Business News

Agfa-Gevaert reports first quarter results – Regulated information

Tuesday 28. April 2009 - Economic slowdown affects businesses, mainly in Agfa Graphics and Agfa Specialty Products; Good performance of Agfa HealthCare; Group Sales decreased 12.1 percent to 662 million Euro; Further improvement of SG&A costs; Recurring EBIT at 28 million Euro versus 40 million Euro in first quarter of 2008; Net result at minus 9 million Euro; Further execution of net financial debt reduction program - Net financial debt further improved from 703 million Euro in the first quarter of 2008 to 661 million Euro

Agfa-Gevaert today announced its first quarter results.

Agfa-Gevaert Group – first quarter 2009
Euro millions Q1 2008 Q1 2009 % change
Net Sales 753 662 -12.1%
Gross Profit (*) 256 208 -18.8%
% of sales 34.0% 31.4%
Recurring EBITDA (*) 71 55 -22.5%
% of sales 9.4% 8.3%
Recurring EBIT (*) 40 28 -30.0%
% of sales 5.3% 4.2%
Operating result 35 37 +5.7%
Net result (consolidated comp.) 10 (9)
Net operating cash flow 19 26
(*) before restructuring and non-recurring items.
Compared to the first quarter of 2008, Group sales decreased 12.1 percent to 662 million Euro. The decline is attributable to Agfa Graphics and Agfa Specialty Products, which are both affected by the economic situation. Agfa HealthCare performed in line with expectations.
The sales decrease affected the Group’s manufacturing efficiency due to lower use of capacity. As a result, the Group’s recurring gross profit margin decreased from 34.0 percent in the first quarter of 2008 to 31.4 percent.
Continuing the efforts of last year, Agfa-Gevaert further reduced its Selling and General Administration costs in the first months of 2009. The SG&A monthly run-rate was brought down from 54 million Euro in 2008 to 48 million Euro in the first quarter of 2009. Compared to the first quarter of 2008, these costs decreased by 22 million Euro. The SG&A expenses represented 21.8 percent of sales. The Group has taken a number of additional measures to further lower its costs in all business groups.
The Group’s recurring EBITDA (the sum of Graphics, HealthCare, Specialty Products and the unallocated portion) decreased from 71 million Euro in the first quarter of 2008 to 55 million Euro. Recurring EBIT decreased from 40 million Euro to 28 million Euro.
An adjustment to the benefit plans in the United States more than offset the normal restructuring and non-recurring items, resulting in an income of 9 million Euro, versus an expense of 5 million Euro in the first quarter of 2008.
The non-operating result was more negative than in 2008 due to a special pension charge (mainly concerning inactives), as mentioned during the fourth quarter 2008 communication. The non-operating result amounted to minus 30 million Euro.
The Group’s tax costs were higher than in 2008, mainly because of deferred tax charges.
The net result amounted to minus 9 million Euro, compared to 10 million Euro in the first quarter of 2008.
Balance sheet and cash flow
– At the end of March 2009, total assets were 3,133 million Euro, compared to 3,160 million Euro at the end of 2008.
– Inventories were 591 million Euro (or 105 days). Trade receivables (including deferred revenue and advanced payments) amounted to 577 million Euro, or 78 days and trade payables were 212 million Euro, or 38 daysx.
– As a result of targeted measures, net financial debt further improved to 661 million Euro at the end of March 2009, compared to 673 million Euro at the end of 2008, and 703 million Euro at the end of March 2008.
– Net operating cash flow amounted to 26 million Euro.
Agfa Graphics – first quarter 2009
Euro millions Q1 2008 Q1 2009 % change
Net Sales 378 315 -16.7%
Recurring EBITDA (*) 30.7 13.5 -56.0%
% of sales 8.1% 4.3%
Recurring EBIT (*) 17.2 1.2 -93.0%
% of sales 4.6% 0.4%
(*) before restructuring and non-recurring items.
