Grifols reaches revenue of EUR 5,100 million, a 13.6% increase, and raises its profits to EUR 625 million
Barcelona --
- Revenue increases 13.6% (9.2% cc) as a result of the sustainable growth strategy, with advances in all divisions and regions
- Bioscience leads the growth with EUR 3,994 million of revenue (13.6%; 8.9% cc). Diagnostic and Hospital continue to make progress with sales of EUR 734 million (4.5%; 1.1% cc) and EUR 134 million (12.5%; 12.1% cc), respectively. Bio Supplies achieves EUR 267 million in revenues, growing by 59.6% (54.1% cc)
- Profitability improves: the underlying gross margin stands at 47.4% and the underlying EBITDA margin at 28.6% on revenue
- EBITDA increases to EUR 1,434 million (17.3%)
- Greater investment effort: more than EUR 660 million allocated to R&D and productive investments (22%)
- Grifols confirms its commitment to reduce the net debt ratio, which decreases to 4.17x
- Successfully close the debt refinancing process amounting to EUR 5,800 million
- Grifols’ workforce increases 13% to more than 24,000 people (60% women)
Grifols (MCE:GRF, MCE:GRF.P, NASDAQ:GRFS) closed the 2019 financial year with record high revenues of EUR 5,099 million, representing a growth of 13.6% and 9.2% cc1. The company’s long-term sustainable strategy led to growth in all of its divisions and geographic regions where it operates.
Over the last years, the company’s strategic investments to increase its access to plasma, as well as greater efforts to boost its sales activities and operations, all contributed to the group’s solid performance.
The Bioscience Division continues to serve as Grifols’ main growth engine. The division increased revenues by 13.6% (8.9% cc) to EUR 3,994 million. Sales of immunoglobulins (including specialty immunoglobulins), were especially strong, growing by double digits, particularly in the United States. Also noteworthy was the recovery of albumin sales in China following the renewal of certain licenses and the upward trend in alpha-1 antitrypsin sales.
The Diagnostic Division’s sales grew by 4.5% (1.1% cc) to EUR 734 million. Revenues generated from transfusion medicine solutions continue to drive the division´s performance with a positive upward trend in NAT donor-screening solutions, used to detect viruses in blood and plasma donations, blood typing and recombinant proteins.
The Hospital Division’s revenues expanded by 12.5% (12.1% cc) to EUR 134 million, with growth in all business lines. While the Bio Supplies Division achieved EUR 267 million in revenues, growing by 59.6% (54.1% cc).
The company attained higher operating margins throughout the fiscal year. The gross margin was 45.9% (45.7% in 2018), driven by solid demand of the main plasma proteins, enhanced production efficiencies and a stable the cost of plasma. The underlying gross margin2 was 47.4% (46.4% in 2018).
Grifols established itself as the leading plasma centers company with 295 managed centers, including 35 centers (26 plasma, 9 blood donation centers and an analytical laboratory), after exercising the call option on the remaining 51% of the capital of Interstate Blood Bank Inc (IBBI).
Meanwhile, the reported EBITDA increased by 17.3% to EUR 1,434 million, representing a 28.1% margin (27.3% in 2018). The underlying EBITDA margin represents 28.6% of revenues (27.7% in 2018).
In 2019, as key drivers of its long-term, sustainable growth, Grifols allocated EUR 661 million to promote innovation and productive investments. Net R&D investments increased by 12.9% to EUR 329 million (EUR 291.4 million in 2018), including internal, external and investee projects. Grifols also advanced in its capital investments plan, allocating a total of EUR 332.2 million (EUR 252.2 million in 2018), up by 31.7%, to expedite the expansion of the Bioscience Division’s production capacity and the growth of the other divisions.
The financial result amounts to EUR 274.7 million. It includes the positive accounting impact recorded in the fourth quarter of 2019 for a net amount of EUR 42,2 million related mainly to the refinancing process.
The company grew by 4.8% in 2019, achieving EUR 625 million in net profits.
Excluding the impact of IFRS 163, as of December 31, 2019 Grifols’ net financial debt totaled EUR 5,725 million, including EUR 742 million in cash. The company has EUR 532 million in undrawn lines of credit, increasing its liquidity position to EUR 1,274 million.
The company progressively improved its debt-to equity ratios in 2019, attaining a net debt leverage ratio of 4.17 times in December 2019 from the maximum of 4.78 times in 1Q 2019.
