Agfa revamp writ large in results
10 Mar 2023 09:24

Agfa has pushed back completion of the sale of its Offset Solutions business by a week, as the group reported on a “transformative year” with the consequences writ large in its accounts.

he complex separation of the Offset Solutions wing – currently Agfa’s biggest business unit – had been slated to complete in Q1. This has now shifted to the first week of April. 

Agfa CFO Dirk De Man said the business had still not met the criterion to be classed as an asset held for sale, due to complexities around the carve-out in the USA and Canada. 

He said the “large accounting impacts” of the disposal included a year-end impairment of non-current assets of €41m (£36.5m), impairment of deferred tax assets of €13m, and then at the end of Q1 the full remaining impairment of €45m-€60m will be made, although some of that will be offset by cash balance adjustments when the transaction eventually concludes. 

For calendar year 2022 Offset Solutions posted sales up 4.2% to €779m, with a big turnaround in profitability despite soft trading and destocking, particularly in Europe, during Q4.

Adjusted EBITDA almost tripled, rising from €12.4m to €35.7m. 

Agfa CEO Pascal Juéry praised the turnaround and said the Offset Solutions team had been “very resolute in their price increase policy.”

The €92m sale to Aurelius was announced just over six months ago

Agfa will also continue to supply a number of consumables to the Offset business in the future.

Profitability at Agfa’s three remaining core business divisions: Digital Print & Chemicals (DP&C), Radiology Solutions, and Healthcare IT, went backwards due to a range of inflationary and market factors, with DP&C the worst affected. 

EBITDA fell by 83.1% to €3.2m on sales up nearly 13% at €372m at the unit, which includes Agfa’s inkjet products. 

Juéry said: “DP&C is probably the business that suffered the most, especially in the second half of the year. 

“The good news is overall, the business itself and the demand is going quite well, except in some areas where we are exposed to China and specific markets.

“We have not been able to increase prices fast enough to face the very strong cost inflation. All price increases are now in place,” he stated, pointing to price increases of 10%-30% being implemented in Q1 “across virtually all product ranges in DP&C”.

Streamlining and restructuring at DP&C will result in about 50 full-time equivalent roles going. 

Juéry also said that the division, which includes the Zirfon membranes business, had higher costs than expected. 

“We also made the conscious choice to start selling Inca machines only with our inks, meaning we did not sell any Inca machines during Q4 and the first ones will happen in Q1 – with our inks. 

“The reason is we are looking for the full solution with Inca.”

Agfa completed the acquisition of Inca in June 2022.

De Man said that negative cashflow of €127m for the year included a “€48m cash out” for the Inca purchase price and a €10m dividend to Chinese joint venture partner Lucky HuaGuang Graphics related to the Offset Solutions sale.

“We are going to see already in Q1 a very material improvement in DP&C from all these actions.”

Some 40% of DP&C’s global headcount is in Belgium, where salary indexation is “impacting us very much” in terms of inflationary costs. 

Agfa’s overall results were impacted by the protracted lockdown in China, inflation, and one-off costs due to the reshaping of the business. Group sales rose by 5.% to nearly €1.86bn. Adjusted EBITDA fell by 9.2% to €94m, and the bottom line net loss ballooned to €223m due to the “heavy transformation efforts” and restructuring costs (2021 net loss: €14m). 

Agfa’s share price slumped to a new 52-week low of €2.62 on the results announcement (52-week high: €4.16).

However, Juéry said he was confident about the outlook for the reshaped group. 

“We have a very clear, precise plan. 2022 was about strategy delivery, 2023 is about the execution of our programme. 

“Recovery in profitability is expected. And I remain a firm believer in the strategy that we are pursuing and the growth engines we are promoting are the right ones – it’s been confirmed even in this difficult business environment.”

Prepared on the basis of information from Print Week