As expected, Agfa Graphics was severely hit by the impact of the global economic crisis on the printing industry. The impact was particularly strong in the field of investment goods, as printers are postponing their investments in equipment, both in prepress and in industrial inkjet. Furthermore, the slowdown in the advertising markets resulted in a lower use of consumables, such as graphic film and printing plates. In countries where the crisis has the strongest impact on the printing markets, the competitive pressure also increased. As a result, Agfa Graphics’ sales decreased 16.7 percent to 315 million Euro.
The decline of the volumes affected manufacturing efficiency, which weighed on Agfa Graphics’ margins. While the US dollar strengthened compared to the first quarter of 2008, most other currencies significantly weakened versus the Euro. Taking into account Agfa Graphics’ limited local cost basis in the countries involved, this leads to an overall adverse currency effect. Continuing the efforts of the past quarters, Agfa Graphics further reduced its Selling and General Administration costs. These costs were 13 million Euro lower than in the first quarter of 2008. Recurring EBITDA decreased to 13.5 million Euro (or 4.3 percent of sales) and recurring EBIT decreased to 1.2 million Euro (or 0.4 percent of sales).
In prepress, Agfa Graphics improved its competitive position in the North American markets, in spite of the weak economic conditions. The business group signed an agreement with Focus Pre-Press Systems to distribute its leading printing plate solutions in British Columbia, Canada. Focus Pre-Press will also distribute Agfa Graphics’ press room supplies. Also, The Union (Grass Valley, CA USA) became the first newspaper in North America to install the new :Advantage N-SL computer-to-plate system. This system is designed to meet the needs of the small and mid-size newspaper segments.
Agfa Graphics’ chemistry-free :Azura printing plates are becoming more and more popular around the world. Recently, important steps were taken in Latin America and Japan, where the important printing group Nichidai Printing signed a contract for the installation of two :Avalon N platesetters and the delivery of :Azura printing plates.
In the industrial inkjet segment, the :Anapurna large-format systems are still selling well, in spite of the economic conditions. The :Dotrix and :M-Press machines are also acknowledged as leading technologies in their respective segments, but printers are postponing their investments in high-end equipment. In June, the European Digital Press Association granted Agfa Graphics’ :Anapurna Mv the ‘Best Flatbed Printer Entry Level of the Year 2009’ award.
In New Zealand, Agfa Graphics signed an agreement with Aarque Graphics NZ, which will distribute Agfa Graphics’ :Anapurna range of large-format inkjet printers throughout the country. Agfa Graphics’ industrial inkjet range was also at the center of interest at the Graphispag trade fair, held in Barcelona. The business group sold a number of :Anapurna Mv systems and both the high-speed inkjet press :Dotrix and the industrial flatbed press :M-Press generated a number of promising leads.
Also in digital printing, Agfa Graphics signed an agreement with Canon in the United Kingdom. The strategic alliance will allow Agfa Graphics to offer Canon’s range of imagePRESS digital color presses to its commercial print customers. Agfa Graphics will market the presses alongside its own inkjet solutions, prepress systems and workflow software.
Agfa HealthCare – first quarter 2009
Euro millions Q1 2008 Q1 2009 % change
Net Sales 294 291 -1.0%
Recurring EBITDA (*) 32.3 39.0 +20.7%
% of sales 11.0% 13.4%
Recurring EBIT (*) 16.8 25.5 +51.8%
% of sales 5.7% 8.8%
(*) before restructuring and non-recurring items.
Agfa HealthCare performed in line with earlier expressed expectations, in spite of the economic crisis. The business group’s sales decreased by only 1.0 percent to 291 million Euro. The markets for X-ray film and hardcopy film evolved in line with the trend of the previous quarters. Due to the crisis, some care organizations are postponing their investments in Computed Radiography (CR) equipment. Despite the weak economic conditions, Imaging IT and Enterprise IT performed markedly better than in the first months of 2008.
Agfa HealthCare’s consumable margins suffered from production inefficiencies due to the lower use of the Group’s production capacity. As planned, Agfa HealthCare further reduced its SG&A expenses by 10 million Euro compared to the first quarter of 2008. As a result, recurring EBITDA amounted to 39.0 million Euro (or 13.4 percent of sales). Recurring EBIT improved by 51.8 percent to 25.5 million Euro, or 8.8 percent of sales.
