CEWE with a slight improvement in earnings after three quarters

CEWE Stiftung & Co. KGaA (SDAX, ISIN: DE 0005403901) reported a slight decline in sales of 3.3% to 413.3 million euros (Q1‐3 2019: 427.2 million euros) for the first three quarters of 2020. The EBIT for this period nonetheless improved by 1.4 million euros to ‐0.6 million euros (Q1‐3 2019: ‐2.0 million euros). "Just like the economy in general, we are naturally also feeling the impact of the coronavirus pandemic. More than anything else, this applies for our retail and commercial online printing business segments, both of which have been affected by the crisis. On the other hand, our core business segment of photofinishing has shown itself to be robust, continuing to grow in the first nine months of the year. This gives us reason to be confident about the upcoming Christmas season, since it is very significantly marked as an occasion to give individual, personal photo products as gifts," emphasises CEO Dr. Christian Friege. For CEWE, sales of CEWE PHOTOBOOK, photo calendars and other photo gifts at Christmas time is traditionally decisive for the company's annual net income.

Photofinishing: customers continue to focus on high‐quality photo products
In spite of the persistent coronavirus situation, the core business segment of photofinishing reported an increase in turnover of 5.9% to 335.7 million euros. In doing so, this segment benefited from the first lockdown in April and May 2020. While instant POS prints were impacted by a reduced visitor frequency, the stay‐at‐home requirement was good for new orders. Q3 was dominated by the coronavirus‐induced change in holiday travel habits to result in few photo orders overall. Turnover per photo increased by altogether more than 10%, to 23.18 eurocents, in the first nine months of the year. The EBIT for this business segment rose sharply by 6.0 million euros to 8.6 million euros (Q1‐3 2019: 2.6 million euros). Besides additional contributions to profits resulting from the rise in sales, the cost‐reduction programme, initiated as early as in March, also improved the EBIT in comparison to that of the previous year.

Cost structure in commercial online printing optimised
The business segment of commercial online printing was particularly hard hit by the coronavirus situation: sales in the first three quarters of 2020 declined by 35.0%, to 48.8 million euros (2019 Q1‐3: 75.1 million euros). Intensive cost management enabled the EBIT decline of 2.7 million euros to ‐5.0 million euros to be contained in spite of this considerable drop in sales (EBIT in Q1‐3 2019: ‐2.3 million euros). "We are convinced that our brand portfolio, which we streamlined as early as at mid‐year, and our sustainably optimised cost structure will see us emerging stronger from the crisis," explains Christian Friege. The integration of LASERLINE production in Berlin into the SAXOPRINT operation in Dresden, initiated at the beginning of the year, has also already been successfully implemented.

Retailing continues to focus on higher‐margin product ranges
CEWE has for some time now been cutting back its hardware retail sales in order to focus on higher‐margin product ranges. This year the temporary lockdown in the second quarter saw CEWE retailing most negatively impacted by shop closures. At 24.0 million euros, sales in the business segment in the first three quarters thus declined by 23.0% (Q1‐3 2019: 31.2 million euros). Due to optimisation measures initiated as early as in the first six‐month period of 2020, to provisions for shop closures already posted and to the depreciation of inventories of altogether 3.2 million euros, the EBIT is reported at 3.7 million euros (Q1‐3 2019: ‐0.8 million euros). Without these extraordinary accounting items, operative earnings generated by retailing, at ‐0.5 million euros for the first nine months of the year, developed even slightly better than in the previous year, mainly as a result of cost cuts. Retailing also traditionally achieves its annual net income in the fourth quarter of a calendar year.

Christmas season is decisive for annual net income
Photofinishing Christmas business largely determines CEWE's annual net income. This year it is not possible to estimate how the pandemic will tangibly impact the performance of business in the 2020 Christmas quarter with any degree of certainty such as is required for forecasts. "In this exceptional year it is not possible to make any reliable prediction concerning fourth‐quarter earnings." Dr. Christian Friege expresses his optimism: "We are confident that our first‐class photo products have long established themselves as individual, personal Christmas gifts and that we are in a position to provide an extremely wide range of products." Besides, this year's Christmas campaign, "My very personal gift" got off to a good start in November. In the campaign, real CEWE customers go on‐camera to share their experience with the CEWE PHOTOBOOK, a very personal, individual product. The campaign is brought to consumers throughout Europe: on television, in magazines, online and also in several other media.

CEWE remains strong: equity and ROCE continue to grow
The fact that CEWE is maintaining its very sound position in spite of a generally difficult economic situation is highlighted by the development of the capital ratio, which increased to 53.2% as at the end of the third quarter (30 September 2019: 46.1%). The return on capital employed also continued to develop positively, with the ROCE as at 30 September 2020 having improved once again, to a current 15.4% in comparison to 15.3% as at 30 September 2019. Adjusted by the restructuring costs in the 12‐month EBIT and by the effect of IFRS 16 on the average capital employed, the ROCE even climbed to a very solid level at 20.0% (adjusted Q3 2019: 17.4%). CFO Dr. Olaf Holzkämper: "It is important to be able to rely on a sound, sustainable foundation, particularly in turbulent times. Our foresighted operation allows us to continue to develop our business, even in this pandemic period. CEWE's position remains extremely sound."