Rainer Hundsdörfer is the CEO of Heidelberger Druckmaschinen, and has, in the past months, been in focus for decisions widely discussed in the printing industry. In this Conversation CEO, Rainer Hundsdörfer and Editor Morten B. Reitoft have an open conversation about where Heidelberg is heading and why it has been necessary to take the measures Heidelberg has. It took some time for us, at INKISH, to fully understand (we believe) why Heidelberg took such drastic measures, but bringing back Heidelberg on course is and was the challenge. Still, Heidelberg has challenges, but judge for yourself – Heidelberg seems to be On Course.
Rainer Hundsdorfer, it’s a pleasure to meet you again. And this time we are in your playing field, right?
Yes. Yeah, thank you for coming. Always a pleasure to see you, Morten.
It’s also a pleasure to see you. To be honest, it’s my first time that I’m here in real Heidelberg in Wiesloch and I’m blown away because it’s a huge company and a nice demo center you have here.
Absolutely. Heidelberg is always an amazing company. And Heidelberg is not by accident the technology and market leader. It’s incredible competence, which is concentrated here in Heidelberg from sales, from service, but also in R&D. And I think we can nicely present our technological leadership in inprinting.
I can’t help thinking, that was the second time I meet you. And I can’t help thinking of that… And you said to me just before, that you also have an engineering background. Of course the business drives you, but is it also the technology still in your heart that is driving your passion for the work?
Basically, it’s technology who drives me. Then of course it must be good business as well. And sometimes you need to take decisions you wouldn’t wanna take as an engineer. But you’ve gotta have to in a business sense. And that’s what we’ve done in the last few months.
You have been busy.
In many areas.
You have been busy, right?
I think the last year was very, very important year for Heidelberg. We were very analytic without the heart of an engineer looking at our business, and established solutions, established measures to secure the future for Heidelberg. So Heidelberg is gonna be reliable and very helpful partner to all the printers in the world.
Some of the things that you have been busy with is also; selling off business units, stopping some like the VLF and the prime fires, we have been drawn back. I actually want to give you an apology here on camera, because as you said to me just before, when I like… Trying to be a reporter is trying to analyze things, right? I should just have called you, right? Because some of the questions you sometimes have can actually be answered maybe simpler than a press release, right?
Absolutely. So please feel free to ask.
Yeah. And as I also said that when we talked about the basis for this interview, I think we had some of the questions I have asked in the article is also some of the things that was raised in the interview with Peter Sommer. I think that we should address some of the questions, but I think that it’s more interesting for the audience to talk about the future of Heidelberg.
Of course. Even though I think it’s important for our customers in particular to know that Heidelberg is absolutely stable and the measures we took support them. So they were necessary and that makes sure Heidelberg will be around for all the years to come to support our customers. And the big transition we’ve started already last fall. I just briefly could mention that. When we met last time, I couldn’t tell you any details yet. But that was all started way before COVID-19 pandemic. And the pandemic put some extra burden on it, but I can also-
Yeah, because one of the things is always as we spoke about, if you, for example, look for investors to finance the subscriptions machines, certainly the environment for financing changes, right?
Absolutely. So you know, our overall strategy from the past was really good. But maybe wrong timing, maybe not perfect product for the marketplace. So we took a very difficult decision, particularly for the engineers.
So the engineering hobby.
Including me. To stop the best digital printing machine and to stop the best large format offset printing press. Because if you can’t make money with it, you simply cannot afford that. And then of course, we took some other measures, some financial measures, in order to stabilize the business. So the focus is gonna be, to have a very profitable Heidelberg as we used to be some years ago.
