Agfa Reports 2001 Results, Net Loss Attributed to Heavy Restructuring Costs
Press release from the issuing company
Mortsel (Belgium) - March 7th, 2002 - In 2001, the Agfa-Gevaert Group posted sales of 4,911 million Euros. This decrease of 6.6 percent compared to 2000 reflects mainly the general economic slowdown but several company-specific elements also played a role.
The so-called 'new digital solutions' continued to show substantial growth (+19.7 percent). Their share of total turnover is now 28 percent against 22 percent last year. This illustrates the rapid transition to digital imaging, which further accelerated during the economic slowdown.
Group EBIT (operating result before restructuring and non-recurring results) amounted to 260 million Euros, 50.7 percent less than in 2000. This was mainly due to the drop in sales, price erosion and higher production and administration costs. The return on sales dropped from 10 percent in 2000 to 5.3 percent in 2001.
To improve profitability rapidly and lastingly, the Group launched its Horizon plan. The restructuring costs linked to it heavily influenced 2001 results. The total of restructuring and non-recurring expenses amounted to 524 million Euros, of which 440 million Euros are related to the Horizon plan. Furthermore, Agfa's net result was affected by the full write off of the stake of 25 percent in Xeikon, which asked for protection from its creditors. Consequently, Agfa recorded a net result of minus 288 million Euros, against a positive 169 million Euros in 2000.
Thanks to its vigorous efforts to decrease working capital, the Group was able to diminish net financial debt, improve the balance sheet structure and net operating cash flows. Compared to end 2000, inventories decreased 238 million Euros to reach 1,055 million Euros. Trade receivables also showed a decrease of 191 million Euros and amounted to 1,125 million Euros at end 2001.
The total inventories and trade receivables thus diminished by 429 million Euros, clearly exceeding the 2001 target. It is the objective to further reduce working capital during the coming years to generate cash flow to finance future growth.
Thanks to the significant decrease of working capital, net operating cash flow reached 738 million Euros and thus even improved compared to 2000.
Technical Imaging's share of group sales rose from 33 to 37 percent. Graphic Systems represented an unchanged 39 percent and Consumer Imaging 24 percent (2000: 28 percent).
Graphic Systems, which includes graphic film, analogue and digital printing plates as well as equipment and software for computer-to-film and computer-to-plate systems achieved sales of 1,890 million Euros in 2001, a drop of 8.5 percent against 2000. Graphic Systems' EBIT fell to 79.7 million Euros, 51.1 percent less than in 2000. The weak economic situation, especially in the United States, resulted in a substantially lower production of commercial print and formed the basis for this decline. Sales of equipment and consumables for Computer-to-Film decreased at double digit rate while those of Computer-to-Plate continued to achieve growth ratios of 40 to 50 percent.
Agfa's share in the contracting markets for graphic film and the associated imagesetters remained stable, while that in the rapidly growing Computer-to-Plate market increased. The extra investment made in 2000 to enhance production capacity enabled Agfa to meet the large demand for digital plates.
In the fourth quarter of 2001, Agfa successfully completed the take-over of the US company Autologic Information International, Inc. This acquisition fits in Agfa's strategy of developing and marketing advanced digital prepress and print production systems for the newspaper industry.
Technical Imaging is made up of HealthCare, Non-Destructive Testing (NDT) and Industrial Imaging. Compared to 2000 (1,708 million Euros) sales in Technical Imaging rose by 6.7 percent to 1,823 million Euros, whereas EBIT was down by 25.3 percent and now stands at 192.8 million Euros.
HealthCare, by far the largest business in this segment, achieved a higher turnover in 2001, mainly due to the stronger demand for hardcopy products, digital systems and networks (Picture Archiving and Communication System or PACS) for hospitals. Agfa's PACS-system IMPAX experienced continuous high growth. Greater investment in R&D, higher production costs and the development of a sales network for digital systems and networks caused HealthCare's EBIT to decrease.
In the fourth quarter, Agfa acquired its long-time technology partner, Mitra. This Canadian company is one of the most important global suppliers of imaging and information management systems for healthcare and has played a major role in the development and success of Agfa's digital IMPAX networks over the past ten years. Talk Technology and Quadrat, two previously acquired companies, will be integrated with Mitra and become the cornerstone of Agfa's strategy to further expand in hospital informatics.
Sales in Industrial Imaging did not quite match those of 2000, but Non-Destructive Testing (NDT) continued to show strong growth. This was partly due to the acquisitions of Krautkramer in 2000 and of Seifert and Pantak in 2001, but also to substantial organic growth in both film and ultrasound activities. With a market share of approximately 60 percent of analogue film systems and approximately 30 percent of ultrasound systems, Agfa confirmed its position as global leader in the very attractive NDT market.
In 2001, Consumer Imaging posted sales of 1,198 million Euros, a decrease of 19.4 percent. Sales were affected by the weak economic conditions, but also by the later than planned availability of the new digital minilabs and the discussions concerning the possible sale of this business to a venture capitalist. Finally, the announcement that Agfa was to discontinue the loss-making activities of digital cameras and scanners accelerated the drop in sales. EBIT was minus 12.1 million Euros; if digital cameras and scanners are excluded, EBIT reached a positive 23.9 million Euros (2000: 120.7).
Europe stands for 50 percent of Agfa's sales. Turnover in the NAFTA (US, Canada and Mexico) region declined by approximately 9 percent and now represents 28 percent of the total. With a drop in turnover of approximately 9 percent, the Asia/Oceania and Africa region now accounts for 17 percent of group sales, whereas the Latin American region stands for 5 percent.
In 2001, Agfa launched its growth and efficiency plan 'Horizon', which will run to the end of 2003. The plan aims to increase profitability on a lasting basis and to release the funds needed to finance future growth. Horizon covers more than 100 individual projects and should lead to cost savings of some 550 million Euros a year from 2004 and to a reduction of working capital with 500 million Euros by end 2003. Several measures in the fields of lowering production costs and reducing administrative expenses have already been announced and are in the course of implementation. At many sites, including Mortsel and Leverkusen, agreements have already been reached with the employee representatives on ways of reducing the workforce.
There are indications that economic growth may pick up again, at least in the second half of 2002. This, together with the fact that the positive effects of Horizon will increase gradually, leads Agfa to expect its first half results to remain weak while those of the second half should improve significantly. Ludo Verhoeven, Chairman of the Board of Management and CEO: "We have been able to book 440 out of the estimated 550 million Euros restructuring costs of Horizon in 2001. While the remaining 110 million Euros will be charged on 2002, the net result of 2002 should be positive again."
"We are convinced that with Horizon, the necessary measures have been taken to rapidly restore profitability. The beneficial effects of Horizon will already be visible in 2002, substantial in 2003 and will have their full impact as from 2004", said Ludo Verhoeven. "Agfa has the know-how, the required talent and the determination to successfully tackle the many challenges we are facing and to create value for its customers, staff and shareholders."
Consolidated key figures* for 2001
Euro million 2001 2000 %
Net sales 4,911 5,260 -6.6
Operating result (264) 401 -165.8
Non operating result (120) (130) +7.7
Profit before taxes (384) 271 -241.7
Profit after taxes (251) 175 -243.4
Share of results of associated companies (38) (7) -442.9
Minority stockholders interest 1 1
Net result (share of the Group) (288) 169 -270.4
EBIT** 260 527 -50.7
Net operating cash flow 738 436 +69.3
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