Hello, and welcome to the Agfa Q3 2023 Results. My name is George, and I'll be coordinator for today's event. Please note this conference is being recorded. [Operator Instructions] I'd like to hand the call over to your host today, Mr. Pascal Juery, CEO, to begin today's conference. Please go ahead, sir.

Thank you very much, and good morning, everyone. Thanks for being with us for the announcement of the Q3 2023 results of Agfa. I'm sitting here in Mortsel with my colleagues of the Executive Committee; our CFO, Dirk De Man, who will take part of the presentation; and also Viviane Dictus, in charge of Investor Relations. So Q3 results in a nutshell, first, it's absolutely in line with our plan and guidance. Second, this is a positive cash flow quarter after the cash outflow of the first half, which, by the way, was more than half due to the Offset divestment. Third, we have EBITDA growth from our growth engine, which is higher than the challenges we are seeing in the film and legacy businesses of the company. And four, currency has a huge impact on our activities since we are a group mainly producing in Europe and exporting in Asia and having also a significant part of our business in North America. So it's weighing of the group top line and more importantly, on the bottom line. So all in all, results in line, positive cash flow, EBITDA growth in the right areas and currency being a negative factor for the company. If I go to our businesses now, HealthCare IT had, I would say, a good quarter, a significant improvement in profitability, stemming from a good mix. Although the top line was not great, what we did sell in the quarter and recognized in the quarter was of a high quality and as well a good control of our cost to serve. DPC, ZIRFON continues to grow significantly, and the news is it's now contributing to profitability. So we have a positive EBITDA from ZIRFON. Of course, in terms of cash, it's still an investment area and we still strongly invest, of course, to prepare our future, but it is profitable and that's new. Also, profitability improvement in digital print. We do have sales of equipment, which is a bit subdued, of course, in the current climate. But the good news is, when we look at the mix of our equipment, we are selling more high-end equipment, so then, I would say, mid-range equipments and the print business is doing very well. In DPC, we have also film activities, and that's under pressure. We mainly exposed in China and electronics, which is not today a very favorable market. So HealthCare IT and DPC, I would say, HealthCare IT good improvement, DPC in line. However, radiology was a bit subdued this quarter. They are still improve profitability, but the market is soft for the top line. And the medical film continues to be impacted from the centralized procurement practices in China. That's not new. It's continuing and amplifying, I would say. And we are also, of course, impacted by the currency, with a very weak R&D. So overall, EBITDA for the quarter at €17 million, a clear improvement from last year, a clear improvement from Q2. Positive free cash flow, that's according to what we told you a few months ago. We are delivering on this promise and still a net loss due to the current transformation of the company that is continuing. So if we look at the P&L, I would like to stress that indeed sales are a bit less with the currency impact. However, when you remove the currency impact, we are still a bit ahead of last year. In gross profit, you will notice that indeed we are improving the percentage of our gross profit, and it's a very contrasting situation across businesses but we do have pricing power in our growth businesses. SG&A fully under control. This is a result of that you see here of all the actions that we have taken in the past 3 years to transform the company. And it shows in terms of cost containments and the ability to really control our expenses. R&D is below last year. I want to stress that the only place where we did significantly cut on R&D by changing a bit the way we address the market is in India in Direct Radiography. The rest of the R&D efforts of the group has been kept in constant as it's really our license to operate in this market. We continue to have significant restructuring and nonrecurring. However, I would stress that you see probably the number is below last year because they are coming at the end I would say of the major plans. So we have now a continuous impact in terms of cash, but P&L is less than it was before. So I think that has been already commented. I will now turn to you, Dirk, to comment on the cash and the working capital. The working capital first.