And you know, that is also the second apologies I want to give you, is not because I’m used to give a lot of apologies, but I want to give you one more because it actually… I think that your consolidated annual report, they are almost 200 pages each. And I have read the past three consolidated reports word by word. And I will still say that from a reporter’s perspective, it’s been a little difficult to figure out what the intentions were. Because I mean, one thing is, as you said, that you have to get rid of business that is not profitable. That makes sense. But it was only a few weeks ago when I wrote an article where I was doing a lot of reading. That it got to me that, and correct me if I’m wrong, but I think that maybe one of you and Mr. Wassenberg’s main topics has been saying that, “Okay, before we start developing new technology, before we enter in new business areas, we need to make sure that the stability, financially for Heidelberg is totally aligned with cashflow, balance sheet, the number of employees and all this is.” Is that-
That’s exactly that. You need to have a stable foundation. If you want to build new business and new business models. And that’s what we’ve done. We’re in the midst of it. And I can say Heidelberg is more stable financially than has been in many years of the past. So we have-
The debt situation is extremely much better, right?
Is much better. We are in the process of repaying our high-yield bond, which was also kind of a threat always to the existence of the company. So all that is managed. And I can also say that different than many other companies in the machinery industry, and even in our machinery industry, we will manage even the COVID-19 pandemic without state aid.
But if the state aid is like something that a company can use as part of the measures against the COVID, isn’t that something that could help Heidelberg even further? Or is it because it’s repayable or why is it-
It is always the last resort, because it puts a lot of restrictions on the freedom how to run your business.
How to run your business, yeah.
And that’s one of the last things you want to do. And by the way, it’s a very expensive undertaking.
Because it’s kind of a loan, yeah.
It’s if you will, also kind of high-yield bond.
So you got rid of once a while find a new one, right?
So it’s the last resort. And I think we will manage this crisis without. Has to do a lot with what we did to stabilize Heidelberg and make it ready for future growth in the first place. So what was right before the crisis is even more right through the pandemic crisis.
So if we look at the situation right now, the measures you took for the restructuring cost last year and how you have got rid of the VLF and the prime fire and also the people that were directly involved with that, now you have got like that foundation. And you said that with the focus on the offset B1 machines, you have like a stable profitable business that will give you a future. When we talk about being a stable partner, I think that Heidelberg has always had the reputation of being the best in service and best quality machines. When people, like for example, Peter Sommer was kind of questioning that in the interview we did with him. What does it do to you personally? Because I mean, it must be strange when you have an organization that performs well, and then you have these kind of words.
It irritates you the first place, then it makes you a bit angry, then you think about it and say, “Okay, we need to communicate better.” So we talked to Peter Sommer and if you ask him now, he will tell a different story.
I had lunch with him yesterday, so I know-
Didn’t understand that in the first place. So it’s always a challenge if you do something to communicate it, that everybody understands. So that’s what I think in the first place. The second is of course, I think what we’ve done is perfectly right. Concentrate on what you can do best. And that’s the whole printing process on sheets. End-to-end. From the data, from pre-press through post-press, to the ramp, to the invoice of the customer and Heidelberg will continue and even extend its offerings to support our customers end-to-end. So not only for the machine, of course the machine is the core, or the machines are the core, but also for the data and for all beneficial business models for our customers. If someone wants to do business with us transactional, fine. He is always welcome for any of our offerings, but also we will continue to build the fast as we can, the subscription model, because we believe that’s at least for large part of our customer base. A very good future business model because they can concentrate on their business model. They can concentrate on their customers and not to optimize, to run the print shop. The smart print shop.
Because the reason I’m asking about is because, I can’t remember, I think it was a couple of days ago, me and my colleagues were talking. Not about Heidelberg specifically, but sometimes if you talk about where you want to take your business, it’s always also a question from where you take it. Because maybe also the demands from customers in relation to have a relationship with the supplier changes. So is that something that you think of that may be the need? Especially during the pandemic, maybe the needs from your customers are different.
Of course. And that’s, I think, always the challenge for successful enterprise to always adapt quickly to the changing demands of the customer. So we need to listen or continue to listen to our customers. And we have learned a lot in the last few months. And I think Heidelberg has done quite well supporting our customers. So right in the midst of the pandemic crisis, we installed the machine in Brescia and in March where basically there was a total lockdown because it was important for a customer to find ways to get our technicians there.
