Agfa Healthcare, Radiology Solutions, Q3 2020, Sales Results

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On November 13th, Agfa-Gevaert announced its financial results for Q3 2020. These show that Group sales continued to contract during the quarter. Total Group sales reached €410m, compared with €488m during Q3 2019, a decrease of -16% year-on-year. On a comparable basis, when excluding the impact of currency movements, sales were -13.7% lower year-on-year. This took cumulative 2020 sales to €1,242m, compared with €1,446m during 2019, a decrease of -14.2% year-on-year. On a comparable basis, when excluding the impact of currency movements, sales were -13.6% lower relative to the first nine months of 2019. Agfa has four reportable segments: ‘Offset Solutions‘, ‘Radiology Solutions‘, ‘Healthcare IT‘ and ‘Digital Print & Chemicals‘. The sales contraction during the quarter was driven by lower sales from all reportable segments, led by Offset Solutions (-€44m, -21%), followed by Digital Print & Chemical (-€16m, -18.5%), Radiology Solutions (-€13m, -10%) and Healthcare IT (-€6m,-10.5%).

The Radiology Solutions segment

The radiology solutions segment encompasses the imaging activities of Agfa’s former healthcare business. This includes its portfolio of direct radiography (DR) and computed radiography (CR) imaging solutions as well as it’s industry-leading proprietary image processing solution, MUSICA. It also encompasses a portfolio of diagnostic printing and film-based X-ray solutions or “hardcopy” solutions.

The Radiology Solutions business has three reportable segments, ‘Hardcopy‘, ‘DR/CR‘ and ‘Classic Radiology’. The sales contracting during the quarter was driven by higher sales from DR solutions, which were more than offset by lower sales from CR, hardcopy and classic radiology solutions.

The top-line sales revenue from the medical film product range continued to be negatively impacted by COVID-19, but a gradual recovery became visible during the quarter. Hospital visits not related to COVID-19 are being postponed, resulting in lower demand for medical film in India, Latin-America and other geographies. During the quarter, overall sales from the Hardcopy segment declined by approximately -8% YoY, resulting in lower cumulative 2020 sales of approximately -10% YoY [PMI calculated].

Sales of DR solutions continued to achieve strong sale revenue growth, driven by COVID-related demand for mobile systems. These devices can be used to perform high-quality bed-side X-ray examinations, including within ICU and ED settings. Agfa commented that it “succeeded in gaining market share” within the mobile DR product segment.

Sales of CR solutions rapidly declined during the quarter, although service revenues had a stabilising effect on profit margins, which were maintained. During the quarter, overall sales from the DR/CR segment declined by approximately -5% YoY, resulting in lower cumulative 2020 sales of approximately -3.5% YoY [PMI calculated]. Agfa commented that “private practices in India, Latin-America and other geographies are postponing their investments in CR equipment”. The sales decline of CR solutions is “partly market-driven” and on November 5th, Agfa announced its consideration to reorganise its CR equipment production footprint to address the market decline and increase competitiveness.

Sales of classic radiology solutions declined substantially during the quarter. During the quarter, overall sales from the classic radiology segment declined by approximately -55% YoY, resulting in lower cumulative 2020 sales of approximately -24% YoY [PMI calculated].

The division’s gross profit margin decreased from 34.9% of revenue in the third quarter of 2019 to 33.1%, as improved service efficiencies in DR were not able to fully compensate for the COVID-19 related volume impact from the medical film business. The division’s adjusted EBITDA margin amounted to 13.9% of revenue, versus 16.7% in the third quarter of 2019. In absolute figures, adjusted EBITDA reached 16.5 million Euro (22.0 million Euro in the third quarter of 2019). Adjusted EBIT amounted to 10.6 million Euro (8.9% of revenue), versus 15.8 million Euro (12.0% of revenue) in the previous year.

Nominal versus comparable revenue

The Agfa-Gevaert Group is exposed to exchange rate volatility, particularly involving the U.S. dollar and the Euro. In terms of absolute values, a weaker euro is generally favourable for its business and a stronger euro is in principle unfavourable.

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