Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Schott Pharma AG & CO KGaA (WBO:1SXP, Financial) reported a 21% year-over-year revenue growth in the third quarter, reaching EUR268 million at constant currencies.
- The company achieved a significant increase in profitability, with an EBITDA margin of 28.2%, up by more than 3 percentage points year-over-year.
- The company's HVS (High Value Solutions) revenue share reached 53% in the first nine months, aligning well with its midterm goal of over 60%.
- Schott Pharma raised its full-year revenue growth guidance from 9%-11% to 11%-13%, reflecting strong performance and market demand.
- The company is actively expanding its production capacities, with new facilities in Hungary and Germany, and a planned USD371 million investment in a new facility in the US to meet growing demand.
Negative Points
- The company anticipates a seasonally weaker fourth quarter due to the annual summer break, which may impact revenue growth and margins.
- There is ongoing underutilization in certain production areas, such as vials, which the company is working to address.
- Currency fluctuations have impacted reported sales growth, with a noted 6% negative impact from currency effects in the first nine months.
- The company faces ramp-up costs associated with expanding production capacities, which could affect short-term profitability.
- The market for GLP-1 therapies and mRNA treatments is still evolving, presenting uncertainties in demand and competitive dynamics.
Q & A Highlights
Q: Given we're one month away from your fiscal year end, why is there still a wide range for Q4 growth guidance? Also, how much of the EUR10 million to EUR15 million ramp-up spend has been completed at nine months?
A: We delivered a strong growth of 13.1% at constant currencies for the first nine months, allowing us to increase the guidance for the full year. However, due to the ramp-up included in the fourth quarter, we anticipate some volatility, hence maintaining the guidance range of 11% to 13%. Regarding the ramp-up spend, specifics were not disclosed, but the impact is factored into our guidance.
Q: Are you still optimistic about long-term volumes for combination flu and COVID vaccines? How much of the EUR700 million accumulated mRNA revenue over 2024 to 2030 would be related to these vaccines?
A: Yes, we remain optimistic about the potential of combination flu and COVID vaccines. However, it's difficult to specify how much of the EUR700 million mRNA revenue will be attributed to these vaccines. We expect some volumes to start next year.
Q: Can you elaborate on the FX hedging impact on EBITDA for the next quarter and into the next fiscal year?
A: We have taken measures to reduce FX volatility, which have already shown results in Q3. We aim to maintain this low volatility level in Q4 and the next fiscal year, although we cannot forecast the exact FX impact.
Q: Regarding the summer shutdown in Q4, will the impact be the same on DCS and DDS, or will one be more affected?
A: The summer shutdown will impact both segments, but DDS might be slightly more affected due to the significant costs associated with clean room maintenance for HVS products. Both segments will see weaker Q4 results compared to Q3.
Q: What is the impact of hyperinflation in South America on constant currency growth during the quarter, and how should we think about it in Q4?
A: The Argentinian Peso had a significant impact on the FX on the top line of DCS in Q3. We expect this impact to continue in Q4, but it should be largely digested by the end of the fiscal year, with no similar impact expected for the next fiscal year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
