Koenig & Bauer AG

views updated

Koenig & Bauer AG

Friedrich-Koenig-Strasse 4
D-97080 Würzburg
Germany
Telephone: ( +49) 931 909-0
Fax: ( +49) 931 909-4101
Web site: http://www.kba-print.com

Public Company
Incorporated: 1817 as Schnellpressenfabrik Koenig & Bauer
Employees: 7,054
Sales: EUR 1.23 billion ($1.55 billion) (2003)
Stock Exchanges: Frankfurt
Ticker Symbol: SKB
NAIC: 333293 Printing Machinery and Equipment Manufacturing

Koenig & Bauer AG (KBA) sees itself as the world's third-largest manufacturer of printing machines. The company makes web presses for printing newspapers, books, booklets, and directories, as well as publication rotogravure, and is the world's largest manufacturer of securities and banknote printing machines. KBA also produces presses for conventional and digital offset printing and supplements its range of printing presses with peripheral systems for paper logistics and counterfeit-proofing. Headquartered in Wurzburg, Germany, the KBA group has production subsidiaries in Germany, Austria, and the United States and a network of sales offices and service stations stretching from Sweden to Italy, from Singapore to Australia, from Russia to China, and from the United States to Brazil. The Bolza-Schünemann family owns roughly 41 percent of KBA.

A Steam-Powered Printing Press
in the Early 19th Century

For three centuries, printing businesses relied on the Gutenberg hand press invented in the late 15th century. Operating the heavy presses that put out about 240 sheets per hour was physically exhausting. In 1803, Friedrich Gottlob Koenig, a 27-year-old German printer who had studied mathematics, physics, and mechanics at Leipzig University became obsessed with the idea of creating a steam-powered printing press. Looking for funding, he traveled throughout Europe but was only greeted with deep-seated skepticism and rejections. In November 1806, he traveled to England and finally found a sponsor for his idea in Thomas Bensley, the country's most prominent book printer. With the help of Andreas Friedrich Bauer, a German precision instrument maker whom Koenig had met in London, he was able to make his idea a reality. In April 1811, the machine, for which Koenig had received a patent a year earlier, was first presented at a printing trade show in London. However, the 400-sheet output of the all-metal steam-engine-driven press was not enough to convince English printing houses to spend the considerable amount it cost to manufacture. Looking for a way to significantly increase the machine's output, Koenig came up with the idea to replace the flat platen used in the Gutenberg press by a rotating cylinder that was able to move the paper sheets rapidly under pressure over the flat type form. Using this principle, Koenig was able to double the output of his machine, which operated smoothly and created high-quality impressions. When John Walter, publisher of the daily newspaper The Times, saw the new press in action in December 1812, he ordered two of them. Put together secretly in a different building to avoid an uproar among his workforce, Walter's machines printed the entire circulation of The Times overnight on November 28, 1814. Koenig's cylinder press, the output of which was further increased to 1,100 sheets per hour, initiated the industrial revolution in printing. Another improvement of his machine was a model that was able to print on both sides of the paper in one step.

When Koenig and Bauer set out to sell their new type of machines outside of England, they met resistance from their business partner Bensley. Finally, the three men agreed to part. Koenig and Bauer went back to Germany and purchased a secularized monastery in Oberzell near Wurzburg, Bavaria. On August 9, 1817, the two partners, who had become close friends, also established their new company, Schnellpressenfabrik Koenig & Bauer. While the shipping of tools, machinery, and iron and coal from England took a few months, Friedrich Koenig traveled Germany in search of new customers. The first ones were Berlin-based publishers Decker and Spener, who received the two presses they ordered in 1822.

Soon after the first machine-printed newspaper in continental Europe had come out in early 1823, Germany's top printing establishments became interested in the new technology. While they all received their steam-powered presses made in Oberzell by retrained iron and steel workers, Koenig was already on the road again, this time looking for business outside of Germany. After a demonstration of his machine at a trade show in Paris, Koenig brought in orders from Denmark, Switzerland, the Netherlands, Spain, and France. The first order from Spain was sent by mule over the Pyrénées mountains. In 1828, Koenig established a paper mill as a side business in another former monastery in Bavaria. Two years later, when business was soaring, the July Revolution in Paris brought export business with France as well as domestic orders to a sudden halt. The paper mill became the young company's sole source of income, and its workforce was cut back from 120 to 14. Three years later, Friedrich Koenig died just before his 54th birthday, and Andreas Bauer became the company's managing director.

