The slower than anticipated sales, continuous high raw material costs and higher than expected price erosion, in particular in HealthCare, will also affect profitability of the second quarter. The operating profit of the two business groups is expected to be higher than in the first quarter, but significantly below last year's.
Consistent with the trend of the last years, Agfa expects very strong sales in the second half of 2005, and especially a very strong last quarter in HealthCare. In addition, the effect of the recently launched initiatives to curb price erosion will gradually increase and production and operating costs will be reduced by an estimated 40 million Euro compared to the first six months of the year. As a result, Agfa expects that 2005 sales will grow year over year in both business groups while second half profits will not completely offset the shortfall of the first half of 2005.
"2005 is a transition year for both businesses. We are focusing on diminishing price erosion, reducing costs and leveraging the acquisitions made. Starting in 2006 we expect the first beneficial effects of industrial inkjet, the new growth platform for Graphic Systems, to become apparent. In HealthCare, the recently made IT acquisitions are already yielding the first synergies and will contribute significantly to the operating profit as of 2006.
We are driving an important portfolio and technology shift in both our business groups. On a quarter to quarter basis, the growth of our digital businesses will not perfectly compensate the decline of the traditional imaging products. However, the fundamentals of the business remain strong and we are convinced that we have the right portfolio, technologies and distribution channels to successfully manage the transition to digital," said Marc Olivié, Agfa's President and Chief Executive Officer.
Agfa also announces that the project to make both business groups operationally independent is advancing well so that its implementation will be pulled forward from the originally planned date of early 2007 to January 1, 2006. By that date, the two business groups will each have full control over their income statement and balance sheet.
In addition, after having received the authorization from the shareholders to buy back up to 10 percent of the shares, the Board of Directors has approved the execution of a first tranche of this program and to buy back up to 3 percent of the outstanding shares.
About Agfa
The Agfa-Gevaert Group is one of the world's leading imaging and information technology companies. Agfa develops, manufactures and markets analog and digital systems for the graphic industry and for healthcare.
Agfa's headquarters are in Mortsel, Belgium. The company is active in 40 countries and has agents in another 100 countries throughout the world. Together they achieved a turnover of 3,762 million Euros (US$ 4,677 million) in 2004.
Agfa's Graphic Systems business group supplies the printing industry with integrated prepress solutions, consisting of consumables, equipment, and software for color, workflow and project management for the most performant computer-to-film and computer-to-plate systems, including digital proofing.
Furthermore, Agfa develops inkjet inks and printing equipment for industrial applications, such as packaging, labels and posters.
Agfa's HealthCare business group supplies hospitals and other healthcare centers with state-of-the-art systems for the capturing, processing and managing of diagnostic images and with IT solutions that integrate the imaging workflow into the overall hospital operations across departmental disciplines.
In addition, Agfa is a leader in the fast growing market of IT systems that span the entire healthcare enterprise and through which healthcare facilities become more efficient and effective, with improved patient outcomes.
For more information on Agfa, visit www.agfa.com.
Contact:
Agfa-Gevaert
Nancy Glynn
Vice President Communication
tel. ++32 (0)3/444.8000
fax. ++32 (0)3/444.7485
e-mail: nancy.glynn@agfa.com
