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In the second quarter, Agfa-Gevaert recorded 397 million euros in revenue. Excluding the sale of part of its healthcare IT business, this constitutes a 20 percent decrease year-over-year. Gross profit dropped 24 percent to 120 million euros, but thanks to the divestment, the net result came in at 668 million. According to the Mortsel-based imaging specialist, 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 its top line.
Still, the Imaging IT business substantially improved its profitability, while the Radiology Solutions division showed overall margin resilience. The Covid-19 impact on the profitability of the printing activities was mitigated by cost containment measures. “The pandemic continued to affect our results and the way we operate,” comments Agfa CEO Pascal Juéry. “We continue to rigorously control our working capital levels, capital expenditure and costs to mitigate as much as possible the impact 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.”
The healthcare IT sale successfully closed in May, at an enterprise value of 975 million euros, resulting in a significant excess cash position. Around 350 million will be used to increase the funding ratio of the funded pension plans in Belgium, the UK and the US, as well as to implement de-risking actions. Given the uncertainty of the current economic context, at this point in time, Agfa 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 Covid-19 pandemic continues to cause a lot of uncertainty in the group’s industries. Mainly in the printing industry, a significant impact is still to be expected in the coming quarters. In Q3, the activity level is believed to grow gradually, but the pace of recovery will remain very subdued. Furthermore, margins will be impacted by increased idle time at production facilities and the fact that the company will benefit less from government measures – including temporary unemployment schemes – than in the previous quarters. Following a weak third quarter, Agfa expects to see more momentum in the fourth quarter.