While the company's orders began to increase as Germany's economy slowly recovered in the second half of the 1830s, the growing demand for printing machines created a number of competitors. Oddly, most of them sprang from Koenig & Bauer. Bauer was a brilliant engineer but lacked Koenig's business sense, strategic thinking, and imagination. His resistance to trying out new designs and manufacturing procedures proposed by some of the company's younger staff led to the establishment of new enterprises by former Koenig & Bauer employees. One of them was Friedrich Koenig's nephew, Fritz Helbig, who set up a printing press factory in Vienna, Austria, in 1836. When the new competition began to threaten Koenig & Bauer's market leadership, Bauer created a new type of circular motion press and sold 24 of them in the year after the new machine was first presented to the public in 1840. However, Bauer resisted the idea of expansion until his death in February 1860. By that time, two other main players in the German printing machine industry, which together with Koenig & Bauer were to become the world's leading manufacturers in the business, had been established. In 1844, another nephew of Friedrich Koenig, Carl Reichenbach, founded a printing press factory that later became one of Koenig & Bauer's main competitors, MAN Roland. The other one, Heidelberger Druckmaschinen, was founded by Andreas Hamm after he left a partnership with former Koenig & Bauer employee Andreas Albert.

Innovation and Expansion after 1860

After Andreas Bauer's death, Friedrich Koenig's two sons, Wilhelm and Friedrich, Jr., took over the management of the company. Friedrich, Jr., was a great organizer while Wilhelm took care of the technical side of the enterprise. They were greatly supported by their young mother Fanny Koenig, who did the business correspondence and helped with calculations and negotiations. Fanny Koenig was the driving force behind a number of social benefit programs for Koenig & Bauer workers—such as a sickness benefit fund, a company savings bank, an employee training center, and housing for workers—which were introduced in the 1860s. In 1873, a factory ordinance was introduced that defined workers' and managers' rights and obligations and a democratically elected factory council consisting of managers as well as workers was established that defined the rules of conduct and discussed and solved important work-related issues.

In 1886, the older son of Friedrich Koenig, Jr., Edgar Koenig, joined the company. However, he died at the age of 38. Albrecht Bolza, the son of Friedrich Koenig's daughter Luise, entered the family business in 1896, followed by the younger son of Friedrich Koenig Jr., Constantin Koenig. After Wilhelm Koenig's death in 1894, Bolza stepped in to help Friedrich Koenig, Jr., manage the company. With domestic and export business thriving again, demand outgrew the capacity of the factory in Oberzell by the late 1860s. A brand-new production hall was built nearby Würzburg in 1872. Another new factory, including Germany's largest manufacturing hall that stretched out over 740 feet was built in 1900. One year later, the monastery in Oberzell was sold. In 1905, the firm was transformed into a limited liability company with Alfred Bolza as managing director. In 1913, Koenig & Bauer acquired a 40 percent stake in Vienna-based Schnellpressenfabrik L. Kaiser's Söhne, the company which one of Friedrich Koenig's nephews had founded.

In the last quarter of the 19th century, Koenig & Bauer introduced a number of important innovations which formed the foundation of the company's success for decades to come. In 1875, the company started making so-called web-fed presses, or web presses. First introduced in the United States, the new presses printed on paper from rolls instead of paper sheets. In 1886, Wilhelm Koenig invented a web press that was able to cut the paper fed from a roll into sheets before they were printed. The machine also allowed for a variety of sheet sizes. Two years later, he constructed the first web press that was able to print in four colors. In 1890, Koenig & Bauer launched another novelty—a web press with two integrated printing units, a twin web press. In the early 1890s, Wilhelm Koenig laid the groundwork for two other of Koenig & Bauer's important product lines. He began to design presses for printing luxury color products and for printing securities and bank notes.

Company Perspectives:

Our customers inspire our policies. Our workforce is our greatest asset. Our innovations secure our future. Our commitment is to quality. Our duty is to society. Our Objectives: To expand the frontiers of technology according to our motto 'Innovation is timeless.' To become the technological leader in prime markets. To expand our global market position in sheet-fed offset, web offset, newspaper and digital offset. To offer systems competence through in-house know-how or strategic partnerships. To maintain a consistently high quality both in our products and services. To offer practical solutions for individual production requirements. To intensify our customer care. To maintain a high level of staff motivation and qualification. To enhance shareholder value. To protect the environment by enhancing press and production ecology. To fulfill our social and cultural obligations.

