Agfa-Gevaert reports second quarter results - Regulated information
- Market trends in line with previous statements: Group sales decreased in line with Q1 trend
- Recurring EBIT at 38 million Euro versus 37 million Euro in the second quarter of 2008 and 28 million Euro in the first quarter of 2009
- Operating result (26 million Euro) remained stable versus the second quarter of 2008
- Decrease of SG&A costs well ahead of previously announced plans
- Net result at minus 9 million Euro
- Net financial debt improved considerably versus the first quarter of 2009
- Agreement with banks about the sale of receivables for an amount of 160 million Euro
Compared to the second quarter of 2008, Group sales decreased 12.9 percent to 677 million Euro. In Agfa Graphics and Agfa Specialty Products, the sales trend was in line with the first quarter of 2009, whereas Agfa HealthCare's sales figures showed the impact of the longer decision processes for investments in IT and equipment.
The sales decrease affected the Group's manufacturing efficiency due to lower use of capacity. This was partially offset by the positive effects of the lower raw material prices. As a result, the Group's recurring gross profit margin decreased from 32.6 percent in the second quarter of 2008 to 31.6 percent. However, the decrease versus last year's quarter is less than in the first quarter of 2009.
Due to its strict cost management, Agfa-Gevaert succeeded in further reducing its Selling and General Administration expenses. The monthly SG&A expense was brought down from 57 million Euro in the second quarter of 2008, to 46 million Euro in the second quarter of 2009, which is a cost decrease by 19.3 percent. The SG&A expenses represented 20.4 percent of sales, versus 22.0 percent in the second quarter of 2008. The Group has taken a number of additional measures to further lower its costs. It will continue to evaluate the market trends in all business groups and take further action if necessary.
The recurring EBIT was affected by a newly imposed pension charge (amounting to 4 million Euro) related to pension insurances in Germany.
The Group's recurring EBITDA (the sum of Graphics, HealthCare, Specialty Products and the unallocated portion) decreased from 66 million Euro in the second quarter of 2008 to 64 million Euro. Recurring EBIT increased from 37 million Euro to 38 million Euro.
The restructuring and non-recurring items resulted in an expense of 12 million Euro, stable compared to the second quarter of 2008.
As in the first quarter of 2009, the non-operating result was affected by pension provisions (mainly concerning inactives), to cover for increased pension deficits in the USA and the UK. The non-operating result amounted to minus 27 million Euro.
Taxes amounted to 8 million Euro versus 2 million Euro in the second quarter of 2008.
The net result amounted to minus 9 million Euro, compared to 3 million Euro in the second quarter of 2008.
Balance sheet and cash flow
- Next to its long-term funding, the Group improved its mid-term funding options by signing agreements with three core banks about the sale of receivables for an amount of 160 million Euro. This transaction has reduced the Group's net debt by 40 million Euro in the second quarter. It is one of the levers to further reduce net debt in the future.
- At the end of June 2009, total assets were 2,963 million Euro, compared to 3,160 million Euro at the end of 2008.
- Inventories were 543 million Euro (or 99 days). Trade receivables amounted to 657 million Euro, or 69 days (including deferred revenue and advanced payments) and trade payables were 187 million Euro, or 34 days.
- Net financial debt further improved to 569 million Euro at the end of June 2009, compared to 673 million Euro at the end of 2008, and 737 million Euro at the end of June 2008. In addition to the sale of receivables (40 million Euro), this improvement is due to working capital improvements and the strict cash management control.
- Net operating cash flow amounted to 106 million Euro.
Following the trend of the previous months, Agfa Graphics' sales were severely hit by the impact of the global economic crisis on the printing industry. The effects of the crisis are the strongest in the field of investment goods, but the slowdown in the advertising markets also resulted in a lower use of consumables, such as graphic film and printing plates. Competitive pressure also increased in recent months, mainly due to - among other reasons - overcapacity. Agfa Graphics' sales decreased 15.3 percent versus last year's second quarter.
The volume decline as well as the competitive pressure affected Agfa Graphics' gross margin. These adverse effects were partially offset by some positive effects of the lower raw material prices. The business group continued its efforts to reduce its Selling and General Administration costs, which decreased by 19 million Euro versus the second quarter of 2008. The recurring EBITDA margin increased to 7.3 percent of sales. The recurring EBIT margin was 3.7 percent of sales, which is a status quo compared to last year's second quarter, but a significant improvement versus this year's first quarter.
In prepress, Agfa Graphics added a new solution to its :Avalon N range of platesetters. The :Avalon N4 is fit for midsize commercial printers and ideally suited to work with Agfa Graphics' :Azura chemistry-free printing plates. Agfa Graphics also introduced a new release of its :Apogee Suite workflow software, which allows printers to shorten their production time and to further simplify their production chain.
In industrial inkjet, Agfa Graphics unveiled the second generation of its :M-Press industrial flatbed press at the Fespa Digital 2009 trade fair. The :M-Press Tiger combines a 300 percent increase in productivity with higher quality output. Agfa Graphics' single pass :Dotrix Modular inkjet press was acclaimed as the 'Best Industrial (Specialty) Printing Solution of the Year 2009' by the European Digital Press Association. Furthermore, Agfa Graphics sold its first :Dotrix Modular in the Asian region to Unit Safety Signs in Tokyo (Japan). At the Sign Expo trade fair (Las Vegas, US), numerous :Anapurna systems were sold, stressing the success of Agfa Graphics' range of large-format inkjet printers.
Outlook
As announced in the publications concerning the first quarter results, Agfa-Gevaert is inclined to believe that the crisis-driven decline in its most important markets is bottoming out. However, it is still impossible to predict when the markets will pick up and when demand will recover. Meanwhile, Agfa-Gevaert continuously adapts the cost structures of its business groups to the situation in their respective markets in order to safeguard and strengthen their competitive positions.
The full report can be found on the Agfa website.
