57 slides from Grifols, S.a. Class A's earnings presentation, Nov 4, 2014
Slide 1: Third Quarter 2014 Report
THIRD QUARTER 2014 REPORT
Slide 2: Disclaimer
2 THIRD QUARTER 2014 REPORT The facts and figures contained in this report which do not refer to historical data are “projections and forwardlooking statements”. The words and expressions like “believe”, “hope”, “anticipate”, “predict”, “expect”, “intend”, “should”, “try to achieve”, “estimate”, “fu
Slide 3: Net profit increases by 26.9% to 339 million euros
3 THIRD QUARTER 2014 REPORT 1 Excludes non-recurring costs and costs associated with recent acquisitions. NET PROFIT INCREASES BY 26.9% TO 339 MILLION EUROS NET PROFIT 339.0 MILLION EUROS +26.9% GROWTH 13.9% NET PROFIT/ REVENUE RATIO ADJUSTED1 EBITDA 791.6 MILLION EUROS +14.7% GROWTH 32.5% EBITDA/RE
Slide 4: Key figures to September 2014
4 THIRD QUARTER 2014 REPORT KEY FIGURES TO SEPTEMBER 2014 Revenues rose by 23.4% at constant currency (cc) reaching 2,438 million euros to september 2014 Growth accelerates 24.5% (cc) during the third quarter for all 3 divisions The EU regains its dynamism, with sales increasing by 4.5%(cc) while Un
Slide 5: Diagnostic division update
5 THIRD QUARTER 2014 REPORT portfolio of products, new commercial strategies to facilitate its gradual entrance into strategic markets and the search for opportunities with other group divisions. Currently the division is focused on three key areas of specialization: transfusion medicine, a sector i
Slide 6: Hospital division results
6 THIRD QUARTER 2014 REPORT The Hospital division increased its sales revenue by 0.6% (2.4% cc) in the third quarter of the year. Sales from January to September 2014 were 71.0 million euros, a decline of 4.5% (-1.6% cc). Grifols remains committed to promoting the internationalization of this divisi
Slide 7: Rest of world sales, margins and profits
7 THIRD QUARTER 2014 REPORT Exchange rate volatility in 2014 has had a significant impact on sales in the rest of the world (ROW). ROW sales totaled 300.5 million euros to September 2014, growing 4.1% at constant currency (cc) but decreasing 4.2% in reported term. In quarterly terms, this decline wa
Slide 8: Costs, R&D and net profit
8 THIRD QUARTER 2014 REPORT The policy of containing overhead costs remains in place and the company will continue to strive to optimize these. Similarly, the company has maintained its objective to allocate resources up to 6% of revenues to R&D over the medium term . The forecast organic growth par
Slide 9: Key balance sheet items as of September 2014
9 THIRD QUARTER 2014 REPORT 2. KEY BALANCE SHEET ITEMS AS OF SEPTEMBER 2014 Assets rise to 8,102.7 million euros following recent acquisitions Total consolidated assets at September 2014 were 8.1 billion euros, a significant increase compared to the figure of 5.8 billion euros reported in December 2
Slide 10: Investment areas: CAPEX, acquisitions and R&D
10 THIRD QUARTER 2014 REPORT 3. INVESTMENT AREAS: CAPEX, ACQUISITIONS AND R&D The strength of Grifols’ results, the positive cash flow figures, and the optimization and control of financial resources provide the company with the necessary funds to undertake the planned investments. Capital expenditu
Slide 11: Key events during the quarter
11 THIRD QUARTER 2014 REPORT 4. KEY EVENTS DURING THE QUARTER CORPORATE Grifols undertakes a global restructuring of its internal organization as part of its strategic plan Grifols has established a new, internal organizational structure for the group across the world with the aim of anticipating ne
Slide 12: Diagnostic and Hospital division events
12 THIRD QUARTER 2014 REPORT DIAGNOSTIC DIVISION: 19.3% OF REVENUES New approvals for the Procleix® range of transfusion safety products The Procleix® Xpress system is Grifols’ new pipetting platform to create aliquots and prepare samples for storage using nucleic acid amplification technology (NAT)
Slide 13: Profit and loss account
13 THIRD QUARTER 2014 REPORT PROFIT AND LOSS ACCOUNT IN THOUSANDS OF EUROS 9M 2014 9M 2013 % VAR. NET REVENUE (NR) 2,438,090 2,046,563 19.1% COST OF SALES (1,181,719) (980,610) 20.5% GROSS PROFIT 1,256,371 1,065,953 17.9% % NR 51.5% 52.1% R&D (127,539) (90,258) 41.3% SGA (497,611) (409,265) 21.6% OP
Slide 14: Group cash flow statement