Yes. Thank you, Pascal. So basically, as you can see, we're making -- we continue to make significant progress in terms of working capital, in line with our plans to primarily reduce inventory. So versus last year, we are €36 million below in inventories, even though trade receivables are a bit up and trade payables a bit down. We still have close to €30 million of trade working capital improvement. So that means that we are about 4 percentage points below last year and again, 1 percentage point below previous quarter. Obviously, we'll continue to work through that in the fourth quarter and get further inventories down. If we move to the cash flow. So indeed, a €5 million positive free cash flow, so supported by the results and the three level of trade working capital. Normal CapEx spending provisions and other versus last quarter where we paid out a lot of employee benefits, it's positive also. Also, income taxes this quarter positive, leading to an adjusted free cash flow of around €34 million with pensions at minus €12 million and restructuring and nonrecurring items at minus €17 million, which, as Pascal already mentioned, it's still a high number, but that number is clearly coming down as also the P&L charges are being reduced in the overall program. So on the next slide, basically, our net cash position is stable versus previous quarter at €14 million. The cash flow, we do expect to be substantially better next year. And the key elements of that, we do expect the Offset proceeds to come in '24, also some subsidies for the ZIRFON investment, and we want to continue to work on improving working capital. But also restructuring and nonrecurring, as I already mentioned, should be lower. We do have sufficient liquidity with our revolving credit facility. And obviously, we will continue to focus steadily on cash generation, both in the business and on the expense side. Back to you, Pascal.

Thanks very much. The Healthcare IT now. So HealthCare IT, as I said, this is -- this was a good quarter for HealthCare IT. When you look at the top line, again, there is an impact on currency and we adjusted for currency. We are improving the top line by 3.3%, but it's not high growth quarter. As you know, quarters could be a bit lumpy depending what we do recognize in the quarter. However, you see that it was a good mix quarter, with gross profit at 48%, while costs are, generally speaking, under control. So it means our adjusted EBITDA for the quarter comes much higher than last year and the previous quarter, actually. So overall comments on the order book and order intake, order book remains at a very healthy level. It has decreased a bit, but remain very well oriented. Indeed, for the last 12 months, rolling order intake versus last year, we have a very modest growth. But this, again, is also quite volatile quarter-on-quarter, and Q3 is never a strong quarter for the order intake. I would still expect the full year '23 order intake to be much higher than full year '22. And when I say much higher, I would quote between 5% and 10% higher than '22. I already commented the impact on the currency on the top line, the gross margin as well. So overall, I would say, for HealthCare IT, it was a quite satisfactory quarter. I would like to remind everyone that the Q4 is always the strongest quarter of the year. So we'll see before, but I'll come back to that in the outlook, of course, a stronger even quarter than this one. Radiology. So radiology is the one division that is the most challenged in the current conditions. So you see it in the sales with a huge impact of currency because basically, all of our films almost is exported out of Europe. So this is an area, a division that is fully exposed to currencies, mainly dollars and renminbis actually. So a huge impact of this currency. And we've seen a weakening of the volumes by -- right at the end of the quarter actually, having a significant impact on our gross profit. SG&A are very well under control and stems from the fact that we did reorganize our radiology solutions set up earlier this year. R&D, I think I already mentioned it, so most of the R&D is for the Direct Radiograph. It's been the object of -- I would say, of resizing and a bit of a change in the way we look at innovation in this market. And therefore, in spite of the huge gap in terms of sales, we limited the gap in terms of EBITDA, even if it's still indeed below last year. So this is the area that is, I would say, operating in market conditions that are a bit more complex. So first, we continue to improve the profitability in the DR market. But the top line of the DR, Direct Radiography, is pretty flat. Actually when we are -- as we operate in a market where I would say, even investments in medical equipment, is a bit subdued. And we are seeing for medical film, the continuation of the procurement policy practices in China, further compounded, which has an impact on pricing, further compounded by the weakness of the renminbi. We also have -- as it's a fairly global business, we are impacted by some of the geopolitics in the world as well. So that means radiology is indeed below last year, and we expect this trend to kind of continue in Q4. Q4 last year was an extremely strong quarter impact for the business. So now turning to DPC. DPC is growing 6.8% without the impact of currency. I would say most of this growth can be related to Japan to the hydrogen membrane while we have a more diverse situation in the rest of the business. So profit -- gross profit is increasing almost 2 points -- 2 percentage points compared to last year. It stems also from the price increases that we've been doing and executing since the beginning of the year, and it shows. What you see on SG&A and R&D is also the reflection of the Inca integration. So we have indeed for 9 months more R&D. It is clearly a growth area in which we are preparing major initiatives in the months to come. The EBITDA, of course, is higher than last year, which was a very complex and weak quarter. And in this business, of course, you have a contrasted performance. If I move a little bit more in detail in Digital Printing, we have an excellent performance of the inks and the high-end equipment business. And frankly speaking, even in a complex economic environment, we continue to grow in this area, which validates for me the strategy of really investing in this digital printing track. We are on track regarding the conversion of printers to Agfa ink sets. It works. We have already started in swaps for a few months. As you know, we are selling now all Inca equipment with our inks, so pretty much according to our business plan. And the development of the SpeedSet, meaning the single-pass packaging printer, which is opening totally new market segment is proceeding as planned. And actually, we have a customer launch then in December. And in '24, the plan is to place two printing lines, one in North America, one in Europe to have a better market introduction. ZIRFON, good news, we continue to grow in ZIRFON. And the good news for us is we have been able to improve productivity through, I would say, process improvement and modifications in our line. So we are able to supply the market and we are now able to do that profitably. Two pieces of news for ZIRFON. I think you know already that we have been selected for EU Innovation Fund Grant. So it will cover a significant part of the investment. We are currently starting to build a new capacity for ZIRFON. And we have also joined the Hydrogen Council, which is a global initiative of companies working in this field. So that's really the growth engines and DPC are really performing very satisfactory. However, the rest of the business continues to be impacted by the weak electronic market in worldwide and especially in China, where most of our exposure is as well as for product lines like Orgacon. However, we did -- we do see the results of our price increase actions and the cost improvement that we have made as well to mitigate these inflation, meaning the business overall is really back to profitability. Now I'm turning to the division that is actually supplying products and services to Offset with you, Dirk.

