Agfa sees weak Q1 in healthcare, shares fall
Thursday, April 01, 2010
Press release from the issuing company
Compared to 2008, Group revenue decreased 9.1 percent to 2,755 million Euro. The crisis-driven decline in Agfa-Gevaert's markets started to bottom-out in the second half of the year.
In spite of the sales decline and manufacturing inefficiencies due to lower use of capacity in the first quarters of the year, the Group's recurring gross profit margin improved from 31.7 percent in 2008 to 32.2 percent. This was mainly due to the successful efficiency improvement programs, lower raw material prices and certain one-off effects.
Agfa-Gevaert is ahead of its plans to reduce its Selling and General Administration expenses. The average monthly SG&A expense was brought down from 64 million Euro in 2007 and 54 million Euro in 2008 to 46 million Euro in 2009. The year on year SG&A cost decrease amounted to 14.5 percent. The SG&A expenses represented 20.1 percent of revenue, compared to 23.3 percent in 2007 and 21.3 percent in 2008.
The Group's recurring EBITDA (the sum of Graphics, HealthCare, Specialty Products and the unallocated portion) increased from 251 million Euro in 2008 to 284 million Euro. Recurring EBIT improved from 135 million Euro to 182 million Euro.
Restructuring and non-recurring items resulted in an expense of 12 million Euro, versus an expense of 158 million Euro in 2008.The 2009 figures were positively influenced by changes in the post-retirement medical plans in theUSAand by changes in the defined benefit plans in theUSAandGermany.The 2008 figures were affected by a considerable impairment loss on goodwill.
The net finance costs amounted to minus 114 million Euro, compared to minus 83 million Euro in 2008. This increase was due to the increased pension deficit, which was caused by the evolution of the stock markets in 2008.
Income tax expense amounted to 49 million Euro versus 60 million Euro in 2008. Current tax expense amounted to 14 million Euro and deferred tax expense amounted to 35 million Euro (non-cash item).
Mainly due to the strong operational performance in all business groups in the last quarters of the year, a positive net result of 6 million Euro was booked, compared to minus 167 million Euro in 2008. The 2008 result was subject to the aforementioned impairment loss, an exceptional tax charge and considerable restructuring costs.
Balance sheet and cash flow
Agfa Graphics' revenue decreased 11.9 percent compared to 2008. The effects of the economic slowdown - which surfaced in the course of 2008 - persisted in the first quarters of 2009. In the second half of the year the crisis-driven decline started to bottom-out. In the last months of 2009 both the prepress and the inkjet market started to recover, mainly inNorth Americaand the emerging countries. However, the crisis-related increased competitive pressure in the Computer-to-Plate segment continued throughout the year.
Agfa Graphics is successfully implementing its plans to reduce its SG&A costs. Compared to 2008, these costs were reduced by50million Euro.
Together with the measures to improve operational efficiency, these efforts clearly supported Agfa Graphics' profitability, resulting in a particularly strong fourth quarter performance. Lower raw material prices and certain one-off effects also had a positive influence. Year-on-year, these beneficial elements were counterbalanced by crisis-related elements, such as the underutilization of the manufacturing capacity, bad debt provisions and increased competitive pressure.
The recurringEBITDA margin amounted to 8.1percentof revenue. The recurring EBIT margin increased to 4.7 percent of revenue.
Agfa HealthCare - full year 2009
Following a strong reduction in 2008, Agfa HealthCare succeeded in a further SG&A cost reduction of 43 million Euro in 2009. Due to these efforts - but also to improved service efficiency and operational efficiency and lower raw material prices - the business group considerably improved its profitability throughout the year. Agfa HealthCare's recurring EBITDA amounted to 168.0million Euro (or 14.3percent of revenue). Recurring EBIT improved to 116.2 million Euro, or 9.9 percent of revenue.
Agfa Specialty Products
Agfa Specialty Products' profitability was affected by the market-driven decline of Classic Film products sales, the manufacturing inefficiencies due to lower use of capacity and by the investments in New Business. The recurring EBITDA margin amounted to 7.2 percent of revenue and the recurring EBIT margin to 5.4 percent of revenue.
Fourth quarter results
Recent judgments in arbitration cases relating to AgfaPhoto - such as the judgments concerning the hereditary building rights and the alleged misconduct of Agfa-Gevaert in connection with the sale of the Consumer Imaging division - have been in favor of Agfa-Gevaert.
In industrial inkjet, the highlight of the fourth quarter of 2009 was the agreement to acquire most of the assets of Gandi Innovations Holdings LLC's North American operations and the shares of its principal foreign subsidiaries. Gandi Innovations is a leading supplier of large format inkjet printing systems in the mid-range market segment. Their product offering is complementary to Agfa Graphics' range of entry-level :Anapurna large format printers and high-end :M-Press Tiger and :Dotrix inkjet machines. The deal was finalized in the beginning of 2010.
