory competition

As in preceding years, the adhesive material division proved to be a motor for growth. In a market that was contracting overall, its sales of 96.3 million euros were up year on year by 5.9 % (2008: 90.9 million euros). Thanks to the capacities of the new coating plant, growth potential in all relevant target markets could be further exploited. In eastern Europe in particular, HERMA recorded overproportional growth with adhesive materials, the primary material for label production. "In view of the long-term prospects for this region, this is exceptionally important to us," stressed Dr. Thomas Baumgärtner, Schneller's fellow managing director and head of the adhesive material division. However, the division achieved an increase of 12 % on the hard-fought domestic market as well.

Labels in aggressive price war

By contrast, the exceptionally unfavourable economic conditions visibly took their toll on sales in the labels division. Following on from 89.3 million euros in the previous year, the 2008 revenues were down 11.9 %, at 78.7 million euros. Along with the general downturn and the forenamed special factors, the situation was exacerbated by structurally-related decreases in consumer and office products, such as classic photo albums and mounting products, as well as continuous and franking labels. At the same time the aggressive price war in industrial labels continued unabated. On the other hand, HERMA recorded pleasing growth in its core business with A4 labels for office copiers and PC printers. For 2009 outline agreements were successfully concluded with major European purchasing associations. "These are an important element in the further expansion of our export business, which harbours particular potential in the medium term," states managing director Sven Schneller. The successful concentration in the industrial sector on labels for logistics applications has already increased capacity utilisation with roll labels. At the same time, the industrial labels' result has already benefited noticeably from all label activities being brought together at the company's head office in Filderstadt, which was completed in mid-2008.

Machines more successful than ever

Although the relocation from Stuttgart-Wangen to Deizisau involved the use of substantial resources in the first half of the year, the label machines division again surpassed the previous year's record sales and earnings. The revenues rose from 26.7 million euros by 4.1 % to 27.8 million euros. The success of the versatile HERMA 400 labelling machine again played a key role in this connection. The number of units sold has doubled for two years in a row. Consequently, the company has achieved a leading market position in this segment. "The envisaged further enhancement of our product range, coupled with the additional scope for streamlining the production process offered by the Deizisau location, make us reasonably confident about the future in this division as well," says managing director Sven Schneller.

Difficult forecast

Initial sales forecasts for 2009 conducted as part of the budget process still anticipated overall growth of 6 % for the company as a whole. "Against the background of the general economic trend, we have revised our position," says Schneller. "We are preparing for a difficult year for which it is practically impossible to make reliable forecasts. However, we are currently anticipating a significant decline in sales in the first half of 2009. Whether we can make up for this in the second six months is questionable.“ Compared to other companies in its industry, however, he said HERMA occupies a strong position. This is attributable, among other things, to its diverse business activities. "In certain product sectors we are even improving our market shares.“

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