Yes. Indeed, so in contractor operations, we do see this quarter a negative EBIT and before, we told you that it was designed to have a neutral adjusted EBIT and this should be covering all the costs. The effects we are seeing though is related to a lower production volume in the film business since the film business is under stress, and that results into non-absorbed costs that cannot be transferred to Offset. So meaning we need to absorb them across all the film divisions, and that is what's creating the negative adjusted EBIT. We expect a similar amount in the fourth quarter. However, for next year, it should be part of the resetting of the price where the overall volumes of the manufacturing sites will be taken into account, and we should go again to a neutral adjusted EBIT. Back to you, Pascal.

Thank you. Okay. Outlook. We are basically confirming that we have a recovery in profitability versus the full year of '22. However, I'd like to precise that when we say that, we look like-for-like, we remove the impact of Offsets in '22, and we look at the performance without Offsets in '22. So I can confirm that, yes, we will significantly improve the profitability in the full year '23 versus '22. Now if I turn by division, not changing the outlook for HealthCare IT. I think we are going to be broadly in line with last year actually. As you know, it's -- there is also a currency impact due to the fact that a significant part of our business is indeed in U.S. dollars. Radiology Solutions, we have, as explained, the continuity of the situation in China and the situation for medical film continue to degrade a bit. So clearly, we are seeing a bit of a weaker performance versus last year, and especially last year, Q4 was a very, very strong quarter for us. So we are seeing indeed pressure in this area. DPC, We will continue on the trend of -- that we are seeing actually since the beginning of the year, especially in Q1 and Q3, maybe that will continue to improve profitability. Q4 is also a strong quarter for DPC in terms of equipment sales. This is the strongest quarter of the year, and we are already, I would say, quite covered in terms of order book in order to deliver this quarter. And ZIRFON will continue to deliver as planned. So we stick to our guidance. So maybe just a word on sustainability. And I will only mention what is new for us. We have been working a lot on our carbon emission reduction plan actually. And I've set our ambition for Scope 1 and 2 at 62% reduction by 2030, which, by the way, is totally in line with the Fit for 55 European package. And we have also decided to join the initiative, Science-Based Target initiative to commit actually two more reduction targets for the group within 2 years and including Scope 3. So that's really what's new in terms of sustainability, I would say, and shows the commitment we have in this area. I'm going to now stop here and take the questions of the analysts.

[Operator Instructions] Our very first question is coming from Laura Roba calling from Degroof Petercam.

Two questions from my side. First, on DPC. To what extent was profitability in Q3 still impacted by the manufacturing efficiencies we saw in Q2 because I think that during the H1 meeting, you mentioned the small remaining share would impact Q3. So I was wondering where we stand there? And then my second question is on radiology. When do you foresee the progress in DR to start offsetting the decline in the medical business -- in the medical film business, sorry.

Okay. So on DPC manufacturing efficiency, maybe I can turn to Vincent Wille, the Head of DPC, who can give an answer on that high level.

Sure. Yes. Thank you, Pascal. So the answer is that, indeed, in Q3, we still had impacts. They were significantly less than in Q2, but the impact was still higher than €1 million, let's say, on the full quarter.

