Good morning ladies and gentlemen.

 

A warm welcome to this Océ press conference for the presentation of the provisional results for 2002.

 

Océ had a good year in 2002.

I am pleased to say that investors who put their money in Océ can also look back on a relatively good year.
The share price showed an excellent resilience in 2002.

 

Now I would like to take a closer look at the financial results and operational matters.
 
What were our targets in 2002?

To what extent did we succeed in achieving these targets?
Let's start with the financial results.

 

 

1.

Revenues for the year were nearly 3.2 billion euro; a decline of 1.8% compared with 2001.
This decline was minimised because the lower machine sales (-17%) were  largely compensated by higher revenues from services and software.
Seventy per cent of total sales is now realised through services and software; the other 30% is through machine sales.
This trend will continue in the coming years.
However, Océ remains, first and foremost, a specialist in the field of high quality printers. With the help of software and services, these are optimally applied in the document workflow of our customers.

 

2.

The gross margin amounted to 41.8% of revenues, well above the 2001 figure (40.7%).
Thanks to foreign currency hedging a positive effect of 1.1% was achieved. 
In addition, the effect of capacity under-utilisation, as a result of lower machine sales, was offset by lower costs and the phasing-out of poorly performing activities. 

3.

Thanks to restructuring measures and tight cost management, the operating expenses were kept under control.

4.

Thanks to a very good fourth quarter, the operating income (EBIT) ended slightly higher than in 2001.
Through lower financial expense and higher income taxes, the net income increased by 7.1% to 112.5 million euro.

 

5.

And finally, the net income per share: this increased by 9% compared to 2001.

Ladies and gentlemen, I can assure you that with these figures, Océ is among the leaders in our industry.

 

Now I would like to look at the results in the various segments in which Océ operates.

 

Situation in the Strategic Business Units

 

For the sake of clarity, I would like to start by saying that in 2002, Océ served the market with three Strategic Business Units: Wide Format Printing Systems, Document Printing Systems and Production Printing Systems. From December 1st, 2002, the last two of these units have been combined.  I will come back to this in a moment.

 

 

I'll start with Wide Format Printing Systems, in other words the wide format printer market.
Océ supplies products and services for the management and printing of wide format documents in both the technical and display graphics market.
The total revenues of WFPS increased by 2,9% to 938 million euro.
The fewer machine sales (-13% compared to 2001) were more than compensated by growth in the display graphics market.

 

Thanks to a higher margin on sales and lower operational expense, the operating income before innovation costs increased by 3.2% to 157 million euro.

 

The integration of Gretag Professional Imaging Division has been completed. As a result of the difficult market conditions, revenues and profit were lower than expected. 
We are convinced, however, that with this acquisition, Océ has created a very promising position in the display graphics market.

 

The introduction of three new colour printers has significantly strengthened our product offerings for both the technical and display graphics markets.

 

 

In the office market (Document Printing Systems), Océ concentrates on the higher volume segments.
As part of the restructuring programme, Océ is gradually phasing-out its activities in the lower volume segments.
We supply printers and digital copiers, with speeds varying from 45 to 100 pages per minute.
In addition, this is the segment in which the Océ CPS700 colour printer is playing an important role.
In 2002, total revenues decreased on an autonomous basis by 2.8%, and amounted to 1,489 million euro.
Thanks to the continuing strong growth of Facility Services, the lower machine sales (-12% compared to 2001) were largely compensated.
Revenues from Facility Services in its own right increased by 17% to 428 million euro.

 

In this sub-segment, the lower machine sales had a depressing effect on the margin. Despite the lower operational expenses, the operating income before R&D costs declined from 137 to 134 million euro.
Two important new products were launched in 2002. Both the Océ VarioPrint 2050/2060/2070 (at 45/52/62 ppm black & white) and the Océ VarioPrint 2090 (at 85 ppm black & white) are very important additions to our product range.

 

In combination with the new high volume printers from our Production Printing Systems, which I'll address in a moment, Océ now offers the most complete range of narrow format printers for the office and commercial market.

 

 

Finally, I would like to update you about the results in the high volume printer market (Production Printing Systems).

 

This is a market in which printers with speeds of up to 1200 pages per minute are used for very high volumes of transaction documents, such as bank statements, insurance policies and energy company bills.
Furthermore, these printers are increasingly used in the graphic arts industry as an alternative for offset printing.

 

Revenues finished the year at 749 million euro, a decline on a autonomous basis of 3.7% compared to 2001.
Thanks to growth in software and services the strong decline in machine sales (-25% compared to 2001) was compensated.
This relatively strong decline in machines sales is caused by the fact that these are costly machines with a long operational lifetime, so customers can postpone their investment decisions for a long time.

 

Customer printing volumes on these machines increased, so that the relative margin on revenues was higher than in 2001.
In combination with lower operational expenses, this resulted in a higher operating income before innovation costs, amounting to 148 million euro compared to 135 million euro in 2001.

 

Here too, just as in the two other Business Units, Océ also introduced a number of important new printers.
In the first place, the family of continuous feed printers in the 100 to 1200 pages per minute speed range has been renewed.
These new products will enable Océ to successfully defend its leadership position in the continuous feed printer market.
Further, the Océ VarioPrint 5100 was launched. This is a black & white cutsheet printer with a speed of 158 pages per minute.

