Business News

Agfa-Gevaert reports full year results – Regulated information

Friday 20. March 2009 - Economic slowdown affects businesses in the second half of the year; Excluding currency effects, sales decreased 4.2 percent to 3,032 million Euro; SG&A costs decreased by more than 100 million Euro, exceeding the targeted amount; Recurring EBIT at 138 million Euro versus 197 million Euro in 2007; Net result at minus 167 million Euro, taking into account non-cash charges: an impairment loss of 119 million Euro and an exceptional deferred tax charge of 34 million Euro; Strong reduction of net financial debt from 723 million Euro in the third quarter of 2008 to 673 million Euro in the fourth quarter of 2008, despite the worsening business conditions in the fourth quarter

Agfa-Gevaert today announced its full year results.

Agfa-Gevaert Group – full year 2008
Euro millions 2007 2008 % change
Net Sales 3,283 3,032 -7.6%
Gross Profit (*) 1,158 963 -16.8%
% of sales 35.3% 31.8%
Recurring EBITDA (*) 340 254 -25.3%
% of sales 10.4% 8.4%
Recurring EBIT (*) 197 138 -29.9%
% of sales 6.0% 4.6%
Operating result 125 (20)
Net result (consolidated comp.) 42 (167)
Net operating cash flow 108 81
(*) before restructuring and non-recurring items.
Excluding currency effects, Group sales decreased 4.2 percent to 3,032 million Euro. In the second half of the year, the bad economic conditions clearly affected all three business groups. Both Agfa Graphics and Agfa HealthCare reported a considerable impact on their investment goods sales. Agfa Specialty Products recorded fewer film orders from its large industrial customers.
Affected by the sales decline, the high raw material costs, certain one-off elements and adverse mix effects, the Group’s recurring gross profit margin decreased from 35.3 percent in 2007 to 31.8 percent.
Agfa-Gevaert is completely on track with its efforts to reduce the Selling and General Administration costs in all business groups. The SG&A monthly run rate was reduced from 64 million Euro in 2007 to 54 million Euro in 2008 (based on 12 months). Compared to 2007, these costs decreased by 118 million Euro (102 million Euro excluding currency effects), clearly exceeding the 100 million Euro target (75 million Euro excluding currency effects). The SG&A expenses represented 21.4 percent of sales, compared to 23.3 percent in 2007. The Group will continue its efforts to improve its efficiency and reduce its costs in all business groups.
In spite of these efforts, the Group’s recurring EBITDA (the sum of Graphics, HealthCare, Specialty Products and the unallocated portion) decreased from 340 million Euro in 2007 to 254 million Euro. Recurring EBIT decreased from 197 million Euro to 138 million Euro.
In the fourth quarter of 2008, the Group performed its annual impairment test for goodwill and intangible assets. Based on the revised economic assumptions of the 5-year plan and the revised discount rate, it was concluded that the recoverable amount of the healthcare business is lower than its carrying amount. Therefore, the Board of Directors has decided to recognize an impairment loss on goodwill and other intangible assets of 119 million Euro in total.
Restructuring costs and non-recurring items (including the impairment loss) were 158 million Euro, versus 72 million Euro in 2007. The non-operating result was minus 86 million Euro.
In 2008, the Group applied an exceptional tax charge of 34 million Euro related to the reversal of deferred tax assets as a result of the revised economic assumptions of the 5-year plan.
The net result amounted to minus 167 million Euro. Excluding the impairment loss, the exceptional tax charge and the restructuring costs, the Group would have posted a positive net result.
Balance sheet and cash flow
– At the end of 2008, total assets were 3,160 million Euro, compared to 3,559 million Euro at the end of 2007.
– Inventories were 575 million Euro (or 100 days). Trade receivables amounted to 750 million Euro, or 89 days and trade payables were 226 million Euro, or 39 days.
– As a result of targeted measures, net financial debt improved to 673 million Euro at the end of 2008, compared to 723 million Euro at the end of September 2008, and 721 million Euro at the end of 2007. The worsened economic environment delayed the planned lease portfolio sale.
– Net operating cash flow amounted to 81 million Euro.
