Agfa shucks consumer imaging as world goes digital

Agfa will dispose of its loss-making consumer imaging division to a management buy-out/buy-in team, as the move to digital cameras gathers pace. The company will focus solely on its Graphic Systems and HealthCare operations from now on.

According to Agfa chief executive, Ludo Verhoeven, the decision was a difficult one. “The photo activities are the origin of our company and an important part of our history. Divesting them was not an easy decision, but we are convinced that this transaction is beneficial to Agfa and its shareholders and will also give the consumer business, its customers and employees, maximum chances for success in today’s challenging markets.

“This divestiture will allow Agfa to focus on its core growth markets of Graphic Systems and HealthCare, which are rapidly going digital. We will now be in a position to move faster in strengthening our position as a leading player in the imaging markets of the future,” he said.

The buy-out team will pay Euro 175.5.million Euros for the division, which results in a non-cash book loss of 430 million Euros for Agfa. A new company that will operate under the name AgfaPhoto will continue to serve all of Consumer Imaging’s markets and customers worldwide.

Photo processing revenue, which represents the most substantial portion of the consumer film sector has been in decline industry-wide since reaching a high point in the year 2000. Film sales have experienced a similar decline as the growth of digital cameras continues to displace that of conventional film camera.

Agfa announced the sell-off with its first-half results, where it reported a larger than expected order intake at drupa with expected increased sales in the second half of the year. The half-year’s gross profit reached 782 million Euros, compared to
912 million Euros in the same period of 2003.

In the six months to 30 June Graphic Systems sales fell 2.8% to 799
million Euro. The costs of staging drupa cut the company’s operating margins, which slipped from 5.4 to 4.8 per cent.

Graphic Systems accounted for 42.6 per cent of Agfa's overall first half sales, but this is set to increase. In the beginning of the year, Agfa announced the acquisition of Lastra, the
Italian manufacturer of offset printing plates, related chemicals and equipment. Lastra employs around 900 staff and its 2003 sales reached 226 million Euros. In August, Agfa announced that it
had received all the required regulatory approvals for this acquisition – the transaction will therefore be closed at the end of August 2004.