During the fourth quarter, Agfa-Gevaert succeeded in substantially reducing its working capital and net financial debt. Sales amounted to Euro 864m. Recurring EBIT was Euro 59m and the net loss amounted to Euro 27m.
Compared to the fourth quarter of 2006, the costs for aluminum - used exclusively in Graphics for the production of printing plates - were again Euro 8m higher.The price of silver - used in all business groups - remained at very high levels.
Since Agfa-Gevaert announced its savings plan in August 2006, a net reduction of the Group's work force by approximately 1100 full time equivalents to approximately 13,400 employees was recorded.
The Group succeeded in bringing down sales and general administration costs by 9.6 per cent to 22.8 per cent of sales for the quarter and further reductions are planned.
R&D expenses remained stable at Euro 50m, the main focus continuing to be on industrial inkjet printing in Graphics and software solutions in HealthCare.
The Group’s recurring EBITDA (the sum of Graphics, HealthCare, SpecialtyProducts and the unallocated segment) amounted to Eur 92m, versus Eur 117m in the fourth quarter of 2006. Recurring EBIT decreased 26.3 per cent from Eur 80m to Eur 59m.
Restructuring costs and non-recurring items amounted to Eur 33m, versus Eur 122m in 2006. The non-operating result was minus Eur 18m and a net loss of Eur 27m was recorded.
Graphics' sales amounted to Eur 416m, a decrease of 2.8 per cent in local currency (6.3 per cent including currency effects). Sales were impacted by the strong Euro, the economic slowdown in the USA and the accelerated decline in the analog computer-to-film segment.
The recurring EBITDA margin amounted to 7.1 per cent of sales and the recurring EBIT margin decreased from 4.0 per cent of sales to 3.5 per cent.
Graphics significantly lowered its working capital, which negatively affected the EBIT margin in the short term, but enabled the business group to generate substantial cash during the quarter.
The prepress segment performed well and succeeded in keeping its EBIT margin stable at approximately 7 per cent, in spite of Eur 8m higher aluminum costs and the impact of the inventory reduction programme. The strict implementation of the savings plan and the shift from analog technology to more profitable digital computer-to-plate systems explain these favorable results.
On the other hand, the industrial inkjet segment continued to face high start-up losses, as the R&D efforts were intensified to finalise the development of the 1st generation of products.
At Ifra, the trade event for news publishers held in Vienna during October, Agfa Graphics demonstrated the next generation of its violet photopolymer printingplate technology. The :N92v printing plate for newspaper and commercial printing applications succeeds the market-leading :N91v plate, with improved run length and higher quality.
Also at Ifra, Agfa Graphics demonstrated the latest version of its workflow system for newspaper production, :Arkitex 6.0, as well as the new tool:Arkitex Portal, which provides a single screen overview of the entire newspaper workflow.
Axel Springer AG, Germany's largest newspaper publishing company, decided to use Agfa Graphics' screening technology :Sublima across all its printing sites in Germany. The software is designed to substantially improve print quality without any additional efforts.
In Thailand, The Post Publishing Public Company installed two :Polaris Computer-to-Plate systems and :Sublima technology. The company publishes The Bangkok Post, the largest circulating English newspaper in Thailand, and the Thai-language The Post Today.
In the commercial printing market segment, Agfa Graphics signed a partnership with Technique Group, which allows Agfa to combine its :Delano project management system and :ApogeeX workflow software range with Technique'sinformation system. The integrated solution offers customers complete job automation and control, from job creation to delivery of the final project.
In November, Agfa Graphics announced the installation of the 1000th :ApogeeXworkflow system in North America.
In industrial inkjet, sign printer Sign-A-Rama in Escondido, California purchased an :Anapurna XL², the flagship of the wide-format range. The company is part of the Sign-A-Rama franchise, which has 600 stores in 25 countries including Australia.
Outlook
The Agfa-Gevaert Group will continue to focus on cash generation and on improving the operational performance of its businesses. Taking into account the current economic climate, Agfa-Gevaert expects stable sales in 2008 (at constant exchange rates), with digital and IT solutions offsetting the market-driven decline of the traditional products.
The Group's profitability will however again be affected bythe raw material costs, should these remain at the same high levels as recorded in the first months of the year.
Agfa Graphics expects stable prepress sales (at constant exchange rates) in 2008, as the growth in digital printing plates should offset the decline in analog prepress.
By strictly implementing the cost saving measures, Graphics aims to offset the
further rising raw material costs.
After the extensive improvement and testing programmes of the last months, the technical problems in the inkjet segment have been overcome and the first generation inkjet product portfolio is now ready for market introduction.
The target is to reach a market share of 10 per cent in 2010 in the relevant industrial inkjet market.
The Group says it is taking adequate measures to reduce its losses and reach break even in the course of 2009.
Faced with continued challenging market conditions, Agfa says its first priority is the operational improvement of the businesses. Whilst confirming its commitment to a phased demerger, the Agfa-Gevaert board says it will continue to examine all strategic options in the course of 2008.