Agfa Graphics – full year 2008
Euro millions 2007 2008 % change
Net Sales 1,617 1,522 -5.9%
Recurring EBITDA (*) 123.6 115.9 -6.2%
% of sales 7.6% 7.6%
Recurring EBIT (*) 60.6 64.5 6.4%
% of sales 3.8% 4.2%
(*) before restructuring and non-recurring items.
Excluding currency effects, Agfa Graphics’ sales decreased 2.2 percent to 1,522 million Euro. The market-driven decline in the analog computer-to-film (CtF) segment continued in 2008. Following three quarters of growth, the market of computer-to-plate (CtP) printing plates and related equipment stagnated in the fourth quarter as a consequence of the overall slowdown in the printing industry.
In this adverse economic environment, Agfa Graphics succeeded in leveraging its technology leadership to further strengthen its position in the CtP markets. The industrial inkjet segment was able to build on the successful drupa trade fair, held in May. The development of the first generation of inkjet machines was fully completed in the first quarters of the year, and the business group has brought its R&D efforts for this segment to a normal level.
Agfa Graphics is on track with its plans to reduce its Selling and General Administration costs. The SG&A costs were 36 million Euro lower than in 2007. These efforts allowed the business group to compensate for the effects of the high raw material costs and the weak economy. In the fourth quarter, the worsening economic conditions forced Agfa Graphics to book higher than normal write-downs on receivables. Towards the end of the year, the business group also faced temporary production stops. Recurring EBITDA decreased to 115.9 million Euro (or 7.6 percent of sales) and recurring EBIT increased to 64.5 million Euro (or 4.2 percent of sales).
Agfa HealthCare – full year 2008
Euro millions 2007 2008 % change
Net Sales 1,392 1,223 -12.1%
Recurring EBITDA (*) 179.6 117.3 -34.7%
% of sales 12.9% 9.6%
Recurring EBIT (*) 105.6 57.8 -45.3%
% of sales 7.6% 4.7%
(*) before restructuring and non-recurring items.
Excluding currency effects, sales decreased 8.6 percent to 1,223 million Euro. The traditional film segment continued its market-driven decline. In the second half of the year, Agfa HealthCare’s sales figures were affected by the economic slowdown as some care organizations are postponing their investments in Enterprise IT, Imaging IT and Computed Radiography (CR) equipment. In 2008, Agfa HealthCare successfully introduced its IMPAX Cardiology Suite in Europe. The major contract signed with the Assistance Publique – Hôpitaux de Paris hospital network serves as a key lever for new successes in the field of Enterprise IT.
Agfa HealthCare further reduced its SG&A expenses by 79 million Euro or 21.0 percent. On top of the weaker sales and the high raw material costs, the business group’s full year results were strongly affected by the decision to book a number of one-off provisions (totalling 12 million Euro) for work that remains to be done under the terms of certain contracts signed in 2006 and 2007. In the fourth quarter, temporary production stops for imaging products and write-downs on receivables and inventories also had an adverse effect. Recurring EBITDA amounted to 117.3 million Euro (or 9.6 percent of sales). Recurring EBIT was 57.8 million Euro, or 4.7 percent of sales. Excluding the one-off elements mentioned above, the business group’s profitability would be at a substantially higher level.
Agfa Specialty Products – full year 2008
Euro millions 2007 2008 % change
Net Sales 274 287 4.7%
Recurring EBITDA (*) 41.2 22.2
-46.1%
% of sales 15.0% 7.7%
Recurring EBIT (*) 35.2 17.1 -51.4%
% of sales 12.9% 6.0%
(*) before restructuring and non-recurring items.
Excluding currency effects, sales grew 5.6 percent to 287 million Euro. Contrary to the positive sales trend in the first nine months of the year, Agfa Specialty Products’ sales decreased 27.0 percent in the fourth quarter of 2008. The market-driven declining trend for some of the traditional film products continued and the economic crisis affected the markets in which Specialty Products’ large industrial customers operate. For instance, producers of electronics ordered less phototooling film for the production of printed circuit boards. Partly because of inventory reduction actions taken by Agfa’s customers in the imaging industry, the high-volume film contracts in this segment also yielded lower sales figures in the fourth quarter compared to the previous quarters. Sales of the Security and Identification segment suffered from a delay in the deliveries for the Moroccan ID-cards project.
