Agfa-Gevaert recently releases its Q2 financial report. The numbers clearly reflect the negative effects of pandemic. The sales were down to 397 million Euros which comparing to 2019 show more than 20% drop. Gross profit also decreases to 120 million Euros which represents even a bigger decline of 24% comparing to 2019. However, there are also some positive results as well. According to Agfa Imaging IT business’ profitability is very robust.
“The COVID-19 pandemic continued to impact our results and the way we operate. I am very proud of our teams who are going out of their way to continue supplying and supporting our customers in these tough conditions. An excellent example is the delivery of a comprehensive Enterprise Imaging solution to the leading AdventHealth care organization in Florida. In spite of all COVID-19 challenges, our teams made sure the solution could go live as planned.
We continue to rigorously control our working capital levels, capital expenditure, and costs to mitigate as much as possible the impact of the pandemic on our cash flow and bottom-line result. The restructuring of the offset business has started with the announcement of the project to reduce our European manufacturing footprint.
I also want to re-affirm our confidence that our COVID-19 resilient healthcare businesses are well positioned for future growth and that our digital printing and chemical businesses have a strong innovation-led growth potential, while they are today deeply impacted by the pandemic,” said Pascal Juéry, President and CEO of the Agfa-Gevaert Group.
Use of the proceeds of the sale of part of the HealthCare IT activities
Around 350 million Euro of the proceeds of the sale will be used to increase the funding ratio of the funded pension plans in Belgium, the UK and the USA as well as to implement de-risking actions. This will significantly decrease the future pension cash-outs and accounting volatility. Given the uncertainty of the current economic context, at this point in time the Agfa-Gevaert Group chooses to use the rest of the proceeds of the sale to secure the future of the company and to further execute the strategies of its divisions.
The sale of part of Agfa HealthCare’s IT activities was successfully concluded in May. Excluding the effects of this sale, the Agfa-Gevaert Group’s revenue decreased by 20.2%. The COVID-19 pandemic, the issues in the offset printing industry and the refocus on higher margin activities in several business areas had a strong impact on the Group’s top line.
The Group’s gross profit margin amounted to 30.2% of revenue, versus 31.8% in the second quarter of 2019. The gross profit margin improvements of the HealthCare IT and Radiology Solutions divisions were counterbalanced by the COVID-19 impact on the printing industry.
Selling and General Administration expenses were reduced by 20.7% versus last year through the ongoing broad cost containment program.
R&D expenses decreased from 24 million Euro in the second quarter of 2019 to 21 million Euro.
Adjusted EBITDA decreased from 48 million Euro (9.7% of revenue) in the second quarter of 2019 to 31 million Euro (7.9% of revenue). Adjusted EBIT reached 16 million Euro (3.9% of revenue), versus 29 million Euro (5.8% of revenue) in the second quarter of 2019.
Mainly due to the intended closure of the printing plate factories in Leeds and Pont-à-Marcq, restructuring and non-recurring items resulted in an expense of 47 million Euro, versus an expense of 10 million Euro in the second quarter of 2019.
The net finance costs amounted to 9 million Euro.
Income tax expenses amounted to 5 million Euro, versus 3 million Euro in the second quarter of 2019.
Including the proceeds of the sale of part of the HealthCare IT activities, the Agfa-Gevaert Group posted a net profit of 668 million Euro.
Outlook
The COVID-19 pandemic continues to cause a lot of uncertainty in the Agfa-Gevaert Group’s industries. Mainly in the printing industry, a significant COVID-19 impact is still to be expected in the coming quarters.
In the third quarter, the activity level is expected to grow gradually, but the pace of recovery is expected to remain very subdued. Furthermore, margins will be impacted by increased idle time at production facilities and the fact that the Group will benefit less from government measures – including temporary unemployment schemes – than in the previous quarters.
Following a weak third quarter, the Agfa-Gevaert Group expects to see more momentum in the fourth quarter, on the assumption that the current business environment will not deteriorate again.
