Reading time ( words)
Agfa-Gevaert has reported a net profit of €15 million for the second quarter of 2021. All divisions performed markedly better than in the first three months of the year, as activities are recovering from the impact of the pandemic.
“With the price increase programs that we implemented where possible across our divisions, we were able to partially offset the increased inflationary pressure,” said Pascal Juéry, President and CEO of the Agfa-Gevaert Group. “However, for some activities, price actions are delayed through contract mechanisms. In the coming months, price management will be continued and even intensified, as we expect an even stronger impact of the hike in raw material costs in the second half of the year. We will also continue our disciplined working capital management and our broad cost reduction program. In the course of the second quarter, we successfully completed our extensive pension de-risking program.”
Despite negative currency effects, all divisions improved quarter over quarter and most divisions substantially improved their top line compared to the COVID impacted second quarter of 2020. Partly due to successful price increases for medical film and increasing Direct Radiography sales, the Radiology Solutions division’s top line increased both versus the second quarter of 2020 and versus the first quarter of 2021. Both the Digital Print & Chemicals division and the Offset Solutions division were also supported by price increase actions and continued to recover from the COVID impact, but are still below the 2019 top line levels. The HealthCare IT division performed according to expectations in the second quarter, beating first quarter revenue and EBITDA. It needs to be noted that the second quarter of the previous year benefited strongly from the revenue and profit recognition of a very large project in North America.
The group’s gross profit margin improved from 30.2% of revenue in the second quarter of 2020 and 29.5% in the first quarter of 2021 to 30.7%.
Selling and General Administration expenses increased by 10% versus the second quarter of 2020, when the Group still benefited from temporary unemployment schemes and other COVID-related government measures. As the Group’s broad cost reduction program continues to bear fruit, Selling and General Administration expenses are about 15% below the level of the second quarter of 2019.
R&D expenses increased from €21 million in the second quarter of 2020 to almost €24 million.
Adjusted EBITDA increased from €31 million (7.9% of revenue) in the second quarter of 2020 and €15 million (3.9% of revenue) in the first quarter of 2021 to €40 million (9.1% of revenue) in the second quarter of 2021. Adjusted EBIT reached €25 million, versus €16 million in the second quarter of 2020 and minus €1 million in the first quarter of 2021.
Restructuring and non-recurring items resulted in an income of €3 million. The Group booked a non-recurring income from the settlement of the Swedish pension plan. On the restructuring side, provisions regarding the restructuring of the Computed Radiography equipment manufacturing capacity in Germany were reassessed and reduced. A restructuring cost was booked for the wind-down of the activities of the printing plate company Ipagsa. In the second quarter of 2020, restructuring and non-recurring items resulted in an expense of €47 million due to costs related to the closure of the printing plate factories in Leeds and Pont-à-Marcq.
The Agfa-Gevaert Group expects business volume growth/recovery in the second half of 2021. In that period, the Group’s adjusted EBITDA is expected to be more heavily impacted by inflationary pressure and by the structural decline in the Offset Solutions division.
Overall, raw material costs are expected to have a stronger impact in the coming quarters. The Agfa-Gevaert Group continues its tight working capital and cost management, as well as its price increase programs to mitigate cost inflation. In some cases, the effects of price actions come with a certain delay due to clauses in contracts with customers.