Agfa-Gevaert NV

Quarterly Report • Aug 25, 2016

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2016

The condensed interim financial statements as of June 30, 2016 as well as the related explanatory notes have not been subject to a review of KPMG Bedrijfsrevisoren.

Condensed consolidated statement of financial position
In million Euro	Note	June 30, 2016	Dec. 31, 2015
ASSETS
Non-current assets		987	1,005
Intangible assets and goodwill	5	624	622
Property, plant and equipment		208	214
Investments in associates		7
Financial assets	12	11
Deferred tax assets		137	152
Current assets		1,388	1,397
Inventories		542	512
Trade receivables	12	515	515
Current income tax assets		64
Other tax receivables		27
Other receivables	12	96	106
Other assets		68
Derivative financial instruments	12	3
Cash and cash equivalents	12	73	123
Non-current assets held for sale		-
Total assets		2,375	2,402
EQUITY AND LIABILITIES
Equity		338	268
Equity attributable to owners of the Company		307	228
Share capital		187	187
Share premium		210	210
Retained Earnings		817
Reserves		(79)	771 (92)
Translation reserve		13
Post-employment benefits: remeasurements of
the net defined benefit liability		(841)	(841)
Non-controlling interests		31
Non-current liabilities		1,279	1,359
Liabilities for post-employment and long-term
Termination benefit plans	6	1,154	1,185
Other employee benefits		9
Loans and borrowings	12	85	137
Provisions		7
Deferred income		2
Deferred tax liabilities		22
Current liabilities		758	775
Loans and borrowings	12	40
Provisions		69
Trade payables	12	253	206
Deferred revenue and advance payments		164	141
Current income tax liabilities		54
Other tax liabilities		41
Other payables	12	10
Employee benefits		116	130
Other liabilities		5
Derivative financial instruments Total Equity and Liabilities	12	6 2,375	2,402

1.2 Condensed consolidated statement of profit or loss and condensed consolidated statement of comprehensive income

In million Euro	Note	6 months ending	6 months ending
		June 30, 2016	June 30, 2015

Condensed consolidated statement of profit or loss

Revenue	7	1,248	1,313
Cost of sales		(824)	(887)
Gross profit		424	426
Selling expenses		(173)	(178)
Research and development expenses		(70)	(73)
Administrative expenses		(84)	(88)
Other operating income		56	50
Other operating expenses		(49)	(65)
Result from operating activities	7	104	72
Interest income (expense) – net		(4)	(7)
Interest income	8	1	1
Interest expense	8	(5)	(8)
Other finance income (expense) – net		(25)	(24)
Other finance income	8	8	2
Other finance expense	8	(33)	(26)
Net finance costs		(29)	(31)
Profit (loss) before income tax	7	75	41
Income tax expense		(25)	(13)
Profit (loss) for the year		50	28
Profit (loss) attributable to:
Owners of the Company		46	25
Non-controlling interests		4	3
Earnings per share
Outstanding shares per end of period		167,751,190	167,751,190
Weighted number of shares used for calculation		167,751,190	167,751,190
Basic and Diluted Earnings per share (€)		0.28	0.15

In million Euro	6 months ending	6 months ending
	June 30, 2016	June 30, 2015

Condensed consolidated statement of comprehensive income

Profit (loss) for the period	50	28
Other comprehensive income, net of tax
Items that are or may be reclassified subsequently to profit or loss:
Exchange differences:	18	10
Exchange differences on translation of foreign operations	8	14
Exchange differences on disposal of foreign operations
reclassified to profit or loss	7	-
Exchange differences on net investment hedge	3	(4)
Income tax on exchange differences on
net investment hedge	-	-
Cash flow hedges:	14	(4)
Effective portion of changes in fair value of
cash flow hedges	6	(14)
Change in fair value of cash flow hedges
reclassified to profit or loss	-	6
Adjustment for amounts transferred to initial carrying amount
of hedged item	8	4
Income taxes	-	-
Available for sale financial assets:	(1)	2
Changes in the fair value of available-for-sale
financial assets	(1)	2
Income taxes	-	-
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of the net defined benefit liability	-	-
Income tax on remeasurements of the net defined benefit liability	-	-
Total other comprehensive income for the period,
net of tax :	31	8
Total comprehensive income for the period	81	36
attributable to:
Owners of the Company	79	29
Non-controlling interests	2	7

