Agfa hampered by supply chain issues but sales up in Q3

Richard Stuart-Turner
Tuesday, November 9, 2021

Agfa achieved “decent top line recovery” but a contrasted performance between its divisions in its Q3 results, with increasing inflationary pressure and supply chain issues reported.

Agfa: "very strong top line growth" in Offset Solutions
Agfa: "very strong top line growth" in Offset Solutions

The Belgium-headquartered manufacturer’s revenue for the three-month period to 30 September was €439m (£375m), up 7.2% on the Q3 2020 figure of €410m, excluding currency, while adjusted EBITDA jumped by 34.9% from €16m in Q3 2020 to €21m.

In a call to investors held this afternoon (9 November) CEO Pascal Juery said: “Sequentially it’s a lower quarter than Q2 and we’ve seen margin pressure from cost inflation but also lost opportunities from supply chain issues.”

The company said it has made good progress, including its recent announcement to partner with Atos for its internal IT activities, which it said will enable the business to futureproof its IT environment “in a socially responsible way”.

The firm’s actions to organise its Offset Solutions activities into a standalone legal entity structure and organisation within the Agfa-Gevaert Group, meanwhile, are expected to be finalised by April 2022.

Agfa’s biggest division, Offset Solutions reported revenue of €192m in Q3 2021, up by 14.5% on the €168m recorded a year ago. The division’s adjusted EBITDA for the period was €2.5m, a turnaround on the €7m loss recorded for the division in Q3 2020.

Juery commented on the “very strong top line growth” in the division; a result of the company recovering volume and increasing prices.

“We are not yet in terms of volumes at pre-Covid levels – we are still about 9% below – but here I would say we are busy increasing pricing [because] this is the division that is most impacted by cost inflation.”

He said the group is expecting Q4 to “still be a difficult quarter for Offset due to this delay in the cost hitting the P&L – we operate in a long supply chain market and therefore Q4 will be impacted by this cost inflation even more than Q3”.

He added: “I’m confident of our ability to recover all of it but there is just a time delay in this recovery. In spite of that, you can see that Offset is doing a lot better than last year and apart from the price actions we are also managing our costs in a very efficient way in this business.”

The Digital Print & Chemicals (DPC) division, which includes Agfa’s inkjet business, saw sales up 18.9% year-on-year in Q3 2021 to €82m, while adjusted EBITDA dropped by 11% to €3.8m.

“We’re seeing a good evolution, and it doesn’t mean that all businesses are back to pre-Covid levels but overall, it’s very well oriented,” said Juery.

He said the industrial film business within the division is “suffering a bit more in margin, and this is also an area where we have supply chain issues that prevent us from shipping some of the goods to our customers”.

He added that while “all our future oriented activities in DPC are well oriented”, with inkjet doing “very well”, equipment is where the group is having supply chain issues.

“We have an order book that is increasing quarter after quarter that we can’t deliver fully. We expect the order book at the end of the year to be two thirds above last year’s level. It’s difficult to ship and difficult to source some of the components.”

Healthcare IT sales dropped by 8.6% to €49m, with adjusted EBITDA down by 24.4% to €4.6m, and Radiology Solutions reported a fall in sales of 2.6% to €116m, with adjusted EBITDA down by 9.2% to €15m.

Group sales for the year-to-date after nine months are €1.28bn, up 2.8% on the same stage last year, while adjusted EBITDA stands at €77m, up 8.1% on last year.

Looking ahead, the group said it expects an upturn in performance for the HealthCare IT division in Q4, “but a subdued performance for the other divisions, as the inflationary impact will increase”.

With Radiology Solutions also expecting lower sales figures for its medical film business, the group’s EBITDA is expected to be below the level of Q4 2020.

Agfa is expecting inflationary pressure and supply chain issues to continue to have an impact in the first quarters of next year.

Agfa-Gevaert’s share price climbed by 2.6% to €3.90 in early trading following the publication of the results this morning but had settled down to €3.75 at the time of writing.

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