Agfa HealthCare took an important step in its strategy to strengthen the imaging segment with new solutions. At the European Congress of Radiology (Vienna, Austria), the business group showcased its new DX-D line of Direct Radiography (DR) solutions. These solutions are complementary to Agfa HealthCare’s leading range of CR systems. Today, Agfa HealthCare is able to offer every healthcare facility of any size the right radiography solution.
In the first quarter, Agfa HealthCare again signed a number of important contracts for its IMPAX 6 PACS (Picture Archiving and Communication System). ENEL-MED, a leading private healthcare provider in Poland, selected IMPAX to serve the needs of its 7 medical centers. The organization also ordered 8 CR systems and 7 hardcopy printers. The Bulgarian Ministry of Health selected Agfa HealthCare for the integration of diagnostic imaging at four leading hospitals.
In Canada, the government of the Northwest Territories selected IMPAX to connect the four main hospitals in the region. In a later stage, 18 community health centers will also be connected to the network. Beaumont Hospitals (Royal Oak, Michigan, USA) will expand its IMPAX PACS to include IMPAX Cardiovascular. After the completion of the project, the hospital group will be one of Agfa HealthCare’s largest integrated cardiology-radiology PACS implementations in North America. Still in the USA, Agfa HealthCare’s latest solution, IMPAX Data Center, was deployed successfully across the 7 hospitals and the 35 health clinics of Oschner Health System of New Orleans, Louisiana, allowing any clinician easy access to imaging data, regardless of its originating department or hospital facility.
In January, Agfa HealthCare announced that it had signed a cooperation agreement with the Government of Ontario (Canada) concerning the expansion of the business group’s R&D and regional operation centers in Toronto and Waterloo.
In Enterprise IT, a number of important contracts were signed in several countries which Agfa HealthCare is targeting with its ORBIS solution. The focus is currently on Germany, Austria, Switzerland, France, Belgium and Luxembourg. In these countries, Agfa HealthCare is the clear leader in contracts awarded for clinical information systems.
Agfa Specialty Products – first quarter 2009
Euro millions Q1 2008 Q1 2009 % change
Net Sales 81 56 -30.9%
Recurring EBITDA (*) 8.0 3.5
-56.3%
% of sales 9.9% 6.3%
Recurring EBIT (*) 6.6 2.4 -63.6%
% of sales 8.1% 4.3%
(*) before restructuring and non-recurring items.
Agfa Specialty Products’ sales decreased 30.9 percent compared to the first quarter of 2008. These figures reflect the effects of the economic crisis on some of the business group’s important markets and the continuing market-driven decline for some of the traditional film products.
Agfa Specialty Products’ profitability was affected by the sales decline, additionally causing manufacturing inefficiencies due to lower use of capacity. As a result, the recurring EBITDA margin amounted to 6.3 percent of sales and the recurring EBIT margin amounted to 4.3 percent of sales.
In February, Agfa and Nekoosa Coated Products entered into a partnership for the distribution of Agfa’s SYNAPS synthetic paper in the North American markets. SYNAPS is now available in a wide range of weights and sizes through Nekoosa’s network of distributors in the United States, Canada and Puerto Rico. Recently, Agfa signed an agreement with Igepa Group for the distribution of Agfa’s synthetic paper in Germany. Both partners have the intention to further extend this agreement to additional European countries. Since the third quarter of 2008, Agfa has already been working with Igepa Belux for the distribution of SYNAPS in Belgium and Luxemburg.
Outlook
In the first quarter of 2009, the demand in Agfa-Gevaert’s markets stabilized compared to the end of 2008. Early trends in the second quarter show no further market decline. At this moment, it is still too early to predict when the markets will pick up and when demand will recover to normal levels.
Meanwhile, Agfa-Gevaert is taking additional measures to adapt the cost structures of its business groups to the situation in their respective markets. The Group is also taking action to further reduce net debt, using – among other things – newly available guarantee schemes.