Specialty Products is on track with its efforts to reduce its operational costs in line with the evolution in its traditional markets. However, the business group’s profitability was affected by high raw material costs, adverse mix effects and inventory write-downs. As a result, the recurring EBITDA margin amounted to 7.7 percent of sales and the recurring EBIT margin amounted to 6.0 percent of sales.
Fourth quarter results
Agfa-Gevaert Group – fourth quarter 2008
Euro millions Q4 2007 Q4 2008 % change
Net Sales 864 761 -11.9%
Gross Profit (*) 291 230 -21.0%
% of sales 33.7% 30.2%
Recurring EBITDA (*) 92 61 -33.7%
% of sales 10.6% 8.0%
Recurring EBIT (*) 59 32 -45.8%
% of sales 6.8% 4.2%
Operating result 26 (102)
Net result (consolidated comp.) (27) (167)
Net operating cash flow 137 72
(*) before restructuring and non-recurring items.
– Group sales decreased 11.9 percent to 761 million Euro.
– Agfa-Gevaert’s profitability was affected by a lower level of production, which led to negative variances, as well as by important one-off elements.
– The Group reduced its SG&A costs by 40 million Euro (42 million Euro excluding currency effects) compared to the fourth quarter of 2007.
– The Group’s recurring EBIT decreased 45.8 percent to 32 million Euro.
– The Group’s net result amounted to minus 167 million Euro, including the following non-cash charges: an impairment loss on goodwill and other intangible assets of 119 million Euro and an exceptional tax charge of 16 million Euro related to the reversal of deferred tax assets.
Agfa Graphics – fourth quarter 2008
Euro millions Q4 2007 Q54 2008 % change
Net Sales 416 382 -8.2%
Recurring EBITDA (*) 29.5 30.4 3.1%
% of sales 7.1% 8.0%
Recurring EBIT (*) 14.5 18.0 24.1%
% of sales 3.5% 4.7%
(*) before restructuring and non-recurring items.

Sales decreased 8.2 percent to 382 million Euro. The business group’s SG&A costs were 14 million Euro lower than in the fourth quarter of 2007. These efforts to reduce its operational costs allowed the business group to compensate for the effects of the economic slowdown. Recurring EBITDA amounted to 30.4 million Euro, or 8.0 percent of sales. Recurring EBIT increased 24.1 percent to 18.0 million Euro, or 4.7 percent of sales.
At the Graph Expo trade show (Chicago, Illinois), several new products made their North American debut. Among these products was Agfa Graphics’ new chemistry-free :Azura TS thermal CtP printing plate. At the show, orders were taken for 14 CtP platesetters and several important consumable deals were signed. In China, Agfa Graphics supplied the Shanghai Publishing and Printing College (SPPC) with a CtP system, :Azura chemistry-free printing plates, and :Apogee Suite workflow software. The SPPC is dedicated to training highly skilled employees for the Chinese publishing and printing industry.
Confirming the trend seen at the four-yearly drupa trade fair, various trade shows held in the fourth quarter reported a growing interest in Agfa Graphics’ industrial inkjet systems. The Viscom exhibitions organized in four European cities resulted in several deals for :Anapurna systems for large-format printing. Furthermore, the :Anapurna technology is being introduced in Asia. An open house at the first :Anapurna site in Hong Kong was a great success, leading to several deals and new sales leads. In New York, Noteworthy, a printer of custom promotional products, expressed its satisfaction with Agfa Graphics’ high-speed inkjet press :Dotrix by ordering a second machine.
Agfa HealthCare – fourth quarter 2008
Euro millions Q4 2007 Q4 2008 % change
Net Sales 374 325 -13.1%
Recurring EBITDA (*) 54.9 29.6 -46.1%
% of sales 14.7% 9.1%
Recurring EBIT (*) 38.9 14.1 -63.8%
% of sales 10.4% 4.3%
(*) before restructuring and non-recurring items.
