Agfa-Gevaert reports first quarter results

Continuing the efforts of last year, Agfa-Gevaert further reduced its Selling and General Administration costs in the first months of 2009. The SG&A monthly run-rate was brought down from 54 million Euro in 2008 to 48 million Euro in the first quarter of 2009. Compared to the first quarter of 2008, these costs decreased by 22 million Euro. The SG&A expenses represented 21.8 percent of sales. The Group has taken a number of additional measures to further lower its costs in all business groups.

The Group’s recurring EBITDA (the sum of Graphics, HealthCare, Specialty Products and the unallocated portion) decreased from 71 million Euro in the first quarter of 2008 to 55 million Euro. Recurring EBIT decreased from 40 million Euro to 28 million Euro. An adjustment to the benefit plans in the United States more than offset the normal restructuring and non-recurring items, resulting in an income of 9 million Euro, versus an expense of 5 million Euro in the first quarter of 2008.

The non-operating result was more negative than in 2008 due to a special pension charge (mainly concerning inactives), as mentioned during the fourth quarter 2008 communication. The non-operating result amounted to minus 30 million Euro.The Group’s tax costs were higher than in 2008, mainly because of deferred tax charges. The net result amounted to minus 9 million Euro, compared to 10 million Euro in the first quarter of 2008.

As expected, Agfa Graphics was severely hit by the impact of the global economic crisis on the printing industry. The impact was particularly strong in the field of investment goods, as printers are postponing their investments in equipment, both in prepress and in industrial inkjet. Furthermore, the slowdown in the advertising markets resulted in a lower use of consumables, such as graphic film and printing plates. In countries where the crisis has the strongest impact on the printing markets, the competitive pressure also increased. As a result, Agfa Graphics’ sales decreased 16.7 percent to 315 million Euro.

The decline of the volumes affected manufacturing efficiency, which weighed on Agfa Graphics’ margins. While the US dollar strengthened compared to the first quarter of 2008, most other currencies significantly weakened versus the Euro. Taking into account Agfa Graphics’ limited local cost basis in the countries involved, this leads to an overall adverse currency effect. Continuing the efforts of the past quarters, Agfa Graphics further reduced its Selling and General Administration costs. These costs were 13 million Euro lower than in the first quarter of 2008. Recurring EBITDA decreased to 13.5 million Euro (or 4.3 percent of sales) and recurring EBIT decreased to 1.2 million Euro (or 0.4 percent of sales).

In prepress, Agfa Graphics improved its competitive position in the North American markets, in spite of the weak economic conditions. The business group signed an agreement with Focus Pre-Press Systems to distribute its leading printing plate solutions in British Columbia, Canada. Focus Pre-Press will also distribute Agfa Graphics’ press room supplies. Also, The Union (Grass Valley, CA USA) became the first newspaper in North America to install the new :Advantage N-SL computer-to-plate system. This system is designed to meet the needs of the small and mid-size newspaper segments.

Agfa Graphics’ chemistry-free :Azura printing plates are becoming more and more popular around the world. Recently, important steps were taken in Latin America and Japan, where the important printing group Nichidai Printing signed a contract for the installation of two :Avalon N platesetters and the delivery of :Azura printing plates.

In the industrial inkjet segment, the :Anapurna large-format systems are still selling well, in spite of the economic conditions. The :Dotrix and :M-Press machines are also acknowledged as leading technologies in their respective segments, but printers are postponing their investments in high-end equipment. In June, the European Digital Press Association granted Agfa Graphics’ :Anapurna Mv the ‘Best Flatbed Printer Entry Level of the Year 2009′ award.

In New Zealand, Agfa Graphics signed an agreement with Aarque Graphics NZ, which will distribute Agfa Graphics’ :Anapurna range of large-format inkjet printers throughout the country. Agfa Graphics’ industrial inkjet range was also at the center of interest at the Graphispag trade fair, held in Barcelona. The business group sold a number of :Anapurna Mv systems and both the high-speed inkjet press :Dotrix and the industrial flatbed press :M-Press generated a number of promising leads.

Also in digital printing, Agfa Graphics signed an agreement with Canon in the United Kingdom. The strategic alliance will allow Agfa Graphics to offer Canon’s range of imagePRESS digital color presses to its commercial print customers. Agfa Graphics will market the presses alongside its own inkjet solutions, prepress systems and workflow software.

In the first quarter of 2009, the demand in Agfa-Gevaert’s markets stabilized compared to the end of 2008. Early trends in the second quarter show no further market decline. At this moment, it is still too early to predict when the markets will pick up and when demand will recover to normal levelsl. Meanwhile, Agfa-Gevaert is taking additional measures to adapt the cost structures of its business groups to the situation in their respective markets. The Group is also taking action to further reduce net debt, using – among other things – newly available guarantee schemes.