In the first decade of the 20th century, Koenig & Bauer focused on catering to the growing number of publishers that were putting out richly illustrated books and magazines. The company developed a variety of publication presses, including stitching or ribbon fold units. At the same time, Koenig & Bauer began to make flat-bed presses and took on the development of rotogravure machines. In 1910, the company introduced an innovative security press with very high accuracy, the "Iris" press, followed by the first matrix-molding press, "Gigant," and a new type of plate-casting machine three years later. The first Koenig & Bauer rotogravure press left the factory in 1912.

Era of Destruction and Rebirth Begins in 1914

When World War I began in 1914, Koenig & Bauer was cut off from markets abroad and domestic demand for printing machines also came to a sudden halt. During the war, the company manufactured a cornucopia of necessary goods, from grinding machines and agricultural machinery, delivery vehicles, and wheel hubs and axles to horseshoes and cooking equipment. Germany's currency became catastrophically de-valued in the early 1920s. Causing a short boom in demand for money-printing machines on one the hand, galloping inflation rapidly pushed up costs and wages on the other. To gain some advantage from this dire situation, Koenig & Bauer even issued its own emergency currency, which soon gained acceptance in the Würzburg region. Meanwhile, the managing director of the company's Austrian subsidiary, a retired army officer who was fluent in several languages, brought in a number of orders from Eastern and Northern Europe. In November 1920, when one American dollar was worth 4.2 billion German paper marks, the German government got the situation under control with the introduction of a new currency. Through a close cooperation with the German Government Printing Office, Koenig & Bauer strengthened its leading position as a manufacturer of security presses. During the mid-1920s, orders from abroad picked up again. The company delivered large rotogravure press installations to customers in the United States and Canada and installed Europe's largest newspaper web press in Norway. However, the short-lived economic boom was stopped by the Great Depression, initiated by the New York Stock Exchange crash in late October 1929. High import duties shut down the export markets in France and Spain, while domestic demand began to dry up due to decreasing investment activities in the printing industry.

In 1931, Alfred Bolza's son Hans took over as Koenig & Bauer's managing director. The 41-year-old Hans, who had changed his course of studies from physics and mathematics to engineering after his older brother Benno suddenly died, led the company during the chaotic political and economic climate in Germany during the 1930s. By 1932, roughly one-third of German workers were looking for a job. One year later, Adolf Hitler became the country's new chancellor and immediately established a totalitarian regime. Once again, the demand for printing presses slipped into a steady decline. At first, the company's efforts to counteract this trend, including increased investment in trade show presentations, product innovation, reducing the number of models in certain product lines, and job sharing among workers to avoid layoffs, seemed to work. However, as Germany increasingly isolated itself from the rest of the world, demand for the country's products declined. At the same time, the Nazi Party began to suppress publishers that were not in line with its narrow ideology, diminishing the demand for printing presses even further. In 1936, Hitler launched his plan to prepare the country for yet another war, and the National Socialist government seized control of the economy. Koenig & Bauer gave in to the mounting political pressure and began to manufacture war goods. In 1937, the company acquired a Würzburg-based competitor, Schnellpressenfabrik Bohn + Herber. One year later, when Austria was occupied by Nazi Germany, Koenig & Bauer's Austrian subsidiary was unable to bring in business from abroad. During World War II, Koenig & Bauer's remaining workforce repaired damaged machine tools for the German roller-bearing industry in nearby Schweinfurt. In March 1945, just before the war ended, the company's main production facilities in Würzburg were destroyed by Allied bombs.

Key Dates:

1817:
Cylinder printing press manufacturer Schnellpressenfabrik Koenig & Bauer is established.: 1828:
The company sets up a paper mill.: 1876:
Koenig & Bauer's first web-fed rotary press is delivered to a Magdeburg newspaper.: 1901:
A new factory in Würzburg replaces the old one in the Oberzell monastery.: 1913:
Austrian Schnellpressenfabrik L. Kaiser's Söhne in Vienna is acquired.: 1923:
The company builds its first collective press for colored bank notes.: 1936:
Koenig & Bauer constructs the first "Rembrandt" sheet-fed rotogravure press.: 1945:
The company's production facilities in Würzburg are destroyed during bombings.: 1952:
The company enters a strategic partnership with Swiss security printing specialist Gualtiero Giori.: 1959:
Hans Bolza formally adopts engineer Hans-Bernhard Schünemann.: 1964:
A new factory is built in Trennfeld.: 1978:
Koenig & Bauer acquires a major share in Albert-Frankenthal GA.: 1985:
The company goes public.: 1995:
Koenig & Bauer merges with Albert-Frankenthal.: 1998:
The company merges with KBA-Planeta to form Koenig & Bauer AG (KBA).: 2001:
KBA takes over Swiss security printing specialist De La Rue Giori; the Bolza-Schünemann family gives up its absolute share majority; KBA shares are listed on the MDax.: 2003:
The company acquires specialty printing machine makers Bauer + Kunzi and Metronic.

