Agfa-Gevaert Group has announced its Q2 2020 financial results, reporting an adjusted EBITDA of €31 million (7.9 per cent of revenue), down from the €48 million (9.7 per cent of revenue) in the second quarter of 2019.
Its adjusted EBIT reached €16 million (3.9 per cent of revenue), versus €29 million (5.8 per cent of revenue) in the previous corresponding period.
According to the company, the COVID-19 pandemic, issues in the offset printing industry, and the refocus on higher margin activities in several business areas resulted in this “strong impact” on its top line.
Within the company’s offset division, revenue decreased by 25.1 per cent from Q2 2019 to €155 million.
“As expected, the COVID-19 pandemic had a very strong impact in the second quarter on top of the structural decline of the offset markets. The pandemic causes a decrease in advertising and commercial activities, leading to lower print volumes and a lower demand for printing plates,” the company said.
The offset solutions division’s gross profit margin decreased from 25.4 per cent of revenue in the second quarter of 2019 to 18.2 per cent. Adjusted EBITDA amounted to a loss of €2.8 million, versus a profit of €11.3 million Euro in the second quarter of 2019.
Its adjusted EBIT amounted to a loss of €7.6 million, compared to a profit of €3.8 million Euro in the second quarter of 2019.
To improve profitability and to address the significant decline in market demand, Agfa said is reviewing its offset business model, simplifying its organisation and streamlining its product offering.
The company also said the current pricing levels in the industry are not sustainable. It is looking into ways to adapt the earning model for certain services it provides to its customers.
Furthermore, Agfa mentioned that it is reorganising its printing plate manufacturing capacity.
In June, the company announced its intention to close its printing plate factories in Pont-à-Marcq (France) and Leeds (UK). The closure would be implemented at the end of the prevailing information and consultation procedures in both countries.
Within its digital print and chemicals division, the division’s gross profit margin amounted to 26.2 per cent of revenue, versus 31.3 per cent in the second quarter of 2019.
“The fade-out of the effects of the strategic alliance for UV digital packaging inks with Siegwerk Druckfarben had a 1.3 million Euro impact on the division’s results,” the company said.
“Together with COVID-19 related effects, this resulted in a decrease of the division’s adjusted EBITDA from €12.5 million in the second quarter of 2019 to €3.6 million. Adjusted EBIT amounted to €1.0 million versus €9.6 million Euro.
“In the field of digital print, COVID-19 heavily impacted the large-format printing equipment business in the second quarter. The market came almost to a standstill towards the end of the first quarter, as many companies have become reluctant to invest in new printing machines.
“However, Agfa is preparing various new product releases in order to be ready for the post-COVID market rebound.”
The company added that as ink sales continue to grow sequentially, it has commercially launched solutions for new digital printing applications, such as laminate floorings and leather. Solutions for other new applications (e.g. in the field of packaging) are being developed.
In this view, Agfa has invested in a new manufacturing plant for water-based inkjet inks.
“The COVID-19 pandemic continues to cause a lot of uncertainty in the Agfa-Gevaert Group’s industries. Mainly in the printing industry, a significant COVID-19 impact is still to be expected in the coming quarters,” the company said.
“Following a weak third quarter, the Agfa-Gevaert Group expects to see more momentum in the fourth quarter, on the assumption that the current business environment will not deteriorate again. Today’s situation does not allow the group to assess a quantified impact of the COVID-19 pandemic on its 2020 financial performance and to provide a full year outlook for 2020.”
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