And how did you do that? Was it possible to go in under some exemptions or-
Yeah. It was basically complete seal of area. So only our people were there. They even were basically more or less sleeping in the company and we got a hotel to provide them with food. So they get the machine installed and started up on time.
Is that your holiday offer to your employees?
No, but it shows the dedication of our people to serving our customers. And that’s only one of many, many examples.
And that is maybe also a good example on when you talk about dedication to your customers and being a stable partner is also, I don’t… You know, maybe I’m wrong on this as well. I take it on my shoulders, but I was thinking that sometimes if companies gets very big, not Heidelberg particularly, but all companies. That sometimes the distance from the top to the customers can be very, very wide. And sometimes you maybe forget the core of customer service. And I think that may be the pandemic opens up for rethinking a little bit, how we do these things.
It does. But on the other hand, if I take my person, even being an engineer, I always been very close to sales and made good part of my career in sales as an engineer. So you know, what I enjoy and that’s something-
Are you saying that you can engineer sales? That was nice. I would like that, yeah.
Of course. What I hate about the situation, that it’s so difficult to see the customers. And believe, me there’s no customer visit, where I don’t wanna see the shop, understand what they do, what their challenges are. Because that’s where I take a lot of input. It’s the same that, you know, I’m also trying to understand our products right to the core. Not on the whatever cloud number seven level. I spent a couple of years ago, several days, not without stop, but in between, to build a whole Speedmaster XL 106 from the components to the printing.
That’s my approach. I tried to be very close to our customers and lead our team as an example to really make sure we understand the needs of our customers, because it’s very simple. That’s something I follow all my business life. We need to make our customers happy, we need to make them successful. I even say something, we need to make them rich. Because if they’re rich and wealthy, they’d buy again. And that has been the Heidelberg story the last 150 years more or less. And we continue that.
It’s funny ’cause you mentioned that because that’s also one of the things that I have been speculating about. Sometimes you see an enormous brand loyalty among printing companies and you know, when you come from the outside, sometimes you think, “Why is that brand loyalty so strong?” And then it came to mind, it’s obvious. Because your technology, your advices, your risk-taking in new area of business have given a lot of people an enormous wealth, right? Of course the market is still in big changes right now. I wouldn’t say difficult, but changes, right? So of course it also requires changes from how you see that relationship thing. What about, you just had your investor analysis meeting and the Q1 numbers. And one of the things that I think a lot of people have been asking about was the lower order intake that you announced. How do you see your sales? Because it’s maybe not only technology, maybe it’s also new thinking of business models, or how do you think of that?
No, it’s not a question of business model. Is just the nature of the old business. And it’s very simple. That’s what we also told them. It’s of course the truth. Our analysis, the low-level where basically everything fell apart was April. Then improved in May and in June still, way below the level.
So you still see an upgoing curve?
And July was already very close to the previous years. So we see a very steady trend going up. And you’ve seen the PMI climate where it shows that at least in general, the usage of our machines, and this is a statistically evidence. It’s not just a few machines, it’s almost 5,000 machines where we have exact datas shows that almost everywhere in the world, we’re reaching pre-corona level productivity. In particular, in packaging.
And I think it’s interesting also from the perspective that when you say almost reaching pre-corona level in the time where we are still in the corona, right? So it’s not that we’re not finished with it, right?
You know, I think what I see people understand, this will not go away in the next few weeks or months. We gonna have to live in it. So people start, like we, start to arrange with the new situation and care about the business again. So there is need for printing products. And some areas like packaging is even growing. Packaging is already, was even in the peak of corona above the previous year level significantly.
I actually think that when I looked at some of the PMI climate things that you have announced, I think that even that the… I think especially was in Chinese market. It was a little bump, but it was not as much as you could have thought of, right?