Yes. So unfortunately, we still have a bit of issues in this area indeed. But again, we expect that to improve, and we are taking actions. And actually, also for your information, we have actually a change of leadership for the operation management of our industrial footprint, especially in Belgium. And we are looking at making improvements here as well. On Radiology, we have three components to our Radiology business. One is growing DR. One is declining -- has been declining for many, many years. That's CR, computed radiography. It's not -- it's a trend. It's a market declining by 10% to 15% a year, but it's a relatively small share of the radiology market. And the film business. So we have these three businesses. And therefore, you have one business improving profitability, that's DR. And you have the CR business profit declining according to the decline of the activity. And the film business, which actually today, if I was looking at the film business, and I would remove the currency impact actually would be almost stable, actually. So the decline in profitability that we are seeing in the firm is currency related almost exclusively in a way. So it means today that DR cannot cover this gap. DR is able to cover part of the gap and cannot cover the full gap. So that's the best way I can characterize the situation as it is today.

Our next question is coming from Maxime Stranart, calling from ING Bank.

Three on my end, if it's possible. First of all, looking at DPC, if I understand your comment correctly, Pascal, inks performed pretty good. ZIRFON was positive. So I would assume that the remaining part was quite negatively impacted. Any, well, building blocks, you could shed some light on there? Secondly, looking at the corporate cost line, quite a steep reduction compared to last year. I would presume this is related to the transformation plan you have put -- well, we have implemented previously. Any comment on that? And what's the new normal for corporate costs? And finally, on cash flow. So you mentioned that you expect a better cash flow in 2024. I would assume this is mostly related to the grant you would receive on ZIRFON and the sales proceed, here again, any detailed information you could provide on this?

Okay. So on DPC, indeed, we are suffering in the film business for electronic market in the same way as for medical, we're suffering from the currency. The weak demand actually with the industry operating today as maybe between 50% and 60% of capacity, I would say, for PCB and as well on repricing in a complex currency environment. So yes, indeed, we continue to suffer from that. You're quite right, but it's not only ZIRFON that's improving. That's also digital printing. The two areas -- I mean, the two growth areas of DPC are improving, while the rest of the business is indeed under pressure. Regarding the corporate cost line, yes, indeed, we have taken steps to reduce corporate costs, especially when we sold Offset. And what you are seeing here is a result of that. Going forward, I would not change the level and the guidance. I don't see anything there.

Yes. Maybe I need to add something and that in the corporate costs, we also have the stock-related compensation that is reflected. And due to the reduction in stock price, the mark-to-market has also reduced dramatically. So that means obviously that the costs have been reducing due to that mark-to-market effect.

Yes, that's on top of...

Guidance going forward, I think we're still in the budgeting process and we need to sort out the levels.

Okay. Now regarding cash flow, mainly your question, if I understand, is cash flow for '24 outlook. I think, again, we can -- Dirk, you can maybe come back to that, you said it...

I think I gave my points. So I don't have anything really to add.

On the amount of the asset proceeds, we always guided for about...

Yes. I think we said €28 million, but that is subject to adjustments due to the closing balance sheet. We -- at this point, I think it will be higher than €28 million.

And the subsidy, we said it's north of €10 million actually.

Yes. So on the subsidies, we still need to go through the full process to close on the submission. So we will get confirmation of that number once that is done. And...

And then third item, I mean, for -- to be considered for cash flow '24. As you know, we've been spending a lot of restructuring costs. Actually, it was also mentioned, expect to see a significant decrease of that because we are at the end of our kind of major restructuring plans. However, as you know as well, CapEx for ZIRFON will be higher in '24. That's also very clear, but that goes also with the subsidy.

That's very clear.

The only component I've not mentioned in cash flow for '24 because it's too soon is, of course, the view on the business for '24. We are currently in the budget process. So it's way too soon for me to comment anything about it. Okay. Thanks a lot. So again, I want to come back to the main messages. For us, we are in line with our plan. Positive cash flow quarter as expected, as announced. EBITDA growth from gross engine, while film is under pressure and currency being the main culprit for us in terms of profitability for especially the film business which again is almost 100% and export business for Agfa. Thanks a lot, and have a good day. Thank you for participation.

Thank you very much, sir. Ladies and gentlemen, that concludes today's presentation. Thank you for your attendance. You may now disconnect. Have a good day, and goodbye.