Agfa-Gevaert NV

Quarterly Report • Aug 23, 2017

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2017

The condensed interim financial statements as of June 30, 2017 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, 2017	Dec. 31, 2016
ASSETS
Non-current assets		1,041	1,066
Intangible assets and goodwill	5	605	621
Property, plant and equipment		191	198
Investments in associates		6
Financial assets	12	10	10
Trade receivables		13	12
Receivables under finance lease		65	57
Other assets		10	13
Deferred tax assets		141	149
Current assets		1,271	1,286
Inventories		534	483
Trade receivables	12	479	493
Current income tax assets		60	64
Other tax receivables		24	25
Receivables under finance lease		19	30
Other receivables	12	13	13
Other assets		55	45
Derivative financial instruments	12	16
Cash and cash equivalents	12	71	129
Non-current assets held for sale		-
Total assets		2,312	2,352
EQUITY AND LIABILITIES
Equity		260	252
Equity attributable to owners of the Company		231	215
Share capital		187	187
Share premium		210	210
Retained Earnings		873	841
Reserves		(71)	(79)
Translation reserve		8	32
Post-employment benefits: remeasurements of
the net defined benefit liability		(976)	(976)
Non-controlling interests		29	37
Non-current liabilities		1,338	1,382
Liabilities for post-employment and long-term
Termination benefit plans	6	1,240	1,269
Other employee benefits		8
Loans and borrowings	12	59	74
Provisions		5
Trade payables		4
Deferred income		2
Deferred tax liabilities		20	19
Current liabilities		714	718
Loans and borrowings	12	39	37
Provisions		65	74
Trade payables	12	231	219
Deferred revenue and advance payments		162	141
Current income tax liabilities		52	56
Other tax liabilities		33	37
Other payables	12	12	11
Employee benefits		115	132
Other liabilities		3
Derivative financial instruments	12	2
Total Equity and Liabilities		2,312	2,352

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, 2017	June 30, 2016
Condensed consolidated statement of profit or loss
Revenue	7	1,210	1,248
Cost of sales		(805)	(824)
Gross profit		405	424
Selling expenses		(174)	(173)
Research and development expenses		(74)	(70)
Administrative expenses		(86)	(84)
Other operating income		34	56
Other operating expenses		(37)	(49)
Result from operating activities	7	68	104
Interest income (expense) – net		(3)	(4)
Interest income	8	1	1
Interest expense	8	(4)	(5)
Other finance income (expense) – net		(17)	(25)
Other finance income	8	5	8
Other finance expense	8	(22)	(33)
Net finance costs		(20)	(29)
Profit (loss) before income tax	7	48	75
Income tax expense		(13)	(25)
Profit (loss) for the period		35	50

Profit (loss) attributable to:
Owners of the Company	32	46
Non-controlling interests	3	4
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 (€) 0.19 0.28

In million Euro	6 months ending	6 months ending
	June 30, 2017	June 30, 2016

Condensed consolidated statement of comprehensive income

Profit (loss) for the period	35
Other comprehensive income, net of tax
Items that are or may be reclassified subsequently to profit or loss:
Exchange differences:	(25)
Exchange differences on translation of foreign operations	(25)
Exchange differences on disposal of foreign operations
reclassified to profit or loss	-
Exchange differences on net investment hedge	-
Income tax on exchange differences on	-
net investment hedge
Cash flow hedges:	8
Effective portion of changes in fair value of
cash flow hedges	20
Change in fair value of cash flow hedges
reclassified to profit or loss	-
Adjustment for amounts transferred to initial carrying amount
of hedged item	(7)
Income taxes	(5)
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 :	(17)
Total comprehensive income for the period	18
attributable to:
Owners of the Company	16
Non-controlling interests	2

The condensed consolidated statement of comprehensive income for the current interim period (second quarter ending June 30, 2017) 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, 2017	6 months ending June 30, 2016
Profit (loss for the period	35	50
Adjustments for:
Depreciation, amortization and impairment losses	26	28
Changes in fair value of derivative financial instruments	(3)	3
Granted subventions	(4)	(4)
(Gains)/losses on sale of non-current assets	(1)	(10)
Net finance costs	20	29
Income tax expense	13	25
	86	121
Changes in:
Inventories	(65)	(30)
Trade receivables	(1)	8
Trade payables	15	17
Deferred revenue and advance payments	27	22
Other working capital	(9)	(33)
Non-current provisions	(25)	(22)
Current provisions	(25)	(24)
Cash generated from operating activities	3	59
Income taxes paid	(7)	(12)
Net cash from (used in) operating activities	(4)	47
Interest received	1	1
Dividends received	-	-
Proceeds from sale of intangible assets	1	1
Proceeds from sale of property, plant and equipment	2	1
Proceeds from non-current assets held for sale	-	14
Acquisition of intangible assets	(2)	(4)
Acquisition of property, plant and equipment	(16)	(17)
Changes in lease portfolio	2	2
Acquisition of subsidiary, net of cash acquired	(2)	-
Change in other investing activities	1	(4)
Net cash from (used in) investing activities	(13)	(6)
Interest paid	(6)	(6)
Dividends paid to non-controlling interests	(10)	(12)
Proceeds from borrowings	-	-
Repayment of borrowings	(11)	(58)
Other financial flows	(12)	(15)
Net cash from (used in) financing activities	(39)	(91)
Net increase (decrease) in cash and cash equivalents	(56)	(50)
Cash and cash equivalents at 1 January	127	122
Effect of exchange rate fluctuations	(2)	(1)
Cash and cash equivalents at 30 June	69	71

