Agfa Q3 Results Impacted by Strong Currency Effects, Decline of Analog Businesses

MORTSEL, BELGIUM—November 13, 2013—Agfa-Gevaert today announced its third quarter 2013 results. "Our third quarter top line is distorted by the very strong adverse currency impact," said Christian Reinaudo, president and CEO of the Agfa-Gevaert Group. "In addition, analog film revenue was much lower than in the third quarter of last year, when the analog businesses performed exceptionally strong, recovering from a weak period in 2011 and in the first months of 2012. Our future oriented digital and IT products, on the other hand, evolved positively. Agfa Graphics' industrial inkjet business confirmed the crossing of the break-even line, resulting in a slightly positive year-to-date recurring EBIT. Our gross profit margin improved compared to last year's third quarter. Furthermore, the improvement of our operational cash flow and the reduced net debt show the success of our working capital efforts."

Agfa-Gevaert Group—Third Quarter 2013

(*) before restructuring and non-recurring items.

Mainly due to adverse currency effects, the weak investment climate and the decline of the analog businesses, the Group's revenue decreased by 10.1 percent. Excluding currency effects, the decline amounted to 5.9 percent.

The Group's gross profit margin improved from 27.3 percent in the third quarter of 2012 to 27.9 percent. Part of the improvement is attributable to positive raw material effects in the last month of the quarter.

As a percentage of revenue, Selling and General Administration expenses amounted to 18.6 percent.

Continuing the trend of the previous quarter, R&D expenses were substantially lower than in the third quarter of 2012 as a result of the Group's efforts to improve efficiency and to rationalize its product portfolio.

As a percentage of revenue, recurring EBITDA (the sum of Graphics, HealthCare, Specialty Products and the unallocated portion) improved to 6.7 percent. Recurring EBIT remained stable at 3.8 percent.

Restructuring and non-recurring items resulted in an expense of 9 million Euro, versus an expense of 2 million Euro in the third quarter of 2012.

The net finance costs amounted to 17 million Euro, versus 19 million Euro in 2012.

Tax expenses amounted to 6 million Euro.

The Group posted a net result of minus 6 million Euro, versus a restated (according to IAS 19R) net result of 2 million Euro in the third quarter of 2012.

Financial position and cash flow

• At the end of the quarter, total assets were 2,641 million Euro, compared to 2,830 million Euro at the end of 2012.
• Inventories amounted to 597 million Euro (or 102 days). Trade receivables (minus deferred revenue and advanced payments from customers) amounted to 436 million Euro (or 57 days) and trade payables were 230 million Euro, or 39 days.
• Net financial debt amounted to 261 million Euro, versus 291 million Euro at the end of 2012.
• Net cash from operating activities amounted to 42 million Euro.

(*) before restructuring and non-recurring items.

Agfa Graphics' revenue decreased by 12.5 percent to 365 million Euro. On a currency comparable basis, the decline amounted to 8.8 percent. In addition to the adverse currency effects, the top line evolution is largely the result of the tough investment climate, the product portfolio rationalization and the decline of the prepress segment's analog computer-to-film (CtF) business. In the corresponding period of 2012, this business' revenue was exceptionally strong. In digital computer-to-plate (CtP), digital printing plate volumes remained stable. However, the business continued to suffer from competitive pressure.

Despite the top line evolution, the industrial inkjet segment confirmed the crossing of the break-even line, resulting in a slightly positive recurring EBIT year-to-date.

As a result of targeted actions, the business group's gross profit margin improved from 24.0 percent in the third quarter of 2012 to 25.8 percent. In the second quarter of 2013, the gross profit margin amounted to 25.5 percent. As a percentage of revenue, recurring EBITDA and recurring EBIT improved to 6.5 percent and 3.9 percent respectively.

In the field of prepress, the European Digital Press Association (EDP) awarded Agfa Graphics' Apogee StoreFront solution as best Web-to-print solution at the FESPA trade show in London. EDP counts 20 member magazines, covering 23 European countries.

In the third quarter, Agfa Graphics signed several major contracts for comprehensive prepress solutions, often including platesetters, workflow software, service and printing plates. In the United Kingdom, for instance, the DG3 Group signed a contract for an Avalon N8-80XT platesetter and two contract proofing systems, as well as a five-year agreement for services and Azura chemistry-free printing plates. St Joseph's Printing—Canada's largest privately owned printing company—will start using Agfa Graphics' Energy Elite printing plates. Other important prepress contracts were signed with—among other companies—Print&Display (Poland), Jean Bernard (France), Grafiche Tintoretto (Italy), Amcor Cartons (Australia), Singapore Press Holding, and Grupo Reforma (the largest printed media company in Mexico).

Furthermore, Agfa Graphics continued to expand its customer base in the Japanese market for its Azura chemistry free printing plate technology. New contracts were signed with—among other companies—Beniya Offset and Nikkei Inc.

In the field of industrial inkjet, the installed base for Agfa Graphics' Jeti Titan printer range continued to grow. Among the new customers are Costco (USA), Garth West (UK), Metro (Poland), Cogeaf Group (Belgium), Publitecnia (Mexico) and Croma (Chile). The French Caractères Enseigne company ordered a Jeti Titan system with 48 print heads, as well as two Anapurna M3200 printers. Companies often cite the combination of excellent print quality and high production speeds as the main reason for their decision to invest in Agfa Graphics' Jeti Titan solution.

In July, Agfa Graphics announced its plans to close down its analog printing plate factory in Manerbio, Italy. The decision is part of the business group's strategy to rationalize its product portfolio and to improve its operational efficiency and its competitive position in the highly competitive prepress market.

Agfa Specialty Products—Third Quarter 2013

(*) before restructuring and non-recurring items.

Agfa Specialty Products' revenue reached 50 million Euro. The Synaps Synthetic Paper, Orgacon Electronic Materials, Security, printed circuit board and microfilm businesses performed well. Compared to the third quarter in 2012, Specialty Products' recurring EBIT improved to minus 0.5 million Euro and recurring EBITDA to 0.6 million Euro.

Source: Agfa.