The condensed consolidated statement of comprehensive income for the current interim period (second quarter ending June 30, 2016) with comparative statements of comprehensive income for the comparable interim period for the immediately preceding year, as required by IAS34.20, has been included in addendum.

1.3 Condensed consolidated statement of cash flows

In million Euro	6 months ending June 30, 2016	6 months ending June 30, 2015
Profit (loss for the period	50	28
Adjustments for:
Depreciation, amortization and impairment losses	28	33
Changes in fair value of derivative financial instruments	3	(1)
Granted subventions	(4)	(4)
(Gains)/losses on sale of non-current assets	(10)	-
Net finance costs	29	31
Income tax expense	25	13
	121	100
Changes in:
Inventories	(30)	(51)
Trade receivables	8	10
Trade payables	17	5
Deferred revenue and advance payments	22	41
Other working capital	(33)	(1)
Non-current provisions	(22)	(35)
Current provisions	(24)	(15)
Cash generated from operating activities	59	54
Income taxes paid	(12)	(2)
Net cash from (used in) operating activities	47	52
Interest received	1	1
Dividends received	-	-
Proceeds from sale of intangible assets	1	2
Proceeds from sale of property, plant and equipment	1	2
Proceeds from non-current assets held for sale	14	-
Acquisition of intangible assets	(4)	(1)
Acquisition of property, plant and equipment	(17)	(14)
Changes in lease portfolio	2	1
Change in other investing activities	(4)	2
Net cash from (used in) investing activities	(6)	(7)
Interest paid	(6)	(13)
Dividends paid to non-controlling interests	(12)	-
Proceeds from borrowings	-	68
Repayment of borrowings	(58)	(157)
Other financial flows	(15)	(11)
Net cash from (used in) financing activities	(91)	(113)
Net increase (decrease) in cash and cash equivalents	(50)	(68)
Cash and cash equivalents at 1 January	122	194
Effect of exchange rate fluctuations	(1)	3
Cash and cash equivalents at 30 June	71	129

1.4 Condensed consolidated statement of changes in equity

	Attributable to owners of the Company
In million Euro	Share capital	Share premium	Retained earnings	Reserve for own shares	Revaluation reserve	Hedging reserve	Remeasurement of the net defined benefit liability	Translation reserve	Total	Non-controlling interests	Total equity
Balance at January 1, 2015	187	210	709	(82)	1	(11)	(905)	(16)	93	53	146
Comprehensive income for the period
Profit (loss) for the period		-	- 25		- -	-	-	-	25	3	28
Other comprehensive income net of tax		-	- -		- 2	(4)	-	6	4	4	8
Total comprehensive income for the period		-	- 25		- 2	(4)	-	6	29	7	36
Balance at June 30, 2015	187	210	734	(82)	3	(15)	(905)	(10)	122	60	182
Balance at January 1, 2016	187	210	771	(82)	4	(14)	(841)	(7)	228	40	268
Comprehensive income for the period
Profit (loss) for the period		-	- 46		- -	-	-	-	46	4	50
Other comprehensive income net of tax		-	- -		- (1)	14	-	20	33	(2)	31
Total comprehensive income for the period		-	- 46		- (1)	14	-	20	79	2	81
Transactions with owners recorded directly in equity
Dividends		-	- -		- -	-	-	-	-	(11)	(11)
Total of transactions with owners recorded directly in equity		-	- -		- -	-	-	-	-	(11)	(11)
Balance at June 30, 2016	187	210	817	(82)	3	-	(841)	13	307	31	338

1.5 Selected explanatory notes to the condensed consolidated interim financial statements as of June 30, 2016

1. Reporting entity

Agfa-Gevaert NV (the "Company") is a company domiciled in Belgium. The condensed interim financial statements of the Company as at and for the six months ended June 30, 2016 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in associates. The consolidated financial statements of the Group as at and for the year ended December 31, 2015 are available on the Company's website: www.agfa.com.

2. Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union up to 30 June 2016. They do not include all of the information required for the full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended December 31, 2015. These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on August 24, 2016.

3. Significant accounting policies

The Group has applied in these condensed consolidated interim financial statements the same accounting policies as those applied in the consolidated financial statements as at and for the year ended December 31, 2015. The first time application of new or revised IFRSs, which are effective for annual periods beginning on or after January 1, 2016 had no impact to the consolidated financial statements.

The condensed consolidated interim financial statements are presented in Euro, rounded to the nearest million.

4. Critical accounting estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from estimates.

In preparing the condensed consolidated interim financial statements, the judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended December 31, 2015.

5. Impairment testing of goodwill and intangible assets with indefinite useful life

An impairment test is to be carried out once a year, and this at the same time, unless indicators would trigger an impairment loss on an earlier moment. The Group performs its impairment test during the fourth quarter. Based on IAS 36.99 management decided not to carry out a formal impairment test at June 30, 2016 since the annual impairment test performed at the Cash Generating Unit level had not revealed any impairment loss at December 31, 2015 and since the following criteria were met at June 30, 2016:

• The assets and liabilities making up the units have not changed significantly since the fourth quarter 2015;
• The recoverable amount calculation dated from the fourth quarter 2015 resulted in an amount that exceeded the carrying amount of the units by a substantial margin;
• Based on an analysis of events that have occurred and circumstances that have changed since the fourth quarter of 2015, the likelihood that a current recoverable amount determination would be less than the current carrying amount of the units is remote.

6. Liabilities for post-employment and long-term termination benefit plans

In million Euro	June 30, 2016	Dec.31, 2015
Net liability for material countries	1,072	1,094
Net liability for non-material	38	41
countries
Long-term termination benefit	44	50
plans
Total net liability	1,154	1,185

For the measurement of its post-employment benefits as at June 30, 2016, the Group has applied the requirements of IAS19 (revised 2011).

During the first half year of 2016, the evolution in the carrying amount of the defined benefit obligation for the material countries, being 22 million Euro is explained by a defined benefit cost included in profit or loss of 26 million Euro, employer contributions and benefits paid directly by the Company amounting to 29 million Euro, the remaining difference is explained by translation differences (19 million Euro).

As per 30 June 2016, no actuarial calculations have been performed. Detailed calculations are only performed at year-end. Therefore, in order to understand the Group's sensitivity to the evolution of the discount rates – in general the most decisive factor for the height of the net pension liability – we refer to the Annual Report 2015, disclosure note 23 'Employee Benefits' to the Consolidated Financial Statements.

7. Reportable segments

In million	Agfa Graphics		Agfa HealthCare			Agfa Specialty	Total
Euro						Products
	2016	2015	2016	2015	2016	2015	2016	2015
Revenue	628	670	531	548	89	95	1,248	1,313
Recurring	40	26	53	52	7	8	100	86
EBIT (*)
Segment	47	17	51	49	7	8	105	74
result
(**)

For the six months ended June 30

(*) Recurring EBIT is the result from operating activities before restructuring and non-recurring items. Nonrecurring items comprise results from the sale of land and buildings, past service costs related to defined benefit obligations and impairment losses.

