Agfa-Gevaert today announced its second quarter results.
Clearly outperforming the trend of the first months of the year, the Group's revenue grew 8.7 percent versus the second quarter of 2009 to 736 million Euro. The increase is largely attributable to Agfa Graphics, whereas Agfa HealthCare posted a slightly higher revenue. The current exchange rate conditions had a beneficial impact on the Group's top line business performance.
Due to the continuous success of the efficiency improvement programs, the optimal use of the manufacturing capacity, favorable raw material effects and an IP related one-off effect in Agfa Graphics, the Group's recurring gross profit margin improved to 36.0 percent, versus 31.6 percent in the second quarter of 2009.
Selling and General Administration expenses were 147 million Euro. Representing 20.0 percent of revenue, these expenses are slightly better than the 20.4 percent of last year's second quarter.
The Group's recurring EBITDA (the sum of Graphics, HealthCare, Specialty Products and the unallocated portion) increased from 64 million Euro in the second quarter of 2009 to 107 million Euro. Recurring EBIT improved significantly from 38 million Euro (5.6 percent of sales) to 84 million Euro (11.4 percent of sales).
Restructuring and non-recurring items resulted in an expense of 15 million Euro, versus an expense of 12 million Euro in 2009.
The net finance costs amounted to 22 million Euro, compared to 27 million Euro in the second quarter of 2009.
Income tax expense remained stable at 8 million Euro.
As a result of the strong operational performances of all business groups, a positive net result of 39 million Euro was booked, compared to a net loss of 9 million Euro in the second quarter of 2009.
Balance sheet and cash flow
- At the end of June 2010, total assets were 3,058 million Euro, compared to 2,852 million Euro at the end of 2009.
- Inventories were 585 million Euro (or 113 days). Trade receivables (minus deferred revenue and advanced payments from customers) amounted to 471 million Euro, or 58 days and trade payables were 235 million Euro, or 45 days.
- Net financial debt amounted to 391 million Euro, versus 445 million Euro at the end of 2009 and 569 million Euro at the end of the second quarter of 2009.
- Net cash from operating activities amounted to 61 million Euro.
Agfa Graphics' revenue improved by 19.9 percent (15.2 percent excluding currency effects) versus the second quarter of 2009, when the crisis was still significantly impacting the graphic industry. Broken down in business segments, the growth was due to an upturn of the digital computer-to-plate (CtP) prepress business and the business group's success in the analogue computer-to-film (CtF) market. The Industrial Inkjet segment's revenue also continued to grow. Regionally, the revenue growth is mainly due to the good performance of Agfa Graphics in the USA and in the emerging countries. In most European countries, the industry is recovering far slower than in the rest of the world. In general, competitive pressure continues to weigh on the business group's revenue.
As a result of the efficient use of the manufacturing capacity, higher volumes in the CtF segment, positive raw material effects and an IP related one-off effect, Agfa Graphics' gross profit margin improved from 27.0 percent in the second quarter of 2009 to 33.2 percent. Following strong improvements in the past two years, SG&A costs further reduced from 20.6 percent of revenue in the second quarter of 2009 to 19.4 percent. Recurring EBITDA amounted to 56.6 million Euro (14.5 percent of revenue). Recurring EBIT amounted to 46.1 million Euro (11.8 percent of revenue), versus 12.2 million Euro (3.7 percent of revenue) in the second quarter of 2009, which was marked by the strong impact of the crisis in the industry.
Major events in the second quarter were the Fespa trade show (Munich, Germany - 22-26 June) and the 4-yearly IPEX trade show (Birmingham, UK - 18-25 May). At IPEX, Agfa Graphics was able to exceed its targets in prepress, as well as in industrial inkjet. At the show, Agfa Graphics introduced several new prepress products and systems, including two new eco friendly printing plates. The :Azura V chemistry-free plate for violet CtP systems is ideal for small to mid-size commercial printers. :Amigo TS is an enhanced version of the popular :Amigo thermal printing plate. The new plate offers higher image contrast and allows printers to increase productivity. Agfa Graphics also demonstrated new software solutions, as well as two new platesetters.
In the field of industrial inkjet, Agfa Graphics launched several new inks. The :Agorix LM UV inks are designed to be used on the :Dotrix Modular single-pass UV inkjet press. The inks are ideally suited for short-run printing on a wide range of packaging substrates. The new :Agora ink family is ideal for the next generation single pass "piezo" print heads. Furthermore, Agfa Graphics introduced a new member to its family of :Anapurna large format printers.
Still in industrial inkjet, Agfa Graphics added variable data capabilities to its high-speed :M-Press Tiger flatbed inkjet press. Thanks to this new tool, users can define elements (text, graphics, images, …) which may change from one document to the next without slowing down the printing process. In June, Agfa Graphics announced that StylePrint, one of Australia's leading screen printing companies, purchased its second :M-Press Tiger only five months after the installation of the first system. The first :M-Press Tiger in North America was ordered by Cameron Advertising Displays Ltd, one of the most successful screen printing companies in Canada.
In August 2010, Agfa Graphics announced the successful completion of the acquisition of the assets of the Harold M. Pitman Company, a leading US supplier of prepress, industrial inkjet, pressroom and packaging printing products and systems. The acquisition will allow Agfa Graphics to strengthen its distribution power and expand its presence in the growing US industrial printing industry. It will boost Agfa Graphics' revenue in the US to over $500 million.
