AGFA-GEVAERT: Negative CEO comments

According to ‘de Tijd’, Agfa CEO Reinaudo stated during a retail investor event held this weekend that since the start of the summer, Agfa is seeing the impact from the economic slowdown, in both Graphics and in Healthcare.

Our View:
More details were not provided. We nevertheless believe this is not fully reflected in our and consensus forecasts, and 3Q earnings might come in below expectations. On a group level, we are counting on 1.1% y/y sales growth to € 750m and € 21m in REBIT, down from € 54m a year ago. The consensus is currently pencilling in € 744m in sales and € 18m in REBIT. Keep in mind that also the higher silver prices will have a material negative impact of as much as € 40m y/y on 3Q profits.
On a positive note, silver prices have come down substantially recently, but this will only be visible starting in the results over the last quarter.
The 3Q11 results will be published on 16 November.

Conclusion:
The 3Q results will likely be weaker than expected due to the economic slowdown. Valuation seems attractive from a long-term perspective, but the short term looks very challenging. Accumulate maintained