Agfa-Gevaert announces preliminary Q3 figures

Agfa-Gevaert today announced preliminary figures for the third quarter. During this period, several internal and external factors had a considerable negative impact on the Group’s results. Although the Group succeeded in substantially lowering its sales and general administration costs, profitability was affected by continuous high raw material costs (plus 17 million Euro compared to Q3 2006) and the further depreciation of the US dollar which weakened the Group’s competitiveness, especially in HealthCare. In addition, there was a delay in the roll-out of Graphics’ industrial inkjet systems.

In the third quarter, Agfa Graphics’ sales remained stable compared to last year, contrary to the decline during the first half of 2007 which resulted from the 2006 price increases and the discontinuation of some unprofitable analog business. Sales amounted to 400 million Euro, a slight increase in local currency. Despite the negative impact of high aluminum and silver costs, the profitability of the prepress segment (EBIT margin of approx. 7 percent) has slightly improved due to the implementation of the cost savings plan.

On the other hand, the market introduction of Agfa Graphics’ industrial inkjet portfolio is taking more time than foreseen. Due to this delay, and taking into account the drupa fair in June 2008, Agfa expects the inkjet segment to be profitable in 2009.

Taking into account all these elements, the recurring EBIT of Graphics for the third quarter will be in the range of 12 to 15 million Euro. Sales and profitability of the fourth quarter are expected to be in line with the fourth quarter of last year.

Sales of Agfa HealthCare amounted to 319 million Euro in the third quarter, a decline of 6 percent compared to last year or 3 percent at stable exchange rates. The main reasons for the decline were the strength of the Euro with an additional effect on price erosion and the decline in medical film sales in some regions due to unexpected high stock levels at dealers. Recurring EBIT was affected by the weaker sales, negative mix and currency effects and higher silver costs. In addition, one-off effects for a total of 7 million Euro, were booked during the quarter. As a result, recurring EBIT for the third quarter will be in the range of 5 to 8 million Euro.

After the unsatisfactory results of the second quarter, several measures were taken to improve HealthCare’s operational performance.

• The HealthCare management has been changed and reinforced. The former HealthCare President left the company and the search for his replacement is ongoing. Carl Verstraelen has already joined the business group as Vice President Finance and Controlling in September.
• The business group is in the process of being reorganized in order to increase the accountability and responsibility of the business units.
• The portfolio of trade receivables was fully analyzed. During the fourth quarter, the focus will be on reducing overdues, e.g. by centralizing the collection of receivables.
• The first beneficial effects of the stricter discipline related to the costs savings program were realized. As a result, SG&A costs decreased by 9 percent in the third quarter, compared to a decrease by 4 percent in the first 6 months. Additional effects from these savings will be seen in the next few quarters.

Regarding the international roll-out of ORBIS and in order to speed up the profitability, it was decided to harvest in 2008 on the investments already made. This will allow the Group to better align the necessary investments related to the roll-out with the expected revenue stream.

Taking into account the traditionally higher sales in the fourth quarter and the additional impact from cost savings, Agfa HealthCare is expected to restore its EBIT margin to a level above 10 percent in the fourth quarter 2007.

Agfa Specialty Products posted solid third quarter sales of 69 million Euro, an increase of 17 percent compared to last year. Its profitability is affected by higher silver costs and negative mix effects. The recurring EBIT of Specialty Products for the third quarter will therefore be in the range of 6 to 8 million Euro. For the full year 2007, Specialty Products is expected to be in line with its target margins of 12 to 15 percent.

For the full year 2007, the Group expects sales in line with last year at stable exchange rates and a recurring EBIT margin of approximately 6 percent.

Agfa-Gevaert will present its full third quarter results as planned on October 31, 2007.