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BLD - Baldwin Technology

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Would do you think about BLD? Right now I am inclined to stay out.


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The decline of the global print markets in the past three years has slammed Baldwin Technology (BLD). With a new CEO and plans to rightsize the cost structure, is Baldwin a turnaround story waiting to play out?


Baldwin makes a variety of accessories for printing presses including cleaning and dampening systems. They sell to both manufacturers of printing presses and printers looking to retrofit presses in operation.


Failure to Print


Capital spending on new printing presses basically shut down during the recession. Compounding their difficulties, Baldwin’s major market is web presses for the newspaper industry, which is in secular decline at least in the U.S. and Europe. Baldwin’s sales to press OEMs dropped from $103 million in FY 07 (their FY ends in June) to $52 million in FY 10. Direct sales to printers remained stable as printers looked to Baldwin products in order to extend the useful life of their presses. The net effect was a drop in revenues from $236 million in FY 08 to $152 million in FY 10.


Ticker BLD

Price as of 6/7/2011 1.30

52 Week Range .83-1.80

Shares Out (MMs) 15.66

Market Cap (MMs) 20.36

Debt (MMs) 18.35

Enterprise Value (MMs) 24.77



Recommendation Watch

BLD managed to remain cash from operations positive until the middle of 2010, helped by a $9.6 million payment from a German competitor to settle a patent dispute. But the last three quarters have been rough, with BLD losing over $12 million in CFO.


Board member Mark Becker was appointed CEO in October 2010 to lead a turnaround. He comes with extensive turnaround experience as CFO of Sylvania Lighting (which emerged from bankruptcy and was eventually sold) and vice president of operations at private equity firm Sun Capital.


Baldwin got caught with a cost structure far too high for the decreased revenue base. Becker’s first step has been to reduce headcount, consolidate production plants, and shed a non-core food packaging business. The restructuring plan is expected to yield net savings of $6.6 million annually. Becker also plans to integrate the disparate company locations into one global platform to better manage costs and focus on company-wide P&L.


Heading Upstream


The harder task for Becker will be growing sales.  It will be difficult to fight the industry headwinds. Sheet-fed presses are used for commercial printing (such as ad flyers) and sales of new sheet-fed presses are predicted to continue to recover to 60-80% of pre-recession levels. The outlook for web presses used for newspaper printing is grimmer. There is some growth in newspaper sales in Asia, but that will probably at best make up for the decline of newspapers in the mature economies. That is not good news for Baldwin. Although they sell into the sheet-fed market, they are better known on the web press side. The sheet-fed/web dichotomy might explain why OEMs such as Koenig & Bauer and competitor Technotrans have reported substantial pick ups in sales, while Baldwin continues to struggle with trough revenues.


Baldwin has a strong market leading position with a brand well known in the industry, and a large global production and distribution infrastructure given their current market cap. They are well positioned for a recovery in their markets if it happens. BLD is reporting increased order backlog, but I am not sure that will be enough to generate meaningful profits even with the new cost structure.


Direct sales to printers, some recurring revenues from the consumables side of the business, and a manageable debt load might give Baldwin the flexibility to reinvent itself under Becker and reduce their exposure to the declining newspaper industry. Right now I am too pessimistic on web press sales to buy in unless Baldwin can further reduce overhead or boost the sheet-fed press and consumables segments of their business.

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