Agfa Healthcare sees rising profits, as cost reduction plan takes shape

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Agfa-Gevaert of Belgium today announced its second quarter 2006 results and detailed its plan to reduce costs annually by approximately $320 million on a worldwide basis. The company overall saw sales increases of 1.2 percent compared to the second quarter of 2005 and with high raw material costs continued to affect the results, the company said. The HealthCare group posted a modest sales increase but saw good profitability improvements overall, the company said.
   
Specifically, Q2 2006 the Healthcare unit saw volume growth and with the acquisition of Heartlab in June 2005 leading to a sales increase of 1.7 percent compared to the second quarter of 2005. Net sales for the unit were approximately $468 million in Q2 2006 compared to approximately $459 million last year during the period.
   
Agfa’s cost saving plans follows the company’s June announcement of the the decision to split the group in three independent businesses: Graphics, HealthCare and a new entity called Materials. The company has now unveiled an initiative to reduce its overall costs by $320 million by 2008 through a streamlining of each organization. The HealthCare unit is expected to provide 41 percent of the overall savings for Agfa.
           
Agfa Healthcare representative Michael Krivich said that the cost savings plan – both at the larger level and for each division – is a case of the company “right sizing the business for how it operates now.”
           
Krivich emphasized that the streamlining efforts largely result from Agfa’s recent efforts to shift to digital technology within the health IT space and other areas. The improved sales numbers as compared to 2005, in light of the transformation Agfa is undergoing, are a very good indication that this transformation is successful, Krivich added.
           
Additional details regarding how the streamlining efforts will impact the Healthcare unit – especially regarding restructurings and personnel reductions – are not currently known, Krivich stated.