Agfa profitable but slowed by economy

Third quarter sales amounted to €1.04bn, a decrease of 6.9 per cent compared to the same period of 2002. Excluding exchange rate effects, the decline was limited to a negligible 0.1 per cent indicating that the sluggishness of the world-wide economies is bottoming out. Sales growth of HealthCare was accelerating, while Graphic Systems and Consumer Imaging have posted lower decreases than during the previous quarters.

The Group’s operating result amounted to €71m, against €116.9m in the third quarter of last year. This trend is also explained by higher restructuring charges and non-recurrent expenses which were to a large extent related to Consumer Imaging. Return on sales amounted to 6.8 per cent.

Sales for the Graphic Systems division reached €1.21bn after three quarters in 2003, a decrease of 10.7 per cent compared to the same period in 2002. Excluding exchange rate variations, the decrease is limited to 3.4 per cent and is explained by the ongoing weakness of the graphic markets.

The decrease of the operating result to €84.3m is due to lower sales, adverse currency effects and increased price erosion. Due to improved efficiency and lower operational expenses, the return on sales could increase to seven per cent, compared to 6.7 per cent in the previous year.

Agfa also believes its capacity problems for printing plates are now solved, since the new manufacturing facility in Wuxi, China became operational since October 30, 2003. The plant will supply the fast growing Chinese and Asian markets with digital and analogue printing plates. The full capacity of the plant is 25 million square metres a year for an investment of €50m.

After taking account of financial charges and taxes, a net profit of €35m was posted for the Group, or €0.27 per share.

During the coming months, Agfa expects to finalise its Horizon Plan. At the end of September, 3723 full time employee’s of the total scheduled headcount reduction of 4000 have already left the company and the remaining 300 will do so by early 2004. By reducing Agfa’s costs significantly, the company believes that this plan will allow the group to benefit from an increased leverage when economic circumstances start to improve.

Agfa expects the results of Graphic Systems and HealthCare in the coming months to be in line with those of the rest of the year. However, as the Group currently anticipates a total of €95m as restructuring charges, €46m of which have already been booked, the last quarter’s net result is expected to be only be marginally positive.

For the full year 2003, Agfa expects turnover to reach €4.2bn. As the sale of Non Destructive Testing is expected to close before year-end, the net profit of 2003 should exceed €280m.

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