Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Euroapi SA (EAPIF, Financial) is on track with its FOCUS-27 plan, with several initiatives launched and advanced discussions for financing.
- The company registered solid momentum in CDMO with 14 new projects in H1, aligning with its strategy to de-risk its portfolio.
- The restart of shipments and production in Brindisi is progressing as expected, with the GMP license reinstated in mid-July.
- Core EBITDA margin was positively impacted by increased prices, better product mix, and improved industrial performance.
- Significant improvement in financial discipline and cash flow, with a reduction in working capital and improved cash collection.
Negative Points
- Consolidated net sales decreased by 9.6%, driven by a strong decline in demand from Sanofi and suspension of production in Brindisi.
- Core EBITDA decreased by 23.8% compared to the previous year, with a margin drop from 12.6% to 10.6%.
- The company recorded a net loss of EUR34.8 million for the period, impacted by non-recurring costs and restructuring expenses.
- Sales to Sanofi dropped by 14.9%, and sales to other clients decreased by 4.6%, affecting overall revenue.
- The financial result was negatively impacted by increased interest rates and full drawdown of the ICS, leading to a negative EUR8.1 million.
Q & A Highlights
Q: Could you explain the factors influencing the second half of 2024, particularly regarding the core EBITDA margin, and how should we think about margin progression in 2025?
A: The second half of 2024 is expected to have lower profitability due to a different volume mix, reduced benefits from renegotiated terms with Sanofi, and the cautious restart of the Brindisi plant. For 2025, while specific margin guidance wasn't provided, the focus remains on executing the FOCUS-27 plan, with more cost benefits expected in 2026-2027. The Haverhill divestment and non-repeating benefits from 2024 are also considerations.
Q: Can you provide an update on the revolving credit facility (RCF) financing discussions?
A: Discussions are progressing well with the pool of seven banks involved. Significant progress has been made, and the company is confident of concluding the RCF in the next two weeks. This will enable full support from all shareholders for the FOCUS-27 plan.
Q: Regarding the margin bridge, which effects are not expected to repeat in the second half, and what is the expected magnitude of restructuring costs?
A: The Buserelin stock clearance benefit will not repeat in H2, and the product mix is expected to be less favorable. Restructuring costs, mainly related to FOCUS-27, will continue in H2, including idle costs and expenses for redundancy plans. These costs are expected to persist throughout the plan's duration.
Q: What gives you confidence in achieving the targeted inventory reduction by year-end?
A: The company has a detailed and professional approach to inventory management, with a steering committee meeting bi-weekly. The reduction is phased to the second half due to long production lead times, particularly at the Vertolaye plant. The company is confident in achieving the reduction and improving inventory quality.
Q: Have you noticed any change in RFPs from pharma companies looking to diversify supply chains away from China due to the Biosecure bill?
A: There is increased interest from customers looking to diversify supply chains, but it is too early to comment on concrete outcomes. The company sees positive momentum but has not yet reflected this in financial results.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