(**) Segment result is the profit from operating activities

Reconciliation of profit or loss

For the six months ended June 30

Consolidated profit (loss) before income taxes	75	41
Other finance income (expense) – net	(25) ____	(24) ____
Interest income (expense) – net	(4)	(7)
Results from operating activities Other unallocated amounts:	104	72
Profit (loss) from operating activities not allocated to a reportable segment	(1) ____	(2) ____
Segment result	105	74
In million Euro
	2016	2015

8. Net finance costs

For the six months ended June 30

In million Euro	2016	2015
Interest income on bank deposits	1	1
Interest expense	(5)	(8)
On bank loans	(2)	(2)
On EIB loan	(2)	(2)
On debentures	(1) _____	(4) _____
Interest income (expense) – net	(4)	(7)
Other finance income	8	2
Other finance expense	(33)	(26)
Other finance income (expense) – net	____ (25)	____ (24)
Net finance costs	____ (29)	____ (31)

Other finance income (expense) – net comprises interest received/paid on other assets and liabilities not part of the net financial debt position such as the net interest cost of defined benefit plans and the interest component of long-term termination benefits; exchange results on non-operating activities; changes in fair value of derivative financial instruments hedging non-operating activities; other finance income (expense).

During the second quarter of 2016, an amount of 7 million Euro was reclassified from translation reserve in 'Equity' to 'Other finance expense' on disposal of a foreign operation, being the closure of a sales organization for which a restructuring expense has been booked.

9. Unusual items affecting the condensed interim financial statements

There are no other unusual items that have affected the condensed interim financial statements as at and for the six months ended June 30, 2016.

10. Contingencies

There were no significant changes in contingencies as those disclosed in the consolidated financial statements of the Group as at and for the year ended December 31, 2015.

11. Related party transactions

Transactions with Directors and members of the Executive Management

For the six months ended June 30, 2016 there are compared to last year no significant changes in the compensation of key management personnel.

As of June 30, 2016 there were no loans outstanding to members of the Executive Management nor to members of the Board of Directors.

Other related party transactions

Transactions with related companies are mainly trade transactions and are priced at arm's length.

Non-controlling interests have a material interest in seven subsidiaries of the Group in greater China and the ASEAN region (June 30, 2016: 30 million Euro, December 31, 2015: 39 million Euro). In Europe, there are two subsidiaries in which non-controlling interests have an interest that is of minor importance to the Group (June 30, 2016: 1 million Euro, December 31 2015: 1 million Euro).

In greater China and the ASEAN region, the Group and its business partner Shenzhen Brother Gao Deng Investment Group Co., Ltd. combined as of 2010 their activities aiming at reinforcing the market position in the greater China and the Asian region. Shenzhen Brother Gao Deng Investment Group Co., Ltd. has a 49% stake in Agfa Graphics Asia Ltd., the holding company of the combined operations of both parties.

The subsidiaries of Agfa Graphics Asia Ltd. are

• Agfa (Wuxi) Printing Plate Co. Ltd.
• Agfa ASEAN Sdn. Bhd.
• Agfa Imaging (Shenzhen) Co. Ltd.
• Agfa Singapore Pte. Ltd.
• Agfa Taiwan Co Ltd.
• Shanghai Agfa Imaging Products Co., Ltd.

Based on the current governance structure, the Group has determined that it has control over these subsidiaries. At June 30, 2016, the accumulated amount of non-controlling interests attributable to Shenzhen Brother Gao Deng Investment Group Co., Ltd amounts to 30 million Euro, including accumulated exchange differences of 7 million Euro. The profit allocated to non-controlling interests of this business partner amounts to 4 million Euro for the 6 months ending June 2016.

In the second quarter of 2016, Shenzhen Brother Gao Deng Investment Group Co., Ltd. received a dividend amounting to 12 million Euro. In the consolidated statements of changes in equity, these dividends have been presented at historical rate, being 11 million Euro. The difference is presented in 'Other comprehensive income attributable to non-controlling interests'.

The following table summarizes the transaction values and the outstanding balances between the Group and Shenzhen Brother Gao Deng Investment Group Co, Ltd.:

		June 2016		June 2015
Million Euro	Transaction values Balances outstanding		Transaction values	Balances outstanding
Sales of goods and services to	12	3	14	6
Shenzhen Brother Gao Deng
Investment Group Co., Ltd.
Purchase of goods from	18	2	21	-
Shenzhen Brother Gao Deng
Investment Group Co., Ltd.
Dividends	12	-	-	-

12. Financial instruments

Financial instruments include a broad range of financial assets and liabilities. They include both primary financial instruments such as cash, receivables, debt and shares in another entity and derivative financial instruments. They are measured either at fair value or at amortized cost.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All derivative financial instruments are recognized at fair value in the statement of financial position.