Following its strategic investments of recent years, effective financial management remains a key priority for Grifols in order to optimize and reduce its debt levels. Thus, the company maintains sustainable operational levels and a solid operating cash generation. Cash generation reached EUR 568.9 million in 2019, allowing Grifols to carry out its planned investments and meet anticipated increases in demand.
Initiated on October 28, Grifols’ debt-refinancing process was concluded in record time on November 15 for EUR 5,800 million. Well-accepted by markets, the new financing includes Term Loan B (TLB) for USD 2,500 million and EUR 1,360 million, both aimed at institutional investors; the issue of two bonds for EUR 1,675 million (Senior Secured Notes); and extension of a multi-currency revolving credit facility (RCF) of up to USD 500 million.
The debt-refinancing optimizes Grifols’ financial structure and significantly improves all financing conditions, including average cost of debt is 2.8% (reduction of 80bps) and average maturity increases to more than 7 years. It also provides with greater flexibility on the terms of the covenants (cov-lite).
Following the debt-refinancing, Grifols’ financial structure and conditions are as follows:
Grifols’ solid performance and positive cash flow trend helped reinforce the balance sheet. Consolidated assets as of December 2019 totaled EUR 15,542.6 million (EUR 12,477.0 million in 2018). This variation is due primarily to the growth of the Bioscience Division including the strategic build-up of inventories, which expanded both organically and via corporate transactions, as well as capital expenditures and R+D investments.
The optimization of working capital remains a priority to strengthen the company’s financial position. Inventory levels increased to EUR 2,342.6 million, with a turnover of 310 days compared to 292 days in December 2018 following the implementation of several strategic initiatives to better anticipate and meet the solid demand for plasma-derived products.
The company’s equity was EUR 6,845.8 million as of December 31, 2019. The share capital includes 426,129,798 common shares (Class A), with a nominal value of EUR 0.25 per share, and 261,425,110 nonvoting shares (Class B), with a nominal value of EUR 0.05 per share.
In 2019, two dividend payments totaling EUR 238.7 million were distributed. In the second quarter of 2019, a second payment was made as a final dividend related to 2018 earnings. In December 2019, an interim dividend was paid based on 2019 earnings for EUR 136.8 million. Grifols remains committed to compensating its shareholders with dividend (pay-out of 40%).
Bioscience division leads the growth: +13.6% and EUR 3,994 million
The Bioscience Division achieved record sales of EUR 3,993.5 million in 2019. Revenue growth stemmed from strategic investments and efforts in recent years to increase the company’s access to plasma and successfully meet the rising demand of the main plasma proteins.
Demand for immunoglobulin remains strong in all regions, especially in the U.S. and main European Union (EU) markets. These markets, in addition to using immunoglobulins to treat primary immunodeficiencies, also utilize them to treat secondary immunodeficiencies and neurological diseases like chronic inflammatory demyelinating polyneuropathy (CIPD). Sales of this plasma protein recorded double-digit growth in 2019.
The company remains committed to continuously developing new formulations and indications of its therapies to meet the growing needs of patients worldwide. In July 2019, Grifols received FDA approval for Xembify®, a 20% subcutaneous immunoglobulin that broadens its portfolio of products to treat primary immunodeficiencies. The company launched Xembify® in the U.S. in the last quarter of 2019 and is currently working with global health authorities to obtain approval in Canada, Europe and other global markets.
Albumin sales recovered throughout the year, particularly in the second half of 2019. Its double-digit growth was the result of strong demand in China, the U.S. and various EU countries. The Chinese market currently leads sales for the plasma protein and continues to hold great growth potential.
Alpha-1 antitrypsin revenues continue to grow. Market breakthrough of this plasma protein grew in the U.S. and the main EU markets thanks to effective sales strategies and an upsurge in the number of diagnosed patients. Grifols continues its efforts to boost the rate of diagnosis of alpha-1 antitrypsin deficiency by developing innovative solutions like AlphaKitTM (blood test) and AlphaIDTM (buccal swab).
The sales trend of factor VIII moderated its decline in the last quarter of 2019. In the new market scenario FVIII/VWF concentrates still play a key role to prevent and treat bleeds, and for the prevention and eradication of inhibitors. The company’s commitment to ensure product availability for all patients and the efforts to position Grifols factor VIII products in the new competitive landscape led to a stabilization in our sales volume.
Grifols continues to promote its specialty proteins to enhance its differential product portfolio. Strong sales of specialty hyperimmunoglobulin, most notably the new formulation of its anti-rabies immunoglobulin (HyperRAB®), contributed to the division’s revenue growth.
