Agfa Healthcare, Radiology Solutions, Q1 2021, Sales Results

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On 11th May, Agfa-Gevaert announced its financial results for Q1 2021. These show that Group sales continued to contract during the quarter with a particularly weak quarter for radiology solutions. Group quarterly sales reached €396m, compared with €435m in Q1 2020, a decrease of -9% year-on-year. On a comparable basis, when excluding the impact of currency movements, sales were -6.2% lower year-on-year. 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 Radiology Solutions (-€19m, -16%), followed by Offset Solutions (-€18m, -10%), Digital Print & Chemical (-€1m, -2%) and Healthcare IT (-1%).

Healthcare IT revenue is comparable for Q1 2021 v 2020 only, due to the restating of sales following the sale of part of the healthcare IT related business in 2020.
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 its industry-leading proprietary image processing solution, MUSICA. It also encompasses a portfolio of diagnostic printing and film-based X-ray solutions or “hardcopy” solutions.

Quarterly sales from Radiology Solutions reached €99, compared with €118m in Q1 2021, a decrease of approximately -16% year-on-year. On a comparable basis, when excluding the impact of currency movements, sales were approximately -14% lower year-on-year. The Radiology Solutions business has three reportable segments, ‘Hardcopy‘, ‘DR/CR‘ and ‘Classic Radiology’. The sales contracting during the quarter was driven by lower sales from all reportable segments.

During the Q1 earnings call, CEO, Pascal Juery commented: “Typically Q1 is a slow quarter for Radiology, but this year, it was much lower than usual” … “volumes were weak” … “Radiology Solutions, [was negatively] impacted by China, but not only China [as this] is only a third of our sales. We’ve seen weakness in volumes across geographies. To be clear, a very slow start of the year, impacted by COVID-19 in some countries still today.” … “DR, which was a positive growth engine for 2020, had a more subdued quarter in Q1, rather flat compared to last year. So it didn’t makeup, I would say, for the decline of film. Medical film volumes are impacted in all geographies. China, the situation is a bit different, as there is a change in the procurement process. That also involves a bit of, I would say, destocking due to the uncertainty, and therefore, our volumes were lower than expected also in China. However, we are already in mid-May and we’ve seen already in March and even more so in April a very significant pickup of the activity in Q2 in film and as well as DR. So I don’t want to leave you with the impression that this is the new state of the business in Radiology. It’s certainly not. It is rebounding very strongly, but it’s fair to say that Q1 was very subdued.”

Procurement changes in China for X-ray Film

During the Q1 earnings call, it was announced that there has been a change in the procurement practice in China for X-ray film. This is whereby procurement is now being organized by provinces whereas it was more decentralized before. This has “created a bit of disruption” as suppliers effectively “lose or you win a province”. CEO, Pascal Juery commented: “I’m not expecting necessarily a tremendous impact in terms of volume, but it’s not going to be organized the same way it was before. And it’s a little bit unclear for the time being as the system is being implemented. Only a few provinces have been going through this system. We won some, we lost some. So we are in this kind of in-between situation. I don’t – at the end of the day, the China market remains the first market for hard copy films and the first market for Agfa. We were in the process of rebuilding our market share after changing our go-to-market a few years back. We have now to adapt to a new system in order to get back, but there is no change in the film consumption, whatsoever, at this stage in China.”

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