For its financial instruments, the Group has applied in its condensed consolidated interim financial statements the same accounting classification and basis for determining fair values as those applied in the consolidated financial statements as at and for the year ended December 31, 2015. Therefore, we refer to the Annual Report 2015, disclosure note 7 'Financial risk management' - 7.5 'Accounting classification and fair values' which comprises more detailed information in this respect.

The Group aggregates its financial instruments into classes based on their nature and characteristics. The following table shows the carrying amounts and fair values of financial assets and liabilities by category and a reconciliation to the corresponding line items in the statements of financial position.

In million Euro	June 30, 2016
		Measured at fair value			Measured at
					amortized cost
	Held for trading	instruments Fair Value – hedging	through profit Designated at fair value or loss	Available-for sale	Maturity * Held-to	receivables Loans and	Total carrying amount in the statement of financial position	Fair Value
Fair Value Hierarchy	(2)	(2)	(1)	(1)
Assets
Financial assets	-	-	-	9	-	2	11	11
Trade receivables	-	-	-	-	-	515	515**
Other receivables -Receivables under finance lease	-	-	-	-	-	79	79**
-Other financial assets	-	-	-	-	-	17	17**
Derivative Financial instruments : - Forward exchange contracts used for hedging	-	2	-	-	-	-	2	2
- Swap contracts used for hedging	-	1	-	-	-	-	1	1
Cash and cash equivalents	-	-	-	-	8*	65	73	73
Total assets	-	3	-	9	8*	678	698
Liabilities
Loans and Borrowings EIB Loan Other bank liabilities Debenture	- - -	- - -	- - -	- - -	- - -	71 12 42	71 12 42	73 14 44
Trade payables	-	-	-	-	-	253	253**
Other payables	-	-	-	-	-	10	10**
Derivative Financial
instruments : - Forward exchange contracts	-	2	-	-	-	-	2	2
used for hedging - Other forward exchange contracts	3	-	-	-	-	-	3	3
- Other swap contracts	1	-	-	-	-	-	1	1
Total liabilities	4	2	-	-	-	388	394

Fair Value hierarchy :

(1) 'Financial assets designated at fair value through profit or loss' and 'Available-for-sale financial assets' are categorized in their entirety at fair value hierarchy 1 meaning that fair value is determined based on quoted prices in active markets.

(2) Financial assets and liabilities 'Held for trading' and 'Fair value-hedging instruments' are categorized in their entirety at fair value hierarchy 2 meaning that fair value is determined based on inputs other than quoted prices that are observable for the related asset or liability.

* The fair value of the financial assets classified as held-to-maturity approximates the carrying amount.

** The Group has not separately disclosed the fair value of trade and other receivables and the fair value of trade and other payables as these assets and liabilities are short-term receivables and payables for which the carrying amount is an approximation of fair value.