Performing markedly better than in the first months of this year, Agfa HealthCare booked a slight revenue increase of 0.3 percent (a decrease of 3.7 percent excluding currency effects) compared to the second quarter of 2009. The traditional imaging products continued their market-driven decline. Computed Radiography (CR) performed well and a strong order intake was booked for CR, as well as for Direct Radiography (DR). For IT, revenue grew substantially in the emerging countries and the USA, where Agfa HealthCare clearly outperformed the market. In certain Southern European countries, the unstable economic climate weighed on Agfa HealthCare's IT sales, whereas the beginning of an upturn was noticed in the German and Northern European markets.
As a result of improved service efficiency in IT and the efficient use of manufacturing capacity, the business group's gross profit margin improved from 39.3 percent in the second quarter of 2009 to 41.9 percent. The business group's SG&A expenses remained stable. Agfa HealthCare's recurring EBITDA amounted to 48.1 million Euro (or 16.3 percent of revenue). Recurring EBIT improved strongly to 35.6 million Euro, or 12.0 percent of revenue.
In the second quarter, Premier Healthcare Alliance honoured Agfa HealthCare with the Supplier Performance Award. With the award, the alliance applauds the efforts of contracted suppliers that meet and exceed operational expectations. Premier is a performance improvement alliance of more than 2,300 US hospitals and 67,000 other healthcare sites working together to achieve high quality, cost-effective care.
In the field of Imaging, Agfa HealthCare was awarded a new three year, multi-source, contract by HealthTrust Purchasing Group to provide Computed Radiography products to their more than 1,400 acute care hospitals, 120 alternate care sites and 3,600 physician practices in the US.
In the 2010 Best in KLAS Medical Equipment Report, Agfa HealthCare was named category leader for single plate CR. Agfa HealthCare's CR 30-X digitizer is the No. 1 ranked CR product according to KLAS, a research firm specializing in monitoring and reporting the performance of healthcare vendors. In the second quarter, a strong order intake was booked for CR and DR systems, with the CR 30-X as the absolute star among the family of CR digitizers.
In Imaging Informatics, Agfa HealthCare signed an agreement with the Academisch Medisch Centrum (AMC) in Amsterdam (The Netherlands) to upgrade its existing Picture Archiving and Communication System (PACS) and install a Radiology Information System (RIS) and Nuclear Information System (NIS). The AMC is one of the The Netherlands' leading university medical centers. Furthermore, Agfa HealthCare completed the installation of its latest PACS and RIS releases at four of Alliance Medical's sites across Ireland. Alliance Medical is an independent provider of diagnostic imaging services with 11 dedicated sites across Ireland. In Brazil, Agfa HealthCare signed an agreement with the Fundação Instituto de Pesquisa e Estudo de Diagnóstico por Imagen (FIDI) for the installation of its CR and Imaging IT solutions across the organization's 25 sites.
In Enterprise IT, Agfa HealthCare continued its geographical expansion by launching its Document Management System (known as HYDMedia) in France and Luxemburg. This new offering completes the digitization of hospitals and healthcare facilities, by allowing them to install a fully paperless workflow.
Agfa Specialty Products' revenue decreased 12.5 percent compared to the second quarter of 2009. Like in the first quarter of the year, the business group's revenue was influenced by the shift of part of its film business to Agfa Graphics and by the market-driven decline for some of the Classic Film products. The revenue for Printed Circuit Board (PCB) film continued to increase due to the growth of the electronics industry in Asia.
The revenue impact and the continued R&D for the New Business products were counterbalanced by the increased use of the manufacturing capacity and the continued efforts to reduce operational costs. The recurring EBITDA margin amounted to 9.0 percent of revenue and the recurring EBIT margin amounted to 7.3 percent of revenue.
Outlook
Provided that the exchange rates and macro-economic conditions remain stable, the Agfa-Gevaert Group expects a full year revenue growth of about 200 million Euro versus 2009. The revenue increase is expected to come from Agfa Graphics, as the business group's internal growth will be supplemented by the impact of the recently announced acquisitions and joint venture. Agfa Graphics' full year EBIT to revenue ratio is expected to be higher than average because of the favorable raw material costs, the stronger than anticipated recovery of the graphic industry in the USA and the IP related one-off effect. Agfa HealthCare anticipates a better top line performance in the second half of the year. The business group expects its full year EBIT to revenue ratio to be closer to 11 percent than to 10 percent.
Agfa Graphics sticks to its 7 percent medium term EBIT target. Agfa HealthCare will continue its programs to improve service efficiency. Furthermore, the business group's profitability will gradually become less exposed to the fluctuations of the silver price. For Agfa HealthCare, the medium term EBIT to revenue ratio is expected to be between 10.5 percent and 11 percent.
Agfa Specialty Products continues to invest in new businesses, which will only gradually start to compensate for the ongoing decline in the demand for some of the traditional film products.
Christian Reinaudo, Agfa-Gevaert's President and CEO, said: "The strong performance in the first half of this year indicates that our targeted strategies and industry-leading technologies have allowed us to rejoin the path to growth. We expect that the combination of organic growth and the effects of our recent strategic moves will yield a full year revenue increase of about 200 million Euro."
