Heidelberg Druck’s Twin Pivot: Offshore Production Cuts and a Ukrainian Drone Bet

Heidelberg Druckmaschinen moves printing to low-cost countries and builds a drone defense business via ONBERG, but faces a near-term net loss and squeezed margins.

The German printing press manufacturer is pulling off a high-wire act: slashing costs by moving its core production to low-cost countries while simultaneously pouring cash into an entirely new defence business. The outcome for Heidelberg Druckmaschinen in the near term is a forecast net loss, raising the question of whether the two strategies can work in tandem before the shares get any further hammering.

Financially, the past year offered a mixed picture. Revenue for the 2025/2026 fiscal year edged up to €2.293 billion, while net profit more than tripled to €15 million. Under the surface, however, pressure was mounting. The operating margin narrowed to 6.6 percent, squeezed by customer hesitancy since February, an unfavourable product mix in the final quarter, and upfront costs for the new business lines. Free cash flow slumped to minus €19 million, and operating cash generation deteriorated sharply.

The company is now tackling the core business with aggressive restructuring. Its best-selling Speedmaster CX 104 will be produced entirely in China from now on, and a completely new site in North Macedonia is scheduled to start operations in 2026. More than 550 employees have already left through severance agreements. These moves are meant to restore profitability at the heart of the group, even as the top line is expected to stay broadly stable in the 2026/2027 financial year.

The bigger strategic shift is happening outside printing. Through its 49 percent-owned subsidiary ONBERG Autonomous Systems, formed in March via a joint venture with US-Israeli specialist Ondas Autonomous Systems, Heidelberg is building a defence division. At the ILA air show, ONBERG signed a memorandum of understanding with Ukrainian manufacturer Skyeton to mass-produce NATO-compliant reconnaissance drones, merging the Ukrainian Raybird platform with German manufacturing know-how. All defence and dual-use activities are housed under HD Advanced Technologies GmbH, with a long-term revenue target of €300 million. Chief executive Jürgen Otto has cautioned that the first production series at the Brandenburg site could start “in six months or a year and a half”, and that the defence market is notoriously tough, with many startups failing at the certification stage. Nonetheless, he expects the defence segment to turn cash-flow positive as early as next year.

The market remains cautious. One analyst describes the ONBERG project as a positive catalyst and expects further announcements, but maintains a “Hold” rating, arguing that Heidelberg needs a significant improvement in operating margins before cash flow can sustainably improve. At €1.54, the shares have climbed nearly 11 percent over the past 30 days, but are still down roughly 24 percent since the start of the year. The stock has recovered about 20 percent from its March trough and currently trades just above its 50-day moving average, well below the 52-week high of €2.54.

Investors will get the next update when Heidelberg holds its first ever virtual annual general meeting on 23 July 2026. The real test comes on 19 August, when first-quarter results for 2026/2027 are due. Those numbers will show whether the ramp-up costs of the new defence unit are deepening the earnings hole – and whether the twin pivot to China and drones can yet win over the doubters.