Under the postwar Allied military administration, Koenig & Bauer's business had to be reconstructed from scratch. While rebuilding its two production plants in Würzburg, the company's engineers took on any kind of mechanical repair work. While bartering flourished during the postwar period, the flood of decrees issued by the military occupation forces had to be put in print, causing the demand for printing presses to pick up once again. The introduction of the new Deutsche Mark in the three western German zones in 1948, the foundation of the Federal Republic of Germany in 1949, and the signing of the Paris agreements in 1954, which granted West Germany its political independence, marked the end of the immediate postwar period. It was followed by an economic boom that became known as the German Economic Miracle. As the world recovered from the devastation of the war, Koenig & Bauer began to receive a steady flow of orders, some of them from countries that had gained political independence after the war or did not suffer significant war damage, such as Portugal, Egypt, Iran, Pakistan, and Ghana. Customers from countries in the newly formed Eastern Bloc that were not able to pay for their orders in an acceptable currency traded other goods for printing presses. In this way, Koenig & Bauer received trainloads of Yugoslavian prunes, Cuban sugar, and Argentinean oranges in return for printing presses. However, the company's main customer base evolved in Western Europe, the United States, and Canada. In 1959, Hans Bolza, who had lost his two sons in the war, formally adopted Hans-Bernhard Schünemann, his best printing-press design engineer, who had joined the company in 1951.

During the 1960s, Koenig & Bauer was able to regain its leading position in printing press technology through a number of important innovations. Among them were the Rotafolio sheet-fed four-color letterpress with an output of 8,000 sheets per hour and the newspaper web press Koebau-Courier, both of which became long-term bestsellers. In addition, Koenig & Bauer began to develop special printing presses for telephone directories. With export business thriving, the company established a number of sales offices abroad in Canada, France, England, and Italy. After the Austrian government had expropriated Koenig & Bauer's subsidiary there, the company was able to regain a controlling stake in Schnellpressenfabrik Mödling. Production capacity in Germany was further expanded with the erection of a brand-new factory in Trennfeld near Würzburg in 1964. Three years later, in the company's 150th anniversary year, the German Post Office issued a stamp honoring Friedrich Koenig's invention of the cylinder printing press.

Becoming a Global Leader after 1967

In the last three decades of the 20th century, Koenig & Bauer evolved from an export-oriented German family business into an international family of businesses that became one of the world's major players in the printing machine industry. This transformation was led by Hans B. Bolza-Schünemann, who succeeded Hans Bolza as CEO in 1971. However, his first major task was crisis management. When offset printing, a technology that used films of text and images instead of lead plates and was therefore much cheaper, rapidly replaced letterpress printing within just five years, Koenig & Bauer invested huge sums to develop their own range of offset printing presses. This investment, combined with the cost of building new production lines, significantly drained the company's financial resources. Only with the help of foreign investors was Bolza-Schünemann able to rescue the company from bankruptcy and from being taken over by a competitor at a time of increasing industry consolidation. In 1985, Koenig & Bauer went public, although the Bolza-Schünemann family still held a controlling interest in the company.

Koenig & Bauer's growth through acquisition began in the late 1970s. In December 1978, one year after the company had regained a majority stake in its Austrian subsidiary, Koenig & Bauer bought a 49.9 percent share in Albert-Frankenthal AG.

Founded in 1873 in Frankenthal by a former Koenig & Bauer employee, the state-owned company was the worldwide leading manufacturer of publication rotogravure presses, a product line that perfectly complemented Koenig & Bauer's. In 1988, Koenig & Bauer increased its shareholding in Albert-Frankenthal to 74.99 percent and took over the remaining shares from the Rhineland-Palatinate Ministry of Finance two years later. From then on, the company presented itself to the public as the Koenig & Bauer-Albert group—in short KBA. Finally, in 1995 Koenig & Bauer merged with Albert-Frankenthal into Koenig & Bauer-Albert AG (KBA).

In 1979, Koenig & Bauer took the first step towards establishing a foothold in the United States with the acquisition of Indianapolis-based Egenolf & Rasdall, a company that specialized in the rigging and repair of printing presses. Renamed Koenig & Bauer/Egenolf Machine Inc., the company was used as a sales and service support center for Koenig & Bauer customers in the United States. Nine years later, the company bought a 20 percent stake in Dallas, Texas-based Publishers Equipment Corporation (PEC). In 1990, Koenig & Bauer took over the U.S. manufacturer of web-fed gravure presses and folders Motter Printing Press Company, located in York, Pennsylvania. Koenig & Bauer renamed the company KBA-Motter Corp. and transferred all of their U.S. activities to its facilities, while the association with Koenig & Bauer/Egenolf was discontinued.