14 THIRD QUARTER 2014 REPORT GROUP CASH FLOW STATEMENT IN THOUSANDS OF EUROS 9M 2014 9M 2013 GROUP PROFIT 338,985 267,037 DEPRECIATION AND AMORTIZATION 138,535 96,535 NET PROVISIONS 1,133 4,945 OTHER ADJUSTMENTS AND OTHER CHANGES IN WORKING CAPITAL 186,149 36,486 CHANGES IN INVENTORIES (71,124) (5,2
Slide 15: Balance sheet
15 THIRD QUARTER 2014 REPORT BALANCE SHEET IN THOUSANDS OF EUROS SEPTEMBER 2014 DECEMBER 2013 ASSETS NON-CURRENT ASSETS 5,395,075 3,701,376 GOODWILL AND OTHER INTANGIBLE 4,138,137 2,775,576 PROPERTY PLANT & EQUIPMENT 1,077,813 840,238 INVESTMENTS IN EQUITY ACCOUNTED INVESTEES 58,058 35,765 NON-CURRE
Slide 16: Grifols Performance Review November 2014
Grifols Performance Review November 2014 1
Slide 17: Disclaimer
Disclaimer This document has been prepared by GRIFOLS, S.A. (GRIFOLS or the “Company”) exclusively for use during this presentation. Therefore it cannot be disclosed or made public by any person or entity with an aim other than the one expressed above, without the prior written consent of the Compan
Slide 18: 1. Grifols Current Performance
1. Grifols Current Performance
Slide 19: Current Performance - Highlights
Grifols Current Performance - Highlights Core business fundamentals remain solid Strong cash generation capability: positive operating CF Investing in the future R&D in line with target significant growth Capex expansion according to schedule Refinancing & average cost of debt reduction M&A: Diagnos
Slide 20: Current Performance – Net Revenue
Grifols Current Performance – Net Revenue Bioscience Healthy protein growth in core business: high single digit for IVIG and albumin and double digit in Alpha 1 Bumpy pdFVIII tenders, contract manufacturing and intermediates Diagnostic Blood typing solutions: robust growth NAT continuous growth (Jap
Slide 21: Grifols products hold leading share positions globally
Grifols products hold leading share positions globally Excluding the impact of pdFVIII tenders, all major proteins growing at expected rates Grifols has capacity to grow with market Source MRB : The Worldwide Plasma Proteins Market - 2013 Grifols Bioscience
Slide 22: Grifols Bioscience: global market shares
N.2 N.1 IVIG Alpha1 Albumin pdFactor VIII Source MRB : The Worldwide Plasma Proteins Market - 2013 Grifols Bioscience: global market shares New Gamunex (IVIG) facility ready to ensure future growth from 2015 Construction of a new facility in Barcelona, to be ready in 2017 High growth in no-tender sa
Slide 23: Grifols holds leading global IG share
Grifols holds leading global IG share Opportunity for treatment growth continues Capacity expansion will support growth globally NA growth in mid single digits – lower than historical growth Dual branding market strategy Immunoglobulins Growth Rate in Grifols IG Pull through Sales in value (US) Sour
Slide 24: Grifols leads Alpha market
Grifols leads Alpha 1 market Strong Alpha 1 growth continues in NA and Europe Significant opportunity remains to increase diagnosis and treatment Alpha1 Growth in Test Kit Returns vs previous year (US) Source: Internal Data from University of Florida lab 8% 22% 0% 5% 10% 15% 20% 25% 1Q 2014 2Q 2014
Slide 25: Strong growth for Albumin continues led by China
Strong growth for Albumin continues led by China IG growth rate will determine Albumin. Balanced growth requirement Grifols is continuing to develop new indications Albumin Source: MRB & Internal Data 24% 17% 12% 9% 3% 35% Albumin by Company 2013 in Value CSL GRIFOLS BAXTER OCTAPHARMA KEDRION OTHERS
Slide 26: pdFVIII: Grifols holds leading market share
Grifols holds leading market share Growth continues in the US and commercial markets Large tender markets key to growth Long-term growth expected in emerging markets 2012 Total pdFVIII market (4.118 M IU) Commercial Market 1.808 M IU 983 M € Tender Market 2.310 M IU 467 M € pdFVIII Source: Calculate
Slide 27: Current Performance – Gross Margin
Grifols Current Performance – Gross Margin Stable cost of plasma: neutral impact on margins Positive Bioscience product mix and higher plasma utilization Manufacturing cost increases due to new plants start-up Stable price environment % GM stability in Bioscience, other divisions slightly improving
Slide 28: Current Performance – R&D
