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August 23, 2000

Leap In Profits At Agfa

COMPANY PRESS RELEASE: The Agfa-Gevaert Group announced outstanding financial results for the first half of 2000. Net sales increased by 16.3 percent to Euro 2.616 billion (previous year Euro 2.249 billion), while profit before taxes virtually doubled. The return on sales before restructuring expenses reached 10.0 percent.

By CBR Staff Writer

The result before restructuring expenditures increased by 63 % to Euro 263 million compared to Euro 161 million in the previous year. The result after restructuring was up 90 percent from Euro 95 million to Euro 181 million. Profit before taxes rose by 97 percent from Euro 64 million to Euro 126 million. The net result for the first half of 2000 totalled Euro 80 million, up 74 percent from the previous year (Euro 46 million).

Agfa-Gevaert N.V. went public on June 1, 1999. Consequently, these figures reflect to some extent the result of the Agfa-Gevaert Group’s first year of independence. Dr. Klaus Seeger, CEO of the Group commented; We have consistently implemented the measures we announced at the time of going public.

The company’s strategy includes the further expansion of Agfa’s market position, the expansion of new market segments and the restructuring of existing lines of the business. Roughly 75 of sales are today generated in fields in which Agfa is the No.1 or No. 2 in the world market. The acquisition of Sterling Diagnostic Imaging mid 1999 and the acquisition of the Krautkrämer Group July 2000 are examples of important steps taken towards sustainable strengthening of the portfolio in favour of highly profitable lines of business. Krautkrämer is clear world market leader in the high-tech ultrasonic systems segment of the non destructive testing market. The success of our restructuring efforts is reflected in the earning figures. The success of expansion in new markets is reflected by the so-called new digital solutions. They include Computer-to-Plate products in Graphic Systems, digital systems in the medical field and digitally-oriented laboratory equipment in the Consumer Imaging sector. Sales in these segments have risen by a total of 53 percent to Euro 546 million in the first half of the year. Around 21 percent of the Group’s sales are attributable to these new digital solutions.

Growth continuing in the second quarter

Group sales in the second quarter of 2000 amounted to Euro 1.356 billion, while the profit before restructuring totalled Euro 140 million. In terms of sales, this represents an increase of 11 percent compared to the second quarter of the previous year and an 8 percent rise on the first quarter of 2000. In terms of profit the result before restructuring expenses improved by 61 percent compared to the second quarter of the previous year and by 14 percent on the first quarter of 2000.

Development of the business segments

All business segments – Graphic Systems, Technical Imaging and Consumer Imaging – recorded a marked increase in sales and a substantial improvement in the result after restructuring.

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Sales in the Graphic Systems business segment rose by 7.2 percent to Euro 1.036 billion. Profit before restructuring showed a slight decline from Euro 67 million to Euro 64 million. However, profit before restructuring in continuing operations, i.e. excluding the Digital Printing Systems Business Unit, which is sold to Xeikon, rose by 8.3 % from Euro 70 million to Euro 75 million. Return on sales at 7.5 percent remained at last year’s level in continuing operations. Profit after restructuring improved considerably by 89 % from Euro 23 million to Euro 43 million.

The Technical Imaging business segment is 85 percent dominated by the Medical Imaging business group. The Technical Imaging business segment further increased its share of Group sales due both to the acquisition of Sterling Diagnostic Imaging and to very strong organic growth in the Medical business. Technical Imaging has now become the company’s second largest business segment, achieving sales of Euro 814 million in the first half of the year increasing by 38.4 percent. However, it must be borne in mind that Sterling Diagnostic Imaging was acquired in mid-May of the previous year. Accordingly, part of the increase in sales is also attributable to the fact that the figures for the previous year only include Sterling sales for this period.

Technical Imaging is the business segment with by far the largest profit contribution. The result before restructuring increased by 79 percent to Euro 136 million (previous year: Euro 76 million). Return on sales is now 16.7 percent (previous year: 12.9 percent). There has also been a significant increase of 63 percent in the profit after restructuring expenses, which rose from Euro 68 million to Euro 111 million.

The development of the Consumer Imaging business segment was very pleasing. With a 10.2 percent increase in sales to Euro 766 million, the result before restructuring expenses showed a substantial improvement, rising from Euro 18 million in the previous year to Euro 63 million in the first half of 2000. The result after restructuring expenses also improved substantially to Euro 41 million (previous year: Euro 7 million). Accordingly, the return on sales also rose from 2.6 percent to 8.2 percent.

Almost half of Agfa’s worldwide sales are recorded in Europe (49.9 percent), including 32 percent in the Euro zone. In comparison Europe accounted for a share of 55 percent in the first half of the previous year. The shift is primarily attributable to the acquisition of Sterling, whose business is mainly focused in North America. Sales in Europe rose by 5.4 percent, whereas we recorded sales growth of around 30 percent in the other three regions – NAFTA, Latin America, Asia/Africa/Australia. The NAFTA region accounts for 29 percent of worldwide sales, while South America contributes for a good 4 percent and Asia/Africa/Australia for nearly 17 percent.

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