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BUSINESS:

Océ weathers economic storm by cutting costs

Océ Company Logo

The world's first multi-national company was the Dutch East India Company. Its trading ships placed the Netherlands at the forefront of modern business practices. Following in their wake came other Dutch multi-national companies, like Shell, Philips and Océ, Europe's only producer of wide format printing systems

Under a "This is Océ" heading, the UK branch describes Océ's activities as: "Hardware (printers, copiers and scanners), software, services and imaging supplies." We are surprised that scanners appear so prominently as part of Océ's business. On the other hand, some suggest that as many "Océ" brand large format scanners are sold as Contex ones. We wonder.

Océ Financial Report Third Quarter 2009
Plain sailing or stormy weather
for this Dutch multi-national?

Like most large format scanner suppliers Océ is struggling to sell its standalone devices in the face of an economic downturn made worse by an aggressive marketing campaign by Contex. Making it perhaps all the more difficult is the fact that Océ's wide format scanners are OEM'ed versions of Contex ones. So aggressive is Contex in the UK right now - a campaign that is intended to hurt Colortrac - that Océ is known to be slashing its prices in order to secure sales. These trading circumstances are fairly typical of the global large format scanning market right now.

So, it is unsurprising that Océ has posted disappointing third quarter results for 2009.

  • Revenues declined 10% to € 631 million
  • Normalized operating income: € 1 million
  • Restructuring costs € 32 million
  • Net loss of € 25 million
  • Free cash flow improved to € 19 million
  • Net debt further reduced by € 18 million
  • Accelerated cost-cutting measures delivered results

The ideal way to increase profits is not only by cutting costs but by making more sales. However, in these difficult times of declining revenues, cutting costs is as much as anyone can do. Océ now has all hands to the pump, manfully doing what is necesary to keep the sole European producer of wide format printing systems afloat.

The view from the top deck

Rokus van Iperen, Chairman of the Board of Executive Directors at Océ N.V., comments:

"Due to market developments, our revenues declined in the third quarter of 2009. The European markets weakened further compared with the first half of the year. Nevertheless, we performed better than the printing industry average, where revenues declined by 19% over the first half of 2009. We strengthened our competitive position by launching a range of new systems and services during the recent industry trade show Print 09 in Chicago.

New Oce CS4236 wide format scanner
The 36" wide Océ CS4236
large format scanner.

"In the third quarter of 2009 color revenues in the office market were under pressure, as customers implemented cost reduction programs. At the same time, in the wide format and graphic arts markets color revenues increased considerably, thanks to customers implementing new color products, such as the Océ ColorWave, Océ Arizona and Océ JetStream printers. Outsourcing of document management services continued to grow, as companies looked to improve efficiency and cut costs.

"We have achieved good progress in implementing our cost-cutting program. The headcount reduction is on-track, as a consequence of which we faced substantial restructuring costs in the third quarter.

"For the fourth quarter we anticipate markets will remain challenging, although we are noticing early indications of bottoming out in some US markets. In the current economic climate we will continue to cut costs aggressively, in order to regain profitability. Our stringent cost-cutting programs, innovative product portfolio and distribution strengths will help to weather the economic storm."

Océ Wide Format Printing Systems (WFPS)

The AEC and manufacturing market sectors declined, especially in Europe. The climate in the display graphics market deteriorated further. Revenues in WFPS amounted to € 166 million. Organically, revenues declined by 19%. The share of color increased to 48% compared to 2008's 34%.

Non-recurring revenues amounted to € 56 million. Organically, revenues declined by 25%, mainly due to significantly lower equipment sales in Technical Document Systems as a result of the decline in the construction and manufacturing market sectors. The US business benefitted from the rollout of the successful Océ PlotWave 300®. Recurring revenues amounted to € 110 million. Organically, recurring revenues declined by 16%.

The main driver was the decline in print volumes in market sectors served by Technical Document Systems and Imaging Supplies where Océ's revenues declined organically by 28%; one third of this decline was due to the divestment of Arkwright and two third was mainly due to lower print volumes.

Thanks to the success of the Océ Arizona® series WFPS increased revenues in Display Graphics Systems, despite the deteriorated market climate. Normalized operating income was € 5 million compared to 2008's € 14 million) and was impacted by the strong decline in market demand for Technical Document Systems equipment as well as print volumes.

About Océ

Océ develops and supplies digital printing systems, software and services for the production, reproduction, distribution and management of documents, in color and black and white, in small format and in wide format, for professional users in offices, educational institutions, industry, AEC, advertising and the graphic arts market.

Océ's product offerings comprise printers, copiers, scanners, software, services, imaging supplies, services for systems integration and outsourcing of document management activities and leasing of printing systems. Its broad portfolio consists of products developed by the company itself for wide format and for the (very) high volume segments of small format, supplemented by selected machines from Original Equipment Manufacturers (OEMs). like Contex, the Danish wide format scanner manufacturer.

Océ supplies its equipment as part of total solutions, ranging from the provision of initial advice through to the maintenance of the systems. Océ's reputation is founded on productivity and reliability, ease of use and a favorable ‘total cost of ownership’.

Océ's commercial organization is coordinated by three Strategic Business Units: Digital Documents Systems (small format), Wide Format Printing Systems (wide format) and Océ Business Services. It is commercially active in over 100 countries and has its own sales and service organization over 30 countries. It has research and manufacturing facilities in Europe, the United States, Canada and Singapore.

In 2008 Océ achieved revenues of € 2.9 billion. The publicly listed holding company of the Group is Océ N.V. The issued share capital amounts to around € 53.7 million, divided into € 43.7 million ordinary shares and € 10 million financing preference shares with a nominal value of € 0.50 each. The ordinary shares of Océ are listed on the stock exchange in Amsterdam (NYSE Euronext).

For more information on Océ see: www.global.oce.com.