Agfa cautious after better than expected start to the year

The glass is half full at Agfa-Gevaert after the first quarter. The image group fears that the full effect of cost inflation can only now be felt. But thanks to the higher interest rates, she can slightly close the gap in the pension fund.

They bore fruit. Revenue in the Mortselse imaging group increased in the first quarter by 7.2 percent to 424 million euros. Gross margin remained stable at 29 percent of sales. Despite inflationary pressures and supply chain problems, operational cash flow (EBITDA) increased from EUR 15 million in the first quarter of 2021 to EUR 19 million.

The biggest surprise is on the bottom line. Analysts had expected a loss of 1 million euros just like in the first quarter of 2021. But Agfa made a net profit of 4 million euros. The restructuring costs amounted to 9 million euros compared to 1 million euros in the first quarter of 2021. This increase is the result of internal transformations, such as the transfer of Agfa’s internal IT activities to a separate company, which resulted in the dismissal of 65 employees.

4 mio

net profit

Analysts had expected a loss of 1 million euros just like in the first quarter of 2021. But Agfa made a net profit of 4 million euros.

Another bright spot: Rising interest rates will lower the book value of pension obligations. It helps to reduce the gap in the pension fund by 100 million euros from 670 to 570 million. CFO Dirk De Man is serious about these calculations, he said in an analyst call. “It is a preliminary projection, but the market requested a limited update.” Normally, Agfa only shares data on the pension fund with the annual result.

Additional price promotions

But there is also less good news. The cash flow amounted to minus 54 million euros. Agfa saw its working capital increased to EUR 507 million, which means that more money left the company than came in. De Man stressed that this negative cash flow is the result of more expensive inventories.

Not only inflation or the doubling of the price of aluminum plays a role, but also the disturbed supply chain. “The demand shock from the corona had a negative impact on our stocks,” says De Man. “We’ve almost worked it out.” Second, shipping delays at sea are a problem, forcing the company to wait longer than usual for components before it can deliver finished products.

The print specialist does not look ahead in numbers and is on guard against the current quarter. The Group expects that the full effect of cost inflation will come in the second quarter. It will also be affected by the precarious geopolitical situation and corona lockdowns in China, “said Agfa. It announces” further price measures “to counter cost inflation.

Weak radiology

The price increases in the first quarter worked particularly well in the Digital Print & Chemicals and Offset Solutions divisions. Only the HealthCare IT leg did not record sales growth, although Agfa is talking about a strong order intake. For example, a first hospital in Norway became a customer.

Agfas fire ben

  • Offset Solutions: printing plates and other solutions for printing companies.
  • Radiology solutions: equipment and software for X-ray departments in hospitals.
  • Digital Print & Chemicals: printers and inks for industrial applications.
  • Healthcare IT: Agfa sold a large part of this division in recent years, mainly IT systems to hospitals, but retained part of the medical imaging business.

In the radiology industry, the signals are conflicting. Compared to the first quarter of 2021, revenue increased by 2.7 percent to 32 million euros. Gross operating profit (EBITDA) decreased by 2.9 percent to 7 million euros. The analyst call pointed out that the first quarter of 2021 was considered weak and exceptional.

Asked whether a difficult first quarter for the radiology business would be a new pattern, Agfa’s CEO Pascal Juéry was unable to answer. ‘It’s hard to explain. That’s how the market works. ‘ Earlier in the call, he stressed that increased prices protected the margins of traditional radiography (on film), except in China.

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