In million Euro	December 31, 2015
	Carrying amount of financial assets and liabilities
		Measured at fair value			Measured at
					amortized cost
	Held for trading	instruments Fair Value – hedging	Designated at through profit fair value or loss	Available-for sale	Maturity * Held-to	receivables Loans and	Carrying amount in the statement of financial position	Fair Value
Fair Value Hierarchy	(2)	(2)	(1)	(1)
Assets
Financial assets	-	-	-	15	-	1	16	16
Trade receivables	-	-	-	-	-	515	515 **
Other receivables - Receivables under finance lease	-	-	-	-	-	82	82 **
-Other financial assets	-	-	-	-	-	24	24 **
Derivative Financial instruments :
- Forward exchange contracts used for hedging	-	-	-	-	-	-	-	-
- Other forward exchange contracts	1	-	-	-	-	-	1	1
- Other swap contracts	1	-	-	-	-	-	1	1
Cash and cash equivalents	-	-	-	-	8 *	115	123	123
Total assets	2	-	-	15	8*	737	762
Liabilities
Loans and Borrowings
EIB Loan	-	-	-	-	-	84	84	86
Other bank liabilities	-	-	-	-	-	56	56	56
Debenture	-	-	-	-	-	41	41	44
Trade payables	-	-	-	-	-	206	206 **
Other payables	-		-	-	-	46	46 **
Derivative Financial
instruments :
- swap contracts used for	-	13	-	-	-	-	13	13
hedging
- Forward exchange contracts used for hedging	-	1	-	-	-	-	1	1
- Other forward exchange contracts	3	-	-	-	-	-	3	3
Total liabilities	3	14	-	-	-	433	450

Fair Value hierarchy:

(1) 'Financial assets designated at fair value through profit or loss' and 'Available-for-sale financial assets' are categorized in their entirety at fair value hierarchy 1 meaning that fair value is determined based on quoted prices in active markets.

(2) Financial assets and liabilities 'Held for trading' and 'Fair value-hedging instruments' are categorized in their entirety at fair value hierarchy 2 meaning that fair value is determined based on inputs other than quoted prices that are observable for the related asset or liability.

* The fair value of the financial assets classified as held-to-maturity approximates the carrying amount.

** The Group has not separately disclosed the fair value of trade and other receivables and the fair value of trade and other payables as these assets and liabilities are short –term receivables and payables for which the carrying amount is an approximation of fair value.

13. Subsequent events

There are no subsequent events.

Addendum This information has not been subject to a review of KPMG Bedrijfsrevisoren. AGFA-GEVAERT GROUP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME for the second quarter ending June 2016 / June 2015

In million Euro	Q2 ending	Q2 ending
	June 30, 2016	June 30, 2015

Condensed consolidated statement of profit or loss

Revenue	645	691
Cost of sales	(416)	(462)
Gross profit	229	229
Selling expenses	(89)	(90)
Research and development expenses	(35)	(37)
Administrative expenses	(41)	(44)
Other operating income	32	22
Other operating expenses	(22)	(32)
Result from operating activities	74	48
Interest income (expense) – net	(2)	(3)
Interest income	1	1
Interest expense	(3)	(4)
Other finance income (expense) – net	(19)	(11)
Other finance income	2	1
Other finance expense	(21)	(12)
Net finance costs	(21)	(14)
Profit (loss) before income tax	53	34
Income tax expense	(13)	(9)
Profit (loss) for the year	40	25
Profit attributable to:
Owners of the Company	38	23
Non-controlling interests	2	2

In million Euro	Q2 ending	Q2 ending
	June 30, 2016	June 30, 2015

Condensed consolidated statement of comprehensive income

Profit for the period	40	25
Other comprehensive income, net of tax
Items that are or may be reclassified subsequently to profit or loss:
Exchange differences:	18	(14)
Exchange differences on translation of foreign operations	13	(22)
Exchange differences on disposal of foreign operations
reclassified to profit or loss	7	-
Exchange differences on net investment hedge	(2)	8
Income tax on exchange differences on
net investment hedge	-	-
Cash flow hedges:	8	(4)
Effective portion of changes in fair value of
cash flow hedges	4	(7)
Change in fair value of cash flow hedges
reclassified to profit or loss	-	-
Adjustments for amounts transferred to initial carrying
Amount of hedged items	4	3
Income taxes	-	-
Available-for-sale financial assets:	-	-
Changes in the fair value of available-for-sale
financial assets	-	-
Income taxes	-	-
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of the net defined benefit liability	-	-
Income tax on remeasurements of the net defined benefit liability -		-
Total other comprehensive income for the period,
net of tax	26	(18)
Total comprehensive income for the period	66	7
attributable to:
Owners of the Company	64	7
Non-controlling interests	2	-