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, 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
Balance at January 1, 2017	187	210	841	(82)	2	1	(976)	32	215	37	252
Comprehensive income for the period
Profit (loss) for the period	-	-	32	-	-	-	-	-	32	3	35
Other comprehensive income net of tax	-	-	-	-	-	8	-	(24)	(16)	(1)	(17)
Total comprehensive income for the period	-	-	32	-	-	8	-	(24)	16	2	18
Transactions with owners recorded directly in equity
Dividends	-	-	-	-	-	-	-	-	-	(10)	(10)
Total of transactions with owners recorded directly in equity	-	-	-	-	-	-	-	-	-	(10)	(10)
Balance at June 30, 2017	187	210	873	(82)	2	9	(976)	8	231	29	260

1.5 Selected explanatory notes to the condensed consolidated interim financial statements as of June 30, 2017

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, 2017 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, 2016 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 2017. 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, 2016. These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on August 22, 2017.

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, 2016. The first time application of new or revised IFRSs, which are effective for annual periods beginning on or after January 1, 2017 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, 2016.

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, 2017 since the annual impairment test performed at the Cash Generating Unit level had not revealed any impairment loss at December 31, 2016 and since the following criteria were met at June 30, 2017:

• The assets and liabilities making up the units have not changed significantly since the fourth quarter 2016;
• The recoverable amount calculation dated from the fourth quarter 2016 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 2016, 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, 2017	Dec.31, 2016
Net liability for material countries	1,166	1,188
Net liability for non-material	42	43
countries
Long-term termination benefit	32	38
plans
Total net liability	1,240	1,269

For the measurement of its post-employment benefits as at June 30, 2017, the Group has applied the requirements of IAS19 (revised 2011).

During the first half year of 2017, 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 36 million Euro, employer contributions and benefits paid directly by the Company amounting to 42 million Euro, the remaining difference is explained by translation differences (16 million Euro). The defined benefit cost of 36 million Euro comprises a defined benefit cost related to the Belgian DC-plans with return guaranteed by law amounting to 10 million Euro. The Group's employer contributions for the first half year 2017 have been impacted by the aforementioned DC-plans for the same amount.

As per 30 June 2017, 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 2016, disclosure note 24 'Employee Benefits' to the Consolidated Financial Statements.

7. Reportable segments

In million	Agfa Graphics		Agfa HealthCare			Agfa Specialty	Total
Euro						Products
	2017	2016	2017	2016	2017	2016	2017	2016
Revenue	609	628	503	531	98	89	1,210	1,248
Recurring EBIT (*)	31	40	36	53	8	7	75	100
Segment result (**)	28	47	34	51	8	7	70	105

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	48	75
Other finance income (expense) – net	(17) ____	(25) ____
Interest income (expense) – net	(3)	(4)
Other unallocated amounts:
Results from operating activities	68	104
a reportable segment	(2) ____	(1) ____
Profit (loss) from operating activities not allocated to
Segment result	70	105
In million Euro
	2017	2016

8. Net finance costs

For the six months ended June 30
In million Euro	2017	2016
Interest income on bank deposits	1	1
Interest expense	(4)	(5)
On bank loans	(2)	(2)
On EIB loan	(1)	(2)
On debentures	(1)	(1)
Interest income (expense) – net	_____ (3)	_____ (4)
Other finance income	5	8
Other finance expense	(22)	(33)
Other finance income (expense) – net	____ (17)	____ (25)
Net finance costs	____ (20)	____ (29)

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 unusual items that have affected the condensed interim financial statements as at and for the six months ended June 30, 2017.

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, 2016.

11. Related party transactions

Transactions with Directors and members of the Executive Management

For the six months ended June 30, 2017 there are compared to last year no significant changes in the compensation of key management personnel.

As of June 30, 2017 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, 2017: 28 million Euro, December 31, 2016: 36 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, 2017: 1 million Euro, December 31 2016: 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, 2017, the accumulated amount of non-controlling interests attributable to Shenzhen Brother Gao Deng Investment Group Co., Ltd amounts to 28 million Euro, including accumulated exchange differences of 5 million Euro. The profit allocated to non-controlling interests of this business partner amounts to 3 million Euro for the 6 months ending June 2017.

In the second quarter of 2017, Shenzhen Brother Gao Deng Investment Group Co., Ltd. received a dividend amounting to 10 million Euro, accumulated exchange differences have decreased with 1 million Euro compared to December 31,2016.

