Agfa continues to be hit by pandemic effects

Richard Stuart-Turner
Friday, November 13, 2020

Agfa has reported a fall in revenue and gross profit in Q3 as the effect of the coronavirus pandemic continues to hit its offset printing activities.

Agfa's revenue was down by 16% year-on-year in Q3
Agfa's revenue was down by 16% year-on-year in Q3

The Belgian manufacturer recorded sales of €410m (£368m) in the third quarter, down 16% on Q3 2019. Year-to-date sales stand at €1.24m, down 14.2% year-on-year.

The firm's gross profit, before restructuring and non-recurring items, was down by 19% in Q3 to €112m, while year-to-date gross profit stands at €367m, down 15.6% year-on-year.

Adjusted EBITDA was down by 52.1% to €16m in Q3, and represented 3.9% of revenue, down from 6.8% of revenue in Q3 2019. For the first-half, EBITDA dropped by 35.2% to €71m and represented 5.7% of revenue, down from 7.6% of revenue at the same stage in 2019.

Agfa said issues in the offset printing industry, as well as the impact of the pandemic on the medical film business and its Digital Print and Chemicals division were still having “a significant impact” on the group’s top line.

Margins, it added, were impacted by increased "idle time" at production facilities and the fact that the group benefited less from government measures, including temporary unemployment schemes, than in the previous quarters.

Due to the proceeds from the sale of part of its HealthCare IT activities for almost €1bn, the group's net financial debt evolved from €219m at the end of 2019 to a net cash position of €532m.

As mentioned previously, around €350m of the proceeds of the sale will be used to increase the funding ratio of Agfa's funded pension plans in Belgium, the UK and the US, as well as to implement “de-risking actions”. Agfa said it is “well on track” with this plan.

On top of the €40m already spent in Q2, for Belgium, the company invested about €110m in the plans in the UK and the US in Q3. It said the de-risking actions are ongoing in Q4 and that before the end of the year the total amount spent will be close to €250m.

By division in Q3, Offset Solutions revenue fell by 20.6% to €168m and sales in the Digital Print and Chemicals division fell by 18.4% to €69m.

Agfa said the actions it has taken to align the printing plate production capacity to the evolution of the offset industry will start to show an effect on the Offset Solutions division’s profitability in the fourth quarter and that this effect will grow gradually in the next quarters.

Radiology Solutions saw a revenue fall of 9.9% to €119m while HealthCare IT experienced a sales drop of 10.5% to €54m, following a solid second quarter, albeit Agfa said the fluctuations between quarters are normal in this division “as a significant portion of revenues and margins are realised when projects reach key milestones”.

In digital print, Agfa said the ink product ranges for sign and display applications continued to perform well, but that the pandemic continued to impact its large-format printing equipment business, with many companies postponing investments in new machines.

Pascal Juéry, president and chief executive of the Agfa-Gevaert Group, said: “Considering these uncertain times, our Imaging IT growth engine continued to perform well, with significant improvement in profitability.

“The Digital Print and Chemicals division was able to keep its EBITDA in line with last year, in spite of the strong Covid-19 impact on its top line.

“The group’s profitability was affected by the ongoing issues in the offset printing industry, which accelerated due to the Covid-19 pandemic. We are taking the necessary steps to secure our position in this industry and to restore profitability.”

He added: “In the third quarter, we reached an agreement with our social partners regarding the closure of our printing plate factories in Pont-à-Marcq and Leeds, effective before the end of the year.

“Furthermore, we also see a Covid-19 related impact on the volume of our highly profitable medical film business. However, in the course of the quarter, most of our activities started to improve gradually, and – although we remain cautious – we believe that the fourth quarter will show further improvement.”

Agfa-Gevaert’s share price fell by 2.4% to €3.25 in early trading following the publication of the results this morning (13 November) but had risen to €3.46 by close.

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