AGFA 1Q Affected by Economic Slowdown, 2001 Sales to Be Below 2000
Press release from the issuing company
Mortsel, May 17, 2001 - In the first quarter of 2001, developments in each of the three business segments of the Agfa-Gevaert Group, Mortsel/Belgium, differed considerably. While the Technical Imaging segment, which is dominated by the Medical Imaging and NDT (non-destructive testing) business groups, succeeded in growing sales by 10 percent, sales in the Graphic Systems and Consumer Imaging business groups declined due to the sluggish economic situation. The company's portfolio has shifted further towards Technical Imaging, which is by far the most profitable business segment. Its share of Group sales has risen from 32 percent to 37 percent. Graphic Systems has maintained its share at 40 percent, while that of Consumer Imaging went down to 23 percent (previous year: 28 percent).
At 1.182 billion (previous year: 1.260 billion), Group sales in the first quarter of 2001 were some 6 percent (for continuing operations some 5 percent) below those of the first quarter of the previous year which were exceptionally high (sales are still 15% up compared to the first quarter of 1999.)
Sales in the so-called "New digital solutions" were up 20 percent, compared to the first quarter of the previous year. This sector now accounts for 25 percent of Group sales (previous year: 20 percent).
The Group's EBIT (operating result before restructuring and non-recurring expenses/income) of 76 million, was 38 percent down on that of the first quarter of 2000. Return on sales fell to 6.4 percent (previous year: 9.8 percent ).
EBIT was, for a total amount of around 19 million, negatively influenced by a number of technical elements. These included, amongst others, silver revaluation, the implementation of an IAS rule concerning derivatives and changes in revenue recognition in Medical Imaging.
Restructuring expenses totalled 20 million but were offset by 12million non recurrent income resulting in a total net amount of 8 million (previous year: 25 million). Higher interest charges caused by acquisitions and higher interest rates, and the newly introduced fair value accounting for derivatives resulted in an increase in net non-operating expenses from 25 million in 2000 to 35 million in the first quarter of this year.
At 33 million, profit before taxes was 55 percent below the figure for the same period of the previous year. After deduction of taxes and Agfa's share in the results of Xeikon (-3 million), the net result reached 20 million (against 49 million last year)
Graphic Systems had sales of 471 million in the first quarter of 2001. This is equivalent to a decrease of 8 percent and of 5 percent for ongoing businesses. The EBIT, at 20 million, was 43 percent down on the first quarter of the previous year. The main reason was the weaker economic situation, which led to amongst others lower production of printed advertising matter, especially in the Nafta and Asia regions. Sales in Europe (ongoing businesses) remained stable.
In the Technical Imaging segment, sales climbed 10 percent to 440 million. The EBIT declined by 4 percent compared to the very good first quarter of 2000 and now stands at 65 million. With a return on sales of 14.6 percent, Technical Imaging remains a very successful operation, for which we recently made two important acquisitions to strengthen our activities:
In March 2001, we took over Talk Technology Inc. Bensalem, USA. This company is a leading supplier of voice-enabled clinical workflow and reporting solutions in healthcare, which means that we will be able to further strengthen our position in Medical Imaging. Also in March 2001, we signed a declaration of intent concerning the acquisition of Rich. Seifert & Co, GmbH & Co. KG, Ahrensburg. The take-over of this leading player in the field of industrial and analytical X-ray equipment and systems for non-destructive material testing will further strengthen Agfa's leading role in this market.
The Consumer Imaging business segment was particularly affected by the economic decline. Sales in the first quarter of 2001 fell back to 271 million. This is equivalent to an overall decrease of 23 percent, although the figure for the NAFTA region was considerably higher. The heavy drop in sales led to an EBIT of minus 9 million (previous year: 20 million). Particularly hit was the Consumer Digital Imaging business unit, whose scanners and digital cameras were unable to escape the maelstrom of the poor PC market situation, as well as the Laboratory Equipment business unit. While the previous year's laboratory equipment business was characterised by heavy demand for the Agfa MSP DIMAX high-speed printer, the market is currently overshadowed by a distinct reluctance to invest. With our new mini-lab, the Agfa d-Lab.3, we now have an all-digital system that is attracting strong demand. We began supplying these mini-labs at the beginning of April this year, which means that a significant improvement in our laboratory equipment business can be expected in the future.
Agfa is currently negotiating with Schroder Ventures, a leading international private equity group, about the possible sale of the Consumer Imaging business segment. The result of the negotiations is still pending, but both sides intend to reach a conclusion in the near future.
In the first quarter of 2001, Europe accounted for 51 percent (previous year: 50 percent) of sales. While there was an average decline in business of 4 percent in the European countries, the average fall in the NAFTA countries amounted to 12 percent. This region's share of Group sales is now 28 percent (previous year: 30 percent). In Asia, Africa and Australia (share of sales: 16 percent), turnover was down 1 percent. With a fall in sales of 5 percent, the Latin America region again contributed 5 percent to Group sales.
Although sales in Technical Imaging continue to show healthy growth, it has now become clear that due to the economic slowdown Agfa's sales in 2001 will not match those of last year.
The decrease in sales, particularly in the Nafta region, is affecting EBIT in Consumer Imaging as well as in Graphic Systems.
The Group continues to take all necessary measures in order to increase its profitability and maintains its goal of achieving double-digit growth in net profit.
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