AGFA results Q2 2023

Agfa has released results for the second quarter of 2023.  

Highlights

• HealthCare IT:
  • Increase in order intake of 11%, revenue increase of 8%
  • Quarter-on-quarter profitability improvement, but service margins under pressure due to cost inflation
• Digital Print & Chemicals:
  • Good performance of the ZIRFON and Digital Print growth engines
  • Profitability improvements for ZIRFON and Digital Print offset by weakness in the electronics industry, especially in China and manufacturing inefficiencies for industrial film
• Radiology Solutions:
• Medical film: continuing margin pressure in China and geopolitical impact
• Direct Radiography: continuing positive trend in profitability

• Profitability impacted by adverse currency effects
• Adjusted EBITDA at 13 million Euro
• Net result at minus 14 million Euro

“Whereas the macroeconomic and geopolitical conditions remained tough for several of our traditional activities, we booked significant revenue growth for our growth engines in HealthCare IT and Digital Print. In terms of new business creation, we are on track with the development of the SpeedSet 1060 single-pass packaging printer. When introduced to the market in 2024, it will be the fastest printer in its category. Furthermore, as more and more large green hydrogen projects are being implemented, sales for our industry-leading ZIRFON membranes are growing exponentially. Meanwhile, we are making good progress with our project to build a new industrial unit for ZIRFON membranes at our Mortsel site in Belgium. I am very pleased that this project has been selected for a EU Innovation Fund Grant. The new plant will allow us to meet future customer demand and to be a key player in the clean energy transition,” says Pascal Juéry, President and CEO of the Agfa-Gevaert Group.

Reporting post Offset Solutions

The recent sale of the Offset Solutions division (now rebranded to ECO3) influences the way the Agfa-Gevaert Group reports its results. The numbers from sales to EBITDA present the Agfa-Gevaert Group with Offset Solutions excluded, but with a new division called ‘Contractor Operations & Services former Offset’ or ‘CONOPS’. CONOPS represents the supply of film and chemicals as well as a set of support services delivered by Agfa to the external party ECO3. The turnover represents the supply agreements, with corresponding COGS charges. The income related to the support services will be accounted for as Other Income, while the costs related to those support services are represented in the different SG&A lines. The comparative period Q2 ‘22 has been re-presented accordingly. As per IFRS 5, stranded costs related to Offset Solutions have been treated differently in 2023 vs 2022. In Q2 ‘22 stranded costs are reported under CONOPS. In Q2 ‘23 these are absorbed by the 3 business divisions.

Second quarter

• The Agfa-Gevaert Group’s revenue was stable versus the second quarter of 2022. All growth engines posted revenue growth. The Digital Print & Chemicals division benefited from price increases and strong demand for inks and for ZIRFON membranes for green hydrogen production.
• The Group’s gross profit margin decreased slightly to 30.2%, mainly due to cost inflation, adverse currency effects, manufacturing inefficiencies, lower service margins in HealthCare IT, mix effects and the weakness in the industrial film markets.
• Adjusted EBITDA decreased from 17 million Euro to 13 million Euro (4.7% of revenue).
• Restructuring and non-recurring items resulted in a charge of 10 million Euro versus 12 million Euro in Q2 2022.
• The net finance costs amounted to 6 million Euro.
• Income tax expenses increased to 4 million Euro versus 2 million Euro in Q2 2022.
• The Agfa-Gevaert Group posted a net loss of 14 million Euro.

 Financial position and cash flow

• Net financial debt (including IFRS 16) evolved from a net cash position of 24 million Euro at the end of Q1 2023 to a net debt position of 33 million Euro.
• Trade working capital (CONOPS excluded) evolved from 36% of turnover at the end of Q2 2022 to 32% in Q2 2023. In absolute numbers, trade working capital evolved from 370 million Euro at the end of Q2 2022 to 354 million Euro.
• In Q2 2023, the Group generated a free cash flow of minus 45 million Euro.

Digital Print & Chemicals 

(*) before restructuring and non-recurring items

Second quarter

• In the field of digital print, the top line of the sign & display business continued to grow, based on the good performance of the ink product ranges for sign & display applications, as well as the Inca Digital Printers acquisition. Agfa already sold several Onset printers using Agfa inks and the development of the SpeedSet 1060 single-pass packaging printer is proceeding as planned. The market introduction of this digital press with water based inks – which will be the fastest printer in its category at 11,000 B1 sized carton boards per hour – will happen as planned in 2024, with a customer unveiling later this year. In Q2, Agfa also announced the launch of new ink sets for its Onset inkjet printers. These inks boast an excellent sustainability footprint, high quality and performance while minimizing ink usage.
• In the field of industrial inkjet, Agfa sold a second InterioJet water-based inkjet printing press to décor paper printing company Chiyoda, in spite of the weak investment climate in that sector.
• In Q2, sales figures for the ZIRFON membranes for advanced alkaline electrolysis continued to grow strongly. Although important productivity progress is being made, this business is not yet contributing to the results of the division. Over 100 active customers are now using ZIRFON membranes, thus confirming ZIRFON’s status as the most efficient technology for hydrogen production via alkaline electrolysis. Several large customers are now starting to build commercial electrolyzers, which allows Agfa to generate recurring ZIRFON sales.
  Agfa’s project to build a new industrial unit for ZIRFON membranes at its Mortsel site in Belgium has been selected for an EU Innovation Fund Grant. The next important step for all selected projects is grant agreement preparation. The new plant will allow the Group to meet the booming customer demand.
• The weakness in the electronics industry continued to impact volumes of the Orgacon conductive materials and the products for the production of printed circuit boards.
• Price increase actions are implemented in most segments to mitigate cost inflation impacts. However, manufacturing inefficiencies, adverse currency effects and the weakness in the electronics industry negatively impacted the gross profit margin, which decreased from 26.2% of revenue in Q2 2022 to 24.1%.