Yes, and investment of course. Until somebody invest takes a little longer. But first, the usage of the machines needs to be there. And I can say also that our business in China, for instance, almost back to the pre-corona. Our business back to pre-corona level. It’s not the case yet in Europe or North America. But we are moving in this direction. And of course, as I said, our commercial printers are a lot more effective. No question. And we see that also in our consumable sales because consumers, mostly we sell to commercial customers. So they’re still lagging a bit behind the times. And if you look in particular, to your online printers, they are pretty bad hit. But packaging printers are doing really well. And you probably know that Heidelberg last year we sold more than half of our equipment to packaging companies. And I also like to use this opportunity to say, Heidelberg sells more printing unit to packaging than any of our competitors in total.
In total, okay.
And this is of course-
That shows also that you are a stable partner because people will not invest if they didn’t believe in you, right?
Yeah. And you know, I think Heidelberg has proven quite often that companies can rely on Heidelberg and we will do as so in the future. It is not by accident that you have 45% world market share. That you have a market share of more than 50% in China. And even in Japan, Heidelberg maintains very, very stable over many years, 25% market share despite to have a local competitor unheard and unknown and I don’t know if you know the company, TRUMPF, is one of the best machinery companies, making lasers and sheet metal equipment. Where I spent a large part of my business life. We never managed-
To get anything like that.
To anything like that. We were fighting like hell. In exactly same situation, we had to fight to maintain like a three, 4% market share.
So Rainer Hundsdorfer, do you thrive also in crisis as a person? I mean, do you like the challenges that you see as a person? Or would you like to have it be more downhill than uphill?
Everybody likes some tailwind.
It’s tailwind, yeah.
No question. On the other hand, in crisis, the challenge for the management is big and you can show your capability so to speak. And I’m very proud on my team, which we have also restructured, you know, we do love a lot of changes and if you’re still not there, how they grow with the challenges. So I’m very optimistic that Heidelberg will, one of the companies who will come out of this crisis stronger than we went in. We are using the crisis. And there’s a very simple thing. If you’re in transition and you have a crisis, you need a lot less convincing to do that you need to change. If everything is nice and dandy, why change? But it is obvious that we need to change. And everybody was happy that we started to transition already prior to corona because it help us a lot. And we were much earlier into the stage of having really working counter-measures and not only to survive, to even speed up our transition to a stable and financial rigid company. And of course, it takes consequences. Of course, I didn’t like to sell our narrow web business. But for the good of the company, for the future and the capability to grow a new field, it’s-
Yeah, and to follow your plan of being stable also financially. Because selling off Gallus is like a tremendously cashflow positive thing. And also on the balance sheet it’s really positive too, right?
I still believe inkjet will eat into offsets sooner or later. So we not only conserve our inkjet know-how, which is by far the best you can find, at least in Europe. We are thinking about new business models even to grow that business. And of course, one part is that we will also be in future, supplier of this technology, to the Gallus inkjet digital printing. As part of the business.
You keep the business intel, the technical intellect on Heilderberg hands and are able to sell that as a service so you can both make money on the deal and you can also serve the future.
And we have this technology in hand when the time is right to bring it to the market. Because when we say we concentrate on end-to-end sheet printing and to products related to that, it is not related to a technology. It is the majority is today offset, yes. But it is also a significant part is digital with our partnership with Ricoh. You were there.
I just saw your demo room just before you said that.
And then it might be more. It might become more as time goes by. So it’s technology which is… The printing technology is for me open.
Rainer Hundsdörfer, thank you very much for your time. And I am honored to be here. I am even more honored that you took one day off from your vacation to meet with Inkish. Thank you very much for your time.
It’s not about you, it’s for our customers. When they have the opportunity to tell our customers.
It’s better for the industry. We have to communicate. That’s where our cope is.
As we said before, you need to communicate better. And if there is an opportunity, I gladly take it. So thank you very much for the opportunity to give you my views and explanations.
I hope you like it. I think it was nice and cozy. So I hope you liked it too.
Thank you very much. Normally I will shake hands, but we can’t do that right now.
Just do like this.
We’ll do that next year, yeah. Alright. Thank you.