The state-owned manufacturer, based in Nanyang, China, will produce printing plates for Agfa Graphics, using Agfa technology and IP, as part of a ‘strategic alliance’ that aims to boost pre-press sales in the region for both businesses.
Under the agreement, the Belgian manufacturer and Lucky HuaGuang Graphics will set up a joint venture that will combine their pre-press distribution networks to accelerate growth across mainland China. Part of the China Aerospace Science and Technology Corporation, Lucky employs 3,000 workers in China and commands 30%-50% of the local market. Its key products are offset printing plates, flexo plates, graphic arts film, PCB film and high-barrier film.
In a call to analysts shortly after the announcement yesterday (28 August), Agfa Gevaert president and chief executive Christian Reinaudo called the move “an important step in Agfa Gevaert’s transformation” and said the essence of the transaction was to try to capture a bigger share of growth markets while maintaining the firm’s capability to differentiate value selling.
“As you know, the graphics pre-press business has been under a lot of pressure for more than four years now, moving towards markets where competition is tough and prices are the dominant driver for success, as opposed to more mature markets where our capability to integrate complete solutions, including software and support services, is valued,” he said.
“Through this partnership Agfa should be able to grow by keeping available a large part of our manufacturing capacity for value selling while having access to qualified and sizeable extra manufacturing capacity in China,” he added.
Reinaudo said that while the agreement was initially solely focused on producing plates for the Chinese market, “over time it may be possible to expand into other regions and other technologies”.
He added: “We aren’t transferring our technology or patents to Lucky but delivering the support they need to manufacture the plates we will buy from them at the level of quality we require, which might be somewhat different from what they are used to delivering.”
Agfa Graphics president Stefaan Vanhooren stated that the move would not affect its existing manufacturing site in Wuxi, China.
The announcement comes amid ongoing profit and revenue decline for Agfa, as the business last week recorded Q2 sales of €559m (£503m), down 10% on Q2 2017, with first-half sales standing at €1.11bn, down 8.4% year-on-year.
However Reinaudo said the strategic alliance was a vital part of Agfa’s transformation plan and again underlined its medium-term target of delivering a 10% EBITDA average in the coming years.
In his closing comments to analysts, Reinaudo said: “This gives more credibility to our transformation plan in Agfa, proof that our non-IT business will be able to grow in the future and it gives Agfa the capability to fight in price-driven markets.”
No financial details of the deal were disclosed and while the boards of both organisations have accepted the transaction, it is subject to regulatory approval, which should be complete in the next few months.
Agfa-Gevaert’s share price opened at €3.77 ahead of the announcement and rose to €3.88 shortly afterwards, settling at €3.80 at the time of writing.