Grifols Current Performance – R&D Significant R&D growth in 2014 (+31%) vs spend decline in 2013 (-1%), as a result of project phasing acceleration. Main R&D projects spend focus to reinforce Bioscience core products with new indications and formulations: IVIG Albumin New products: Fibrin Sealant an
Slide 29: Current Performance – SG&A
Grifols Current Performance – SG&A New cost items, non-recurring: Validation of new facilities Diagnostic unit integration Completion of integration process will contribute to future growth Bioscience commercial HQ moved to Raleigh, NC and Diagnostic commercial HQ moved to Emeryville, CA Additional
Slide 30: Current Performance - EBITDA
Grifols Current Performance - EBITDA Diagnostic Division higher revenue weight (with lower margin) Significant R&D growth FX headwind up to Q3 % EBITDA margin c. 32%
Slide 31: Operating Profit Breakdown by Divisions
YTD September 2014 vs 2013 Operating Profit Breakdown by Divisions Operating Profit margins in Raw Mat approx 66%; for Royalties, included in Other, close to 100% Diagnostic margin Q1 vs Q2 not comparable, H1 margins to be sustainable in H2 (€ Million) (1) Including intersegment revenue and Operatin
Slide 32: Diagnostic Unit acquisition – Financial snapshot
Diagnostic Unit acquisition – Financial snapshot 2014 Estimate Revenue Share 2014 Estimate EBIT Share NAT makes most of the Revenue but IA and Licensing carry a significantly higher impact on EBIT NAT: distribution business Immunoassay: manufacturing activity / business
Slide 33: Current Performance – Below the line
Grifols Current Performance – Below the line Financial Result: moderate growth besides additional $1,5 Bn. debt Financial Expenses (cash) reduction from Q2 and onwards Amortization of deferred fees (non cash) declining Derivatives, FX negative impact Tax rate : 20%-22% Significant Net Profit increas
Slide 34: 2. Industry Outlook
2. Industry Outlook 20
Slide 35: Industry Outlook - Highlights
Industry Outlook - Highlights Sector growth Bioscience: 6-7% volume growth Diagnostic : 3-4% market growth Stable Prices: on average all proteins ROW prices may be lower than US/EU for some proteins Impact of geographical mix in global revenues The supply / demand balance and the general plasma mark
Slide 36: Main Volume Demand by Protein Worldwide
Main Volume Demand by Protein Worldwide Source: JB Capital Markets, MRB 2013 2014 2015 2016 2017 2018 CAGR % IG Demand growth 8% 7% 6% 6% 6% 6% 6% % Albumin Demand growth 5% 5% 5% 4% 3% 3% 4% % pdFVIII Demand growth 6% 5% 4% 3% 3% 3% 3.5% % A1PI Demand growth 7% 7% 8% 8% 8% 7% 7.5%
Slide 37: Global IVIG balanced supply demand
Global IVIG balanced supply demand Source: UBS
Slide 38: 3. Grifols Future Performance
3. Grifols Future Performance
Slide 39: Future Performance - Highlights
Grifols Future Performance - Highlights Ready to meet future growth - 12.5 million liters total capacity from 2015 State of the art facilities fully cross-licensed – Production flexibility Additional access to Plasma New collection centers: ~20 relocations & openings in 2015 Third-party contracts 2
Slide 40: Future Performance – New organization
Grifols Future Performance – New organization Geographical expansion and portfolio strengthening as key growth drivers Corporate HQ in Barcelona Organization more focused on sales performance with new commercial HQs: Raleigh, NC for Bioscience Emeryville, CA for Diagnostic Division All industrial HQ
Slide 41: Future Performance – Net Revenue
Grifols Future Performance – Net Revenue Sustainable long-term market growth in Bioscience. Additional expansion in ROW markets Expected pdFVIII tenders positive phasing impact Alpha1 opportunities in Europe and South America Building stronger US diagnostic franchise with blood typing solutions
Slide 42: Future Performance – Margins
Grifols Future Performance – Margins + New plants: Significant depreciation increase & start-up costs (2015-2016) Divisional EBIT mix - Diagnostic EBIT Lower royalties – significant revenue decline Temporary higher cost of plasma – ongoing network expansion Lower revenue per liter because of lower F
Slide 43: Future Performance – Operating expenses
Grifols Future Performance – Operating expenses Cash-out R&D as % of NR: 5% - 6% mid term Strengthening Alpha 1 sales force to roll-out this business model Stronger Diagnostic sales platform (Immunohematology) After business integration, operational leverage – progressive reduction expected in SG&A