Also in inkjet, new :M-Press Tiger presses - the second generation of the :M-Press industrial flatbed press - will soon be installed at printers in theUK,Australia,Canada, theUSAandFrance.In the fourth quarter, the :Anapurna large format printers also continued to sell well. As their installed base is growing gradually, these systems are now starting to generate more substantial ink sales.
In the field of prepress, Agfa Graphics unveiled a number of technological innovations at the IFRA 2009 newspaper trade show (Vienna,Austria). These innovations allow newspaper printers to improve the efficiency of their prepress departments. :Arkitex Portal, for instance, is a new addition to Agfa Graphics' popular :Arkitex software for managing and controlling the production process for newspaper publishers. Agfa Graphics also introduced a high speed option for its range of :Advantage N platesetters. Due to the new option, platesetters can produce significantly more printing plates per hour.
In January 2010, Agfa Graphics signed a letter of intent with its business partner Shenzhen Brothers for the establishment of a joint venture aiming at reinforcing both partners' market position in the Greater China and ASEAN region.Agfa Graphics is convinced that the combination of Shenzhen Brothers' strong relationship with local suppliers and governments and Agfa Graphics' know-how and leading technology will facilitate the realization of both companies' ambitious growth plans.
Agfa HealthCare - fourth quarter 2009
In line with the previous quarters, the business group continued its strong operational performance. The recurring EBITDA margin improved to 16.3 percent of revenue and the recurring EBIT margin reached 12.5 percent of revenue.
In the fourth quarter, Agfa HealthCare announced the acquisition of Insight Agents GmbH, a European producer of contrast media. The acquisition was successfully completed at the end of 2009. As contrast media are increasingly used for diagnostic imaging, they are a logical addition to Agfa HealthCare's imaging portfolio.
Also in Imaging, Agfa HealthCare introduced the DX-G, a next generation Computed Radiography (CR) system with unprecedented flexibility. In December, Agfa HealthCare announced the signing of a new contract with its partners in the People's Republic ofChinafor the installation of CR systems with MUSICA² software and hardcopy printers, as well as the delivery of all related consumables. The new 4-year contract is expected to be worth 500 million US dollar.
Launched inEuropein March 2009, Agfa HealthCare's systems for Direct Radiography (DR) started to generate revenue in the fourth quarter. At the RSNA 2009 event held inChicago, the systems were introduced to the North American markets.
In the field of Imaging Informatics, Agfa HealthCare released a new version of its leading Picture Archiving and Communication System (PACS) in the fourth quarter. The improvements of IMPAX 6.5 enable a radiologist to read more exams, with fewer mouse clicks. They include new communication tools - such as instant messaging - enhanced task management and optimized algorithms that speed up image delivery.
In 2009, Agfa HealthCare signed over 50 new agreements for its leading IMPAX PACS and RIS solutions with local, regional, university and governmental care organizations all over the world.
InEnterpriseIT, Agfa HealthCare achieved its planned growth for its ORBIS solution with over 40 new agreements signed in 2009. As a result, the business group enforced its leading position in Europe.
Agfa Specialty Products
In the fourth quarter, Agfa Specialty Products introduced PETix, an innovative range of polyester films for the production of ID cards, drivers' licenses, financial cards and cards for mass transport. Card makers can use this robust plastic film to produce cards with the best-in-class resistance against mechanical and chemical influences.
Following the very strong end of 2009, Agfa HealthCare anticipates a weaker top line performance in the first quarter of 2010. However, the business group expects that the results in 2010 as a whole will be in line with the previous year.
For Specialty Products, 2010 will be a year of transition. The business group continues to invest in new businesses. These new businesses will only gradually start to compensate for the ongoing decline in the demand for some of the traditional film products.
Management Certification of Financial Statements and Quarterly Report
"The Board of Directors and the Executive Committee of Agfa-Gevaert NV, represented by Mr. Julien De Wilde, Chairman of the Board of Directors, Mr. Jo Cornu, President and CEO, and Mr. Kris Hoornaert, CFO, jointly certify that, to the best of their knowledge, the consolidated financial statements included in the report and based on the relevant accounting standards, fairly present in all material respects the financial condition and results of Agfa-Gevaert NV, including its consolidated subsidiaries. Based on our knowledge, the report includes all information that is required to be included in such document and does not omit to state all necessary material facts."
Statement of risk
"As with any company, Agfa is continually confronted with - but not exclusively - a number of market and competition risks or more specific risks related to the cost of raw materials, product liability, environmental matters, proprietary technology or litigation.
Agfa believes that the most noteworthy risks facing the company for the coming quarters would be the effects of the continued economic crisis on its key markets."
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