In the same year that the Berlin Wall fell, 1989, an East German printing machine manufacturer, Planeta Druckmaschinenwerke, was founded near Dresden. In 1991, Koenig & Bauer acquired a majority holding in the company, which had already become a leading international producer of high-tech sheet-fed offset presses and had acquired Royal Zenith Corp. in the United States in 1990. Planeta Druckmaschinenwerke was renamed KBA-Planeta AG. In 1994, Koenig & Bauer bought the remaining shares in KBA-Planeta and merged with it to create Koenig & Bauer AG (KBA) four years later. Besides these major acquisitions Koenig & Bauer conquered other new markets, such as Japan and Russia, through licensing agreements with local manufacturers. The acquisitions of Albert-Frankenthal and Planeta catapulted Koenig & Bauer into the top global league of printing press manufacturers. However, the integration of the company's new subsidiaries took a considerable amount of cash and effort. Albert-Frankenthal, Planeta, and Motter posted losses which in turn resulted in net losses for the KBA group well into the 1990s.

In 1995, Hans B. Bolza-Schünemann was succeeded by his long-time right-hand man and CFO Reinhart Siewert as CEO. Under his leadership, KBA launched a rigid reorganization, rationalization, and cost-cutting program. However, not until 1997 did Planeta finally come out of the red. While this was mainly due to a vastly oversized workforce and huge reorganization cost, another reason for the company's slow recovery was the fact that a growing number of competitors in the industry were offering ever-lower prices in order to lure a decreasing number of customers. In 1996, after a complaint by U.S. printing press maker Rockwell International about unfairly low-priced competition from Germany and Japan, the U.S. Department of Commerce threatened Koenig & Bauer with a heavy 46 percent anti-dumping import duty. However, the company successfully defended itself, and the case was finally settled six years later. The combination of global overcapacities and stagnating markets in Western Europe, the United States, and Asia resulted in a steep 30 percent drop in price levels. The worldwide printing press industry, including Koenig & Bauer, went through waves of crises during the 1990s and into the early years of the 21st century.

In 2000, the Koenig & Bauer group's turnover passed the EUR 1 billion mark for the first time. In 2001, the Bolza-Schünemann family gave up its majority stake in the company. To increase KBA's capital base, the company transformed its preferred shares into ordinary shares with voting rights, which increased the number of free-floating shares from one-third to almost 60 percent. In mid-2001, KBA shares were listed on the German MDax stock market index. In the same year, the company acquired its long-time business partner, Swiss security-printing specialist De La Rue Giori. Two years later, KBA took over two other German business partners: metal-decorating press manufacturer Bauer + Kunzi and Metronic, a producer of UV offset systems for printing CDs, CDRs, DVDs, and plastic cards. These acquisitions followed the company's group strategy to venture into promising niche markets. Other areas for potential future growth were "74 Karat" digital offset presses for short runs of color publications and the "Rapida" line of super-large sheet-fed offset presses. In mid-2003, Hans B. Bolza-Schünemann's oldest son Albrecht, who had managed the restructuring of the Planeta division in the 1990s, took over as Koenig & Bauer's CEO. His younger brother Claus Bolza-Schünemann was appointed deputy president.

Principal Subsidiaries

KBA-Mödling AG (Austria); KBA North America Inc. (United States); KBA Berlin GmbH; Metronic AG (73.9%); Bauer + Kunzi; KBA (UK) Ltd.; KBA-France SAS; KBA-Italia SpA; KBA Asia Pacific Sdn. Bhd. (Singapore); KBA Australasia Pty Ltd (Australia); KBA (HK) Co. Ltd. (China; 51%); KBA RUS (Russia); KBA-Le Mont-sur-Lausanne SA (Switzerland); Holland Graphic Occasions (HGO) (Netherlands); KBA Printing Machinery (Shanghai) Co., Ltd. (China); KBA Nordic A/S (Denmark; 50.2%); KBA Leasing GmbH.

Principal Competitors

Heidelberger Druckmaschinen AG; MAN Roland Druckmaschinen AG; Tokyo Kikai Seisakusho (TKS); Goss International Corporation; Komori Corporation; Mitsubishi Heavy Industries, Ltd.