Slide 44: Future Performance - EBITDA
Grifols Future Performance - EBITDA Opportunities to improve margins in the Bioscience division in the medium term after new plants ramp-up Higher plasma collections will support plasma cost improvements R&D spend stabilized after 2014 pick-up Estimated FX tailwind in 2015 Medium-term % EBITDA margi
Slide 45: Strategic Pillars
Strategic Pillars CORE BUSINESS OPTIMIZATION GLOBAL EXPANSION CAPACITY LEADERSHIP INNOVATION ACCELERATION MULTI-BUSINESS BUILD Plasma Liter Economics Product franchise development & expansion IG franchise power Differentiate on Quality and Safety Pulmonary Bolt-on India Turkey China LATAM Japan Glob
Slide 46: Future Performance – Below the line
Grifols Future Performance – Below the line Financing: long-term debt maturities, quasi bullet and low financing costs Effective Tax rate: 20% - 22% range Sustainable growth in EPS Continuous shareholders reward through dividends: - 40% pay-out - Two payments (interim / final) Sensitivity to strong
Slide 47: 4. 2014 YTD September Performance
4. 2014 YTD September Performance
Slide 48: 2014 YTD September Sales by Division
2014 YTD September Sales by Division (*) €15.8 Million of intersegment sales not included (€ Million) 9M 2014 % of Sales 9M 2013 % of Sales % Variance % Variance at constant rate Bioscience 1,823.3 74.8% 1,821.4 89.0% 0.1% 3.7% Hospital 71.0 2.9% 74.3 3.6% -4.5% -1.6 Diagnostic (*) 452.8 18.6% 97.9
Slide 49: Solid Performance supported by organic and non-organic contribution
Solid Performance supported by organic and non-organic contribution Net Revenues Adjusted EBITDA Net Profit Financial Result +19.1% +23.4% c.c. +14.7% 32.5% +26.9% 13.9% 33.7% 13.0% 2013 YTD Sept. 2014 YTD Sept. 2013 YTD Sept. 2014 YTD Sept. 2013 YTD Sept. 2014 YTD Sept. +12.9% 2013 YTD Sept. 2014 Y
Slide 50: LTM Adjusted EBITDA
LTM Adjusted EBITDA: Positive organic and non-organic contribution Continuous operational improvement: Manufacturing and plasma cost efficiencies Yield improvements Higher plasma cost utilization and income per liter increase SG&A leverage Significant R&D investment in 2014 (€ Million) 592.8 630.8 7
Slide 51: Financial Result – Interest expense declining
Financial Result – Interest expense declining (€ Million) +3% excl. FX loss YTD Sept. 2013 YTD Sept. 2014 % Variance Interests 119.6 121.3 1.5% Financing deferred cost 59.1 43.9 -25.6% Other financial expense / income -3.2 4.0 NM Derivatives valuation 2.9 14.8 NM FX variance Loss 0.8 18.4 unrealized
Slide 52: Strong operating Cash Flow generation
Strong operating Cash Flow generation – 2014 YTD September Sources Uses (€ Million) - Operating Cash Flow 787,0 - Working Capital Increase -8,9 - Net Operating Cash Flow 778,1 - Gross Debt Increase 1.243,8 - Others 13,6 - Cash Beginning Balance 708,8 - Cash Ending Balance 917,7 - Cash Increase -208,
Slide 53: Net Bank Debt increases after Diagnostic Unit acquisition
Net Bank Debt increases after Diagnostic Unit acquisition (USD Million) Diagnostic Unit acquisition 3,887 3,904 3,663 3,532 3,396 3,451 3,347 3,328 2,984 4,770 4,696 4,448 2.800 3.000 3.200 3.400 3.600 3.800 4.000 4.200 4.400 4.600 4.800 5.000 Dec. 2011 Mar. 2012 June 2012 Sept. 2012 Dec. 2012 Mar.
Slide 54: Moderate Leverage Ratio
Moderate Leverage Ratio level Covenant Level PF PF PF PF 2.78x at c.c. 5.0 5.0 5.0 4.34 2.87 2.28 3.0 2.83 2.92 3.04 2,0 2,5 3,0 3,5 4,0 4,5 5,0 5,5 Dec. 2011 Dec. 2012 Dec. 2013 PF Dec. 2013 PF March 2014 PF June 2014 PF Sept. 2014
Slide 55: Shareholders Return
Shareholders Return 42
Slide 56: Dividends distribution: Improving return to shareholders
Dividends distribution (1): Improving return to shareholders € DPS 2009 2010 2011 2012 2013 Pay-out 40% €0.38 Interim 2009 + Final 2008 €0.13 Final 2009 Script Dividend 1B: 10 A or B Script Dividend 1B: 20 A or B (2) In addition to the 2013 interim dividend, the 2012 preferred dividend of € 0.01 was
Slide 57: YTD September Performance - Highlights
YTD September Performance - Highlights Quarterly ramp-up performance, with solid growth in the 4 core proteins (+5,7% c.c.), excluding FVIII tenders Robust growth in Diagnostic (w/o acquisition) +8,5%, due to Blood typing solutions acceleration, while Hospital declined by 1,2% Adjusted EBITDA margin