 

Summarising, we can conclude that for all 3 Business Units the decline in machine sales was to a large extent compensated by the growth in software and services.
Because of this, but also thanks to the reduction of the operational expenses and a favourable development of interest charges, the net income achieved in 2002 was higher than in 2001.

 

Ladies and gentlemen, this brings me to the status of the restructuring operation, which was started a year ago.

 

 

The targets that were formulated for 2002 have been more than achieved.

 

First of all, the planned organisational changes have been completed.

 

The former Strategic Business Units for the office market (Document Printing Systems) and the high volume printer market (Production Printing Systems) have been integrated in one new Strategic Business Unit, Digital Document Systems.

Through 4 Business Groups:

we offer a package of print solutions and services to large office organisations and the commercial printing market.

 

The Strategic Business Unit Wide Format Printing Systems, which serves the wide format market, consists of 3 Business Groups:

Through these groups Océ supplies print solutions and services to customers in both the technical and display graphics markets, including printing media.

 

The 10 R&D laboratories have been clustered into 4 technologies: cutsheet printing, continuous feed printing, wide format printing and document management software.

 

The transparent and direct management of the R&D centres around the world enables us to use our technological capabilities more effectively, and to achieve shorter cycle times in the development of new products.

 

The result is an organisation which optimally anticipates the changes in the market. That is the first element of our restructuring. Now the second.

 

 

As I already mentioned, in the narrow format market, Océ is now focusing on the high and very high volume segments.
Accordingly, the second part of the restructuring programme is aimed at phasing-out the poorly performing business in the low volume segment of the office market.
The planned reduction of approximately 1,100 jobs, is scheduled for completion by the end of 2003.
At present 74% of this reduction has already been achieved.
The phasing-out of the low volume machines portfolio is scheduled to be completed by the end of 2004.
Of this target, 44% had been achieved by the end of 2002.
These factors resulted in cost savings of 35 million euro in 2002. That is the second part.

 

The third element of the restructuring programme is the outsourcing of the lease portfolio.
In 2002 Océ entered into strategic partnerships with two leasing companies: Telia Finans A/B for the Scandinavian countries, and De Lage Landen International B.V. for the other European countries. Both of these companies are taking over the existing and new lease contracts, as well as the financing and administrative processes.

 

Océ is and remains the 'customer-facing brand', through the use of the Océ logo, the Océ sales force and the Océ service organisation.
The improvement of the financial offering not only increases the commercial opportunities for Océ, but also provides extra freedom for investment in our core activities.
This separation of the commercial and financial activities  significantly increases the transparency of the Océ results, which is also positive in light of developments in the field of Corporate Governance.
Last but not least, the resulting substantial shortening of the balance means that there is significant scope for improvement of the Return on Assets (RoA) and, Return on Equity (RoE).
The transfer of the leasing portfolio, with a total value of 1 billion euro, will be largely completed in both Europe and the USA by the end of 2004. That is an overview of the restructuring at Océ.

 

 

Ladies and gentlemen,
a lot has been achieved in 2002.
And that was necessary. Because Océ has set itself ambitious targets, both financial and commercial.
In the financial area, Océ is aiming for a Return on Assets (RoA) of 12% and a Return on Equity (RoE) of 18%.
These targets must be achieved by 2005.
In 2002 the RoA was 7.5% and the RoE was 11.5%.

 

In commercial terms, Océ aims for a top three position in the strategic market segments in the corporate environments and in the commercial printing markets.
At present we hold these positions in the wide format market and in high volume transaction printing. In the other segments we are among the top five.

 

 

The planned actions to achieve these targets, briefly summarised, are:

 

1.

A further phasing-out of the poorly performing business in the low volume segment of the office market.
This will lead to further reductions in personnel, assets and expenses.

2.

A further strengthening of our market position in the core segments, supported by the new commercial structure and the new products.
High volume printers and software generate higher margins.

3.

An increase in the investment budgets for the development of new products in black & white, colour and software.

4.

This will significantly shorten the balance, and create capacity for acquisitions or other activities such as purchase of own shares.

5.

Acquisition of profitable activities in the growth segments.

We expect that as a result of these measures the revenues and profitability of the commercial activities will be able to grow by an average of 10%; 5% on an autonomous basis and 5% through acquisitions and alliances.

 

In short, we also have a lot to do in 2003.
However, the management and employees of Océ have every confidence that we will achieve our long-term targets.
The strategy is clear, and it has broad support in the organisation. The implementation of the plans is running precisely according to schedule. With our  strong technology base, we will continue to launch competitive new products in the coming years.

 

 

Ladies and gentlemen, that brings me to the end of this presentation, and to the outlook for 2003.
The one major unknown is how the economy will develop, and with it the willingness of our customers to make new investments.
Up to now there are no indications of a significant improvement in the short term.
In view of this uncertainty, it is not possible under the present conditions to give a reliable expectation for 2003.

 

But I do know the following:
The restructuring measures will lead to a further reduction of the operational expenses in 2003.
On the other hand, the relative weakness of the US dollar and the increase in pension premiums will tend to reduce the result for 2003.
Thanks to the new, market-focused organisation and a number of important new products, Océ has been able to increase its competitive strength.
Accordingly, we will respond optimally to improvements in the market as they occur.

 

Thank you very much for your attention.