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

		June 2017	June 2016
Million Euro	Transaction values	Balances outstanding	Transaction values	Balances outstanding
Sales of goods and services to	13	7	12	3
Shenzhen Brother Gao Deng
Investment Group Co., Ltd.
Purchase of goods from	17	-	18	2
Shenzhen Brother Gao Deng
Investment Group Co., Ltd.
Dividends	10		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, 2016. Therefore, we refer to the Annual Report 2016, 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, 2017
			Carrying amount of financial assets and liabilities
	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	-	1	10	10
Trade receivables	-	-	-	-	-	492	492*
Other receivables -Receivables under finance lease	-	-	-	-	-	84	84*
-Other financial assets	-	-	-	-	-	13	13*
Derivative Financial instruments : - Forward exchange contracts	-	8	-	-	-	-	8	8
used for hedging - Swap contracts used for Hedging	-	5	-	-	-	-	5	5
- Other forward exchange contracts	2	-	-	-	-	-	2	2
- Other swap contracts	1	-	-	-	-	-	1	1
Cash and cash equivalents	-	-	-	-	-	71	71	71
Total assets	3	13	-	9	-	661	686
Liabilities
Loans and Borrowings EIB Loan	-	-	-	-	-	45	45	48
Other bank liabilities	-	-	-	-	-	11	11	13**
Debenture	-	-	-	-	-	42	42	44
Trade payables	-	-	-	-	-	235	235*
Other payables	-	-	-	-	-	12	12*
Derivative Financial instruments : - Forward exchange contracts used for hedging	-	2	-	-	-	-	2	2
Total liabilities	-	2	-	-	-	345	347

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 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 mainly short-term receivables and payables for which the carrying amount is an approximation of fair value. **Transaction costs are included in the initial measurement of the financial liability (2 million euro)

Carrying amount of financial assets and liabilities Measured at fair value Measured at amortized cost Carrying amount in the
Designated at through profit Available-for instruments Fair Value – receivables Maturity * Loans and Fair Value statement of fair value Held for hedging Held-to trading or loss financial sale position
Fair Value Hierarchy (2) (2) (1) (1)
Assets
Financial assets - - - 8 - 2 10 10
Trade receivables - - - - - 505 505 **
Other receivables - Receivables under finance - - - - - 87 87 **
lease
-Other financial assets - - - - - 13 13 **
Derivative Financial
instruments :
- Forward exchange contracts - 1 - - - - 1 1 used for hedging
- Swap contracts used for - 2 - - - - 2 2
hedging
- Other forward exchange 1 - - - - - 1 1
contracts
Cash and cash equivalents - - - - 10 * 119 129 129
Total assets 1 3 - 8 10* 726 748
Liabilities
Loans and Borrowings
EIB Loan - - - - - 58 58 60
Other bank liabilities - - - - - 11 11 13 ***
Debenture - - - - - 42 42 44
Trade payables - - - - - 225 225 **
Other payables - - - - 11 11 **
Derivative Financial
instruments :
- Forward exchange contracts - 3 - - - - 3 3
used for hedging
- Other forward exchange 3 - - - - - 3 3 contracts
- Other swap contracts 2 - - - - - 2 2
Total liabilities 5 3 - - - 347 355

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 mainly short –term receivables and payables for which the carrying amount is an approximation of fair value.

*** Transaction costs are included in the initial measurement of the financial liability (2 million euro)

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 2017 / June 2016

In million Euro	Q2 ending	Q2 ending
	June 30, 2017	June 30, 2016

Condensed consolidated statement of profit or loss

Revenue	622	645
Cost of sales	(409)	(416)
Gross profit	213	229
Selling expenses	(88)	(89)
Research and development expenses	(37)	(35)
Administrative expenses	(43)	(41)
Other operating income	20	32
Other operating expenses	(20)	(22)
Result from operating activities	45	74
Interest income (expense) – net	(1)	(2)
Interest income	1	1
Interest expense	(2)	(3)
Other finance income (expense) – net	(7)	(19)
Other finance income	3	2
Other finance expense	(10)	(21)
Net finance costs	(8)	(21)
Profit (loss) before income tax	37	53
Income tax expense	(10)	(13)
Profit (loss) for the year	27	40
Profit attributable to:
Owners of the Company	26	38
Non-controlling interests	1	2

In million Euro	Q2 ending	Q2 ending
	June 30, 2017	June 30, 2016

Condensed consolidated statement of comprehensive income

Profit for the period	27
Other comprehensive income, net of tax
Items that are or may be reclassified subsequently to profit or loss:
Exchange differences:	(24)
Exchange differences on translation of foreign operations	(24)
Exchange differences on disposal of foreign operations
reclassified to profit or loss	-
Exchange differences on net investment hedge	-
Income tax on exchange differences on
net investment hedge	-
Cash flow hedges:	-
Effective portion of changes in fair value of
cash flow hedges	5
Change in fair value of cash flow hedges
reclassified to profit or loss	(1)
Adjustments for amounts transferred to initial carrying
Amount of hedged items	(4)
Income taxes	-
Available-for-sale financial assets:	(1)
Changes in the fair value of available-for-sale
financial assets	(1)
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	(25)
Total comprehensive income for the period	2
attributable to:
Owners of the Company	2
Non-controlling interests	-