VISTASEALTM is a fibrin sealant developed by Grifols to control surgical bleeding and distributed by Ethicon as part of a strategic global alliance. VISTASEALTM reflects Grifols’ ongoing strategic efforts to expand its product portfolio of plasma proteins.
VISTASEALTM combines fibrinogen and thrombin and is administered with Ethicon’s airless spray device technology. The biological components of VISTASEALTM are manufactured in Grifols’ industrial complex in Barcelona (Spain) in a designated plant with a production capacity of 30,000 kits, as well as the capacity to expand to 3 million equivalent liters of plasma.
Diagnostics division progresses in its growth: +4.5% up to EUR 734 million
Grifols is the worldwide leader in transfusion diagnostics, the division’s main engine for growth in 2019. This business area includes NAT donor screening diagnostics (Procleix® NAT Solutions), blood typing solutions and the manufacture of recombinant antigens for immunoassays.
Sales of NAT donor screening solutions remained stable due to an increase in plasma donations and greater market breakthrough in EMEA and Japan. Over the last 12 months, the division continued to consolidate its global-expansion strategy, opening up new markets for its NAT-technology solutions in Malta, Hungary, Slovakia, Bulgaria, Peru, Panama and Ecuador.
The company also broadened its product portfolio by incorporating new FDA-approved reagents to detect babesiosis. After obtaining the CE mark, the division will launch its innovative Procleix® Panther® with ART (Automated Ready Technology), designed to improve workflow efficiencies in laboratories.
Sales of the blood-typing line grew by double digits. The product portfolio includes analyzers (Wadiana®, Erytra® and Erytra Eflexys®), gel cards (DG-Gel®) and reagents. Sales were especially strong in China, a market with significant growth potential; the U.S., its main market thanks to a solid sales strategy and successful strategic investments; Latin America, and specific markets in Asia and Europe.
Grifols also reinforced its presence in Africa with the installation of the first Erytra Eflexis® in the largest hospital in Tunisia.
Grifols continues its efforts to consolidate its line of recombinant proteins for immunoassays. The agreement with PCL will further consolidate this business line.
Sales of blood-extraction bags grew significantly, a segment that will expand following the start-up of operations in the new Brazil plant. The new plant in Campo Largo (Brazil) dedicated to the manufacturing of blood-collection bags has an annual production capacity of 2 million units, scalable to 4 million units. The plant’s production output will initially serve the Brazilian market, although Grifols plans on reinforcing its presence in other Latin American markets over the next two years as it obtains the necessary regulatory approvals.
Revenues of specialty diagnostics remain stable, with sales expected to grow with the gradual expansion of the clinical diagnostics portfolio. As such, it is important to highlight the FDA approvals of QNext®, a coagulometer developed in-house, and DG-PT (thromboplastin), one of the main reagents to promote hemostasis. With this latter approval, Grifols became the first company in more than 15 years to earn authorization in the U.S. market to sell instruments and reagents for routine hemostasis testing.
Hospital division notes its geographical expansion: +12.5% and revenues of EUR 134 million with very significant growth in the U.S.
Sales increased in 2019 across all of the division’s business lines, especially the Pharmatech line in the U.S. This business line offers comprehensive solutions for operational pharmacy, including the inclusiv® product portfolio, which includes equipment, software and services to improve safety and quality in compounded sterile preparations. With a double-digit upturn in sales, this line represents an important growth lever for the division fueled by the MedKeeper® and Kiro Grifols® technology solutions.
Grifols is a leading supplier of technology and services for hospitals, clinics and specialized centers for the manufacture of medicines. The launch of its leading-edge system for automated compounding of intravenous treatments (KIRO Fill®) and software enhancements to the workflow platform for intravenous preparations (PharmacyKeeper) optimize hospital-pharmacy operations by affording greater accuracy and safety in the preparation of (IV) medications. This advancement improves patient safety and reduces reliance on manual processes.
Sales of IV solutions grew as a result of U.S. demand for Grifols’ physiological saline solution (manufactured in the Murcia, Spain plant) and its use in the company’s network of plasma centers. Sales of the Nutrition and Medical Devices lines also increased, accompanied by an upturn in third-party manufacturing services.
Bio Supplies Division: EUR 267 million for the significant increase in sales of biological products for non-therapeutic use and plasma sold to third parties
The division mainly consists of the sales of biological products for non-therapeutic use and plasma sales to Haema and Biotest third parties, which amount to EUR 180 million.
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