Restructured Aqfa eyes the industrial market
The town councilor in suburban Morstel here was incensed. Agfa-Gevaert had announced in February that ownership of the Belgian-German photographic company would be altered from a 50-50 ratio to a 60-40 percentage in favor of its German owners. The councilor proposed a resolution blocking the move. But the town, of course, had no such powers and the suggestion was defeated.
The Flemish parent of the group, Gevaert PhotoProducten Ltd., goes back to 1890 when Lieven Gevaert, an Antwerp photographer, began the manufacture on a small scale of sensitive photo paper. As his company grew, Mr. gevaert became well known for his socially minded contributions to the community, such as founding schools. "He was before his time," said a company official here.
Thus the older generation in this Dutch-speaking area of Belgium was unhappy when the delicate ownership balance in the multinational corporation was upset. It offended their Flemish pride. Also, despite a promise by the German owners, Bayer, that their majority position would not be used to the disadvantage of Belgian business, some suspicion remained that Mortsel might suffer economically.
What prompted the financial restructuring of Agfa- Gevaert was the fast increase in the price of silver and the need for more capital for new investment , particularly in the United States. Last year the group, the second largest photographic company in the world after Eastman Kodak, used some 700 metric tons of silver in its film. That amount cost about $100 million in 1978. If silver prices had held near their peak, the extra bill would have run around $700 million.
The company maintains it couldn't find such a large sum on the tight Belgian capital market. Huge government borrowings to cover budget deficits forced up interest rates in that market and left relatively little money behind for private companies. Moreover, the price of shares of Gevaert Photo-Producten were badly depressed on the stock market.
So Bayer, the huge West German chemical concern, offered to put up an extra $ 115 million of equity for an extra 10 percent of the joint concern. Additional money will be borrowed.
Another problem for Agfa-Gevaert was that it could not get up its film prices fast enough to cover the extra cost of silver. So, it is expected that when the books on 1979 are closed shortly, the company will declare either a loss or marginal profits. Worldwide sales last year were up around 4 or 5 percent in volume. In money terms, they were up from $1.8 billion in 1978 to something just over $2 billion in 1979, a company official said. (Eastman Kodak sales are about four times larger.)
Agfa-Gevaert has an unusual corporate structure because of the absence of any European Community law for the registration of a European company. A 1964 merger created two operating companies, the Belgian NV Agfa-Gevaert and the German AG Agfa-Gevaert. Each then was owned 50-50 by its parent companies. The board of directors and managing board are composed of the same persons. The chairmanship was rotated at first from Belgian to German -- a practice that has been dropped.
It was a relatively natural merger. The Belgian company had specialized in the technical and scientific application of photography. Agfa (Aktien Gesellschaft fur Anilin Fabrikation) had concentrated on conventional photography, that is, cameras and film for amateur photographers.
Those specializations continue today. Because the technical and scientific side of photography has been growing faster than amateur photography, Agfa-Gevaert has been expanding here more rapidly than in Leverkusen, Germany, the headquarters for the production of films, papers, and chemicals for conventional photography. The company makes such equipment as cameras, projectors, copiers, electronic processing laboratory equipment, x-ray processors, microfilm equipment, and other machines at a plant in Munich. It also makes magnetic tape in the Bavarian capital, though it has plans for a magnetic tape plant in the United States where labor costs are lower.
In Western Europe Agfa-Gevaert's color slides capture some 70 percent of the market. Most Europeans appear to prefer its "more natural colors" to the strong colors of Kodak film. However, Kodak takes some 70 percent of the European colorprint market.
Altogether, Agfa-Gevaert last year won some 40 percent of the European film market, up 4 percent from the year before.
"We are not a sick company," maintained an official.
In the United States, Agfa-Gevaert has not seriously challenged Kodak in the amateur market. It distributes its film through Braun NA, a subsidiary of Gillette. But it expects to have only 0.4 percent of the market for slide film this year and 6.2 percent of the market for color paper (down from 11.5 percent in 1977).
"We almost don't consider ourselves a competitor of Kodak in the consumer field," said an executive at the American subsidiary in Teterboro, N.J. Kodak itself is facing increased competition in colorprint film from Japanese filmmakers, including Fuji, Sakura, and Mitsubishi,
But it is different in the area of materials for the graphic arts and x-ray film. Here US sales are above expectations.
"We can sell a lot more goods than Europe has been willing to provide us," noted the executive. The decline in the value of the dollar against the Belgian franc or West German deutsche mark has in some cases made exports to the US nonprofitable. That is why Agfa-Gevaert wants to expand production in the US, the world's largest market for photographic materials.
Some 70 percent of Agfa-Gevaert's Belgian and German production is exported, mainly to countries with weak currencies. Exports have become somewhat easier with the strengthening of the dollar recently. "Let's pray it continues," said an official here.