AGFA posts  €223 million loss

Snapshot:

• Adjusted EBITDA decrease of 9% versus 2021 due to continuing cost inflation, lockdowns in China and softer demand in non-healthcare markets
• HealthCare IT: momentum created
  • Significant improvement in order intake, both in terms of volume and in terms of quality, resulting in top-line growth and stabilisation of recurring revenue
  • Conversion of sales growth in EBITDA delayed by post-COVID reinvestments in R&D and commercial efforts
• Digital Print & Chemicals: overall revenue growth – profitability strongly impacted by cost inflation and one-offs
  • Profitability impacted by lagging price increase impact, industrial inefficiencies, cost inflation and investments in the future
  • Inca acquisition creates new growth opportunities
  • Zirfon membranes for green hydrogen production take off
• Radiology Solutions: profitability suffered from margin and volume pressure in China
  • Medical film impacted by lockdowns in China and the geopolitical situation
  • Direct Radiography: growth and streamlining of operations
• Offset Solutions: turnaround established and sale to Aurelius Group on track
  • Successful pricing and restructuring actions, but demand weakness in H2
  • Sale to Aurelius Group on track – targeted closing in the first week of April 2023
• Net loss of 223 million Euro mainly impacted by non-cash impairment charges
  • Significant impairments in Radiology Solutions and Offset Solutions impacted restructuring/non-recurring items
  • Additional tax expenses related to the Offset Solutions carve-out and the above-mentioned impairments
• Strong decrease in net pension liability (material countries): the positive impact of 177 million Euro versus the end of 2021

“2022 has been a year of unprecedented economic and geopolitical instability. Cost inflation, supply chain disruptions and COVID lockdowns in China impacted our activities. Especially in these turbulent times, we continued to execute our strategic agenda. Given the expected strong increase in demand, the Board of Directors validated an investment in a new production facility for our Zirfon green hydrogen membranes in our Belgian site in Mortsel. We finalised the acquisition of Inca Digital Printers, which strengthens our position in high-speed digital printing and speeds up our entry into digital packaging printing. In HealthCare IT, we stepped up investments in R&D and commercial resources, and we established a new management team focusing on the core North American markets. The sale of our Offset Solutions division to Aurelius Group, which is expected to close early April, should enable us to increase the focus on our growth businesses. In our efforts to build a simple, agile and future-oriented organisational model, we reorganised our internal financial services and partnered with Atos for our internal IT operations. Our 2023 priorities are the implementation of further price increases across our businesses, the reduction of costs related to our operating model initiatives, and to deliver growth in HealthCare IT, Zirfon and digital printing,” said Pascal Juéry, President and CEO of the Agfa-Gevaert Group.

Full-year results

The HealthCare IT and Digital Print & Chemicals divisions posted sales growth, excluding currency impact. Mainly due to price increases, Offset Solutions’ top line remained stable, and Radiology Solutions’ medical film business was heavily impacted by the COVID lockdowns in China.

The Group’s gross profit margin remained stable at 28.5% of revenue, mainly due to price increase actions to tackle the strong impact of cost inflation and supply chain issues.

Adjusted EBITDA was influenced by inflationary pressure, disrupted supply chains and industrial inefficiencies in Q4.

On top of heavy transformation efforts, impairments in Radiology Solutions (73 million Euro) and Offset Solutions (41 million Euro) strongly impacted restructuring and non-recurring items, resulting in a charge of 192 million Euro versus 33 million Euro in 2021.

The net finance costs amounted to 19 million Euro.

Income tax expenses increased to 42 million Euro versus 15 million Euro in 2021, primarily driven by additional tax expenses related to the Offset Solutions carve-out and the impairment of deferred tax assets related to the performance of Radiology Solutions and the Offset Solutions transaction.

The Agfa-Gevaert Group posted a net loss of 223 million Euro.

Fourth quarter

The HealthCare IT division continued to post strong sales figures, whereas the Offset Solutions division and several activities of the Digital Print & Chemicals division continued to feel the impact of the weaker economic conditions. In the Radiology Solutions division, the medical film business started to recover from the impact of the COVID lockdowns in China.

Although impacted by manufacturing inefficiencies and cost inflation, the Group’s gross profit margin improved to 27.5% of revenue thanks to all pricing actions.

Financial position and cash flow

Net financial debt (including IFRS 16) evolved from a net cash position of 325 million Euro at the end of 2021 to a net cash position of 72 million Euro, as it was partially impacted by the Inca acquisition and the share buy-back program.

Although the Group was able to reduce trade working capital from 31% of turnover in Q3 2022 to 28% in Q4, this is still an increase versus the end of 2021 (26%). In absolute numbers, trade working capital evolved from 449 million Euro at the end of 2021 to 523 million Euro, including an effect of Inca at year-end (19 million Euro).

In the full year 2022, the Group used a free cash flow of 127 million Euro. In the fourth quarter, the free cash flow amounted to minus 2 million Euro.

After a first pension buy-in transaction for the UK pension plan in 2021, an additional buy-in transaction has taken place, which leads to a full de-risking of the UK pension plan without additional cash contributions.

A strong decrease in net pension liability (material countries) was recorded: positive impact of 177 million Euro versus the end of 2021.