Agfa HealthCare’s sales decreased 13.1 percent to 325 million Euro. SG&A costs decreased by 25 million Euro or 25.8 percent compared to the fourth quarter of 2007. Due to the effects of the economic slowdown and certain one-off effects, recurring EBITDA decreased from 54.9 million Euro (or 14.7 percent of sales) in the fourth quarter of 2007 to 29.6 million Euro (9.1 percent of sales). Recurring EBIT decreased to 14.1 million Euro or 4.3 percent of sales.
The highlight of the quarter was the annual meeting of the Radiological Society of North America (RSNA). In spite of the economic conditions, the number of professionals visiting the world’s largest medical meeting remained stable. Agfa HealthCare’s booth was very popular, with the IMPAX IT solutions and the complete CR portfolio taking center stage.
In imaging, ProHealth Care in Wisconsin (USA) ordered 10 DX-S digitizers for use in three of its care centers. Riley Hospital for Children (Indiana, USA) purchased a DX-S for its Neonatal Intensive Care Unit. Recent studies show that the system allows an X-ray dose reduction by up to 50%, without reducing the diagnostic quality of the images.
In the field of imaging IT, Intermountain Healthcare (Utah, USA) partnered with Agfa HealthCare to integrate imaging from its 21 hospitals and from its more than 150 clinics. Furthermore, the US Air Force granted the newest version of Agfa HealthCare’s Picture Archiving and Communication System (PACS), IMPAX 6.3, and the IMPAX Data Center an Authority to Connect, which means that these systems meet all requirements to be installed on US Air Force networks. In the UK, the private acute care center King Edward VII’s Hospital Sister Agnes signed an agreement for the installation of an IMPAX Radiology Information System (RIS) and a PACS, as well as a number of CR 35-X digitizers. In Cardiology IT, the Antwerp University hospital (Belgium) signed an agreement for IMPAX Cardiovascular. This confirms the success of Agfa HealthCare’s internationalization strategy of its Cardiovascular solutions outside North America.
In Enterprise IT, Agfa HealthCare’s ORBIS solution continued its strong growth in the fourth quarter. In the course of 2008, 35 new contracts have been signed in Germany, Austria and Switzerland.
Agfa Specialty Products – fourth quarter 2008
Euro millions Q4 2007 Q4 2008 % change
Net Sales 74 54 -27.0%
Recurring EBITDA (*) 9.2 1.3 -85.9%
% of sales 12.4% 2.4%
Recurring EBIT (*) 7.2 0.2 -97.2%
% of sales 9.7% 0.4%
(*) before restructuring and non-recurring items.
Agfa Specialty Products’ sales decreased 27.0 percent to 54 million Euro. The recurring EBITDA margin was 2.4 percent of sales and the EBIT margin amounted to 0.4 percent of sales.
In October 2008, Agfa announced that Igepa Belux (Belgium) will distribute SYNAPS?, Agfa’s high-quality synthetic paper, in Belgium and Luxembourg. In the beginning of this year, Agfa signed a similar distribution agreement for the USA with Nekoosa Coated Products.
Outlook
The weakening economic conditions have clearly impacted Agfa Gevaert’s fourth quarter results. As it is highly uncertain how deep the crisis will go and how long it will last, it is impossible to give an outlook for the months to come.
Based on the trends observed in the first months of 2009, the Group anticipates a continued weak demand for Agfa Graphics’ and Agfa Specialty Products’ products and solutions, as both business groups are sensitive to the economic environment. In the printing industry, the bad macroeconomic conditions lead printers to postpone their investments in equipment. Furthermore, the slowdown in the advertising markets results in a decline in the use of consumables. Also based on the trends observed early 2009, it is expected that Agfa HealthCare will suffer less from the crisis, although some IT projects could be delayed as decision processes tend to take longer when the economic circumstances are unfavorable.
The Agfa-Gevaert Group will continue to implement the additional savings program that was announced in 2008. In addition, the Group will continue its efforts to improve its profitability and to further adapt its cost structure to the economic conditions whenever necessary.