Agfa’s sales in the first quarter of 2003 amounted to 1,027 million Euros. The decrease of 9.7 percent compared to the same period of last year is explained by the sharp currency fluctuations and continuous weak economic conditions, especially in the consumer markets. In spite of these difficult circumstances, Agfa was able to show further progress as its operating margin improved and net profit more than doubled compared to the previous year.
  • Net profit more than doubled
  • Gross profit margin rises to 43.9%
  • Lower turnover due to large currency effect and economic weakness
  • Orion plan launched for top line growth, improved quality and further working capital reduction

Compared to the first quarter of 2002, the Euro appreciated by approximately 25 percent against the dollar which heavily affected turnover. At stable exchange rates, total sales decrease only 1.4 percent, which is explained by the continuous subdued economic and political environment.

Thanks to the beneficial effects of the Horizon Plan, Agfa succeeded to further improve its gross profit margin, which reached 43.9 percent, compared to 43.4 percent in the first quarter of 2002.

Agfa was able to reduce sales and general administrative costs with 9.6 percent as an effect of a lower dollar and Horizon related cost cuttings. 
The elimination of overlap with the previously acquired companies resulted in a reduction of research and development expenses with 6.5 percent. Other operating expenses also decreased, amongst others because of a reduction in restructuring charges and non-recurring items.
The operating result consequently reached 85 million Euros, against 78 million Euros in the same period of the previous year. Return on sales equals 8.3 percent compared to 6.9 percent last year.

The non-operating result remained almost stable at minus 21 million Euros (previous year minus 20 million Euros). Profit before taxes amounted to 64 million Euros, compared to 58 million Euros in the first quarter of 2002 and net profit reached 39 million Euros, more than double the amount of last year, when the tax rate was exceptionally high.

Balance Sheet

Total assets amounted to 4,054 million Euros compared to 4, 574 million Euros in the previous year. This reduction of 520 million Euros is explained by the decrease of the dollar and by Agfa’s efforts to reduce working capital.
At the end of March 2003, inventories amounted to 1,002 million Euros and trade receivables to 922 million Euros, in total 212 million Euros lower than at the end of the first quarter of 2002. 
Shareholders’ equity stood at 1,329 million Euros against 1,291 million Euros in the previous year. Compared to end 2002, this represents a decrease of 54 million Euros, which is mainly explained by the fact that Agfa proceeded to buy back shares for an amount of 91 million Euros during the first quarter.
Earnings per share rose from 12 Eurocents in the first quarter of 2002 to 28 Eurocents, taking account of an average number of outstanding shares of 138,245,491.

Cash Flow

The gross operating cash flow for the quarter reached 98 million Euros, as against 73 million Euros in the corresponding period of 2002. The net operating cash flow, which also takes account of the variations in working capital stands at 89 million Euros (previous year: 61 million Euros).

Business segments

The share of Technical Imaging in the Group’s turnover increased from 39.3 percent to 40.7 percent. Graphic Systems represented 40.6 percent of total sales, almost stable compared to last year and Consumer Imaging’s share decreased to 18.7 percent (previous year: 20.3 percent).

Turnover in Graphic Systems decreased with 9.2 percent to 417 million Euros. The drop is reduced to only about 1 percent if exchange rate variations are excluded. Sales of equipment suffered from the reluctance to invest in view of the difficult economic context in the graphic industry, while sales of consumables remained nearly stable if currency effects are not taken into account.
Thanks to a further increase in operational efficiency and lower restructuring charges, the operating result of Graphic Systems increased to 33.9 million Euros and the return on sales amounted to 8.1 percent compared to 6.4 percent in the previous year.

During the first quarter, Agfa reached an agreement to acquire Printing Techniques Ltd (PTL), established in North-Hampton, UK, which already held the sole distribution rights for the UK market. As a consequence of this agreement, Agfa will be able to fully integrate distribution and sales of its printing plates in the UK market.
Agfa was also able to confirm its position as a technology leader in the field of Computer-to-Plate by introducing the Advanced GLV Imaging System. This technology, which was originally designed for use in high-definition television, was added to the Xcalibur platesetters and offers high-resolution imaging with improved performance.

Technical Imaging comprises HealthCare, Non-Destructive Testing and Industrial Imaging. Its sales and results are mainly determined by HealthCare. Total sales amounted to 418 million Euros (previous year: 447 million Euros). 
The operating result reached 72.1 million Euros. This large increase of more than 50 percent compared to the first quarter of 2002 is largely explained by the positive effects of the Horizon plan and by lower restructuring charges. Return on sales in Technical Imaging exceeded 17 percent (Q1 2002: 10.6 percent).

HealthCare posted sales of 339 million Euros against 362 million Euros in the previous year. This decrease of 6.4 percent is exclusively due to currency effects: at stable exchange rates, turnover increased about 3.5 percent. HealthCare, Agfa’s most profitable business group was able to further improve its return on sales, which now stands at 19.7 percent.

In January, Agfa announced that it acquired a minority stake in Med2Rad, an Italian software company active in Radiology Information Systems (RIS). Agfa’s PACS platform together with the RIS solution of Med2Rad will enable Agfa to consolidate its important market share in Italy. Furthermore, a joint development and OEM agreement was reached with Hologic, a leading US company in the field of digital mammography. Under the terms of the agreement, Hologic will manufacture a digital mammography system, which Agfa will bring to specific international markets.
During the first quarter, several European hospital groups concluded important contracts with Agfa to digitise their radiology departments and install hospital networks comprising an Electronic Patient Record. In the US, the Florida division of the Adventist Health System concluded a 30 million dollar deal with Agfa to upgrade its current analogue radiology system into a digital one, comprising IMPAX and Agfa’s ADC computer radiography. Also in the US, Agfa was selected by Novation, one of the foremost purchasing companies, to offer its full suite of PACS solution products to Novation’s more than 2,400 members.

Sales in Industrial Imaging decreased, while those of Non-Destructive Testing (NDT) remained stable. At constant exchange rates however, turnover of NDT increased more than 7 percent. Agfa is still awaiting regulatory approval for the sale of NDT to GE’s Aircraft Engines division.

Sales of Consumer Imaging amounted to 192 million Euros, a decrease of 16.9 percent and around 11 percent at stable exchange rates. The consumer markets world-wide were particularly affected by the ongoing economic weakness. Moreover, the war in the Middle-East and the outbreak of the SARS disease again reduced travel considerably, influenced the number of pictures taken and printed and induced photo shop owners to postpone their investment in Lab Equipment.
Due to the decrease in turnover, the operating result fell from 1.5 million Euros to minus 21.4 million Euros in the first quarter of 2003.

Although the market circumstances of today are clearly exceptional, it is very difficult to forecast when the economies will rebound. Therefore, Agfa decided to take immediate additional measures to restore profitability in Consumer Imaging and adapt production to lower demand. The management team of Consumer Imaging has been reinforced and is mandated to take all necessary measures. Temporary unemployment has been installed and discussions with the social partners have already started with respect to working hours reduction and additional redundancies, 200 of which are planned in the production of film and finishing products.

Agfa is convinced that this will have an immediate beneficial effect, which will be reinforced whenever the economic situation starts to improve again. 
Especially its Lab Equipment division will be able to take advantage of this, as two important new product launches are scheduled for the end of this year: the d-lab.1, the smallest version of the digital minilab and the d-ws, the large industrial digital lab, have indeed met with great interest when their prototypes were showed at trade fairs.

From Horizon to Orion

The Horizon plan, which was launched in 2001 and runs until the end of 2003, aimed at making the Agfa organisation more flexible and transparent. It also targeted considerable cost savings and a major reduction of working capital. 
Horizon is on track and its targets will be fully realised at the planned timing.

In order to stimulate top line growth, further improve quality and further reduce working capital, the Orion program is now launched and will run until the end of 2005. Several projects focusing at improving the sales model and service delivery have started and will result in revenue growth. Although not its primary target, Orion will through its systematic approach to improve processes and quality lead to further cost savings which are estimated at 200 million Euros. Orion also aims to reduce working capital again with 350 million Euros by 2005.

Consolidated key figures 1st Q. – 2003

non-audited, consolidated figures following IAS rules

Euro million
1st Q. 2003
1st Q. 2002
currency effect
Net sales
· Graphic Systems
· Consumer Imaging 
· Technical Imaging
Operating result (*)
· Graphic Systems
· Consumer Imaging 
· Technical Imaging
Non-operating result (**)
Profit before taxes
Net result (share of the Group)
Gross operating cash flow
Net operating cash flow (***)
1st Q. 2003
1st Q. 2002
Earnings per share°

(°) Number of shares taken into account for calculation = 138,245,491 in 2003 and 139,850,000 in 2002 

Euro million
Total assets
Trade Receivables
Net Financial Debt 
Shareholders Equity 

(*) after 25 million Euros restructuring charges and non-recurring items in Q1 2002 and 8 million Euros in Q1 2003 
(**) financial result
(***) the changes in working capital make the difference between gross and net operating cash flow

Johan Jacobs
Corporate Press Relations Manager
Tel nr.: +32 (0) 3 444 8015
Fax nr.: +32 (0) 3 444 4485