Fagron reports turnover of € 276.6 million
Regulated information
Nazareth (Belgium)/Rotterdam (The Netherlands), 5 August 2021
Fagron reports turnover of € 276.6 million
Accelerated growth at Fagron Sterile Services in Wichita – turnover target raised on acquisition of US Compounding activities
Financial highlights of H1 2021
- Turnover decreased 0.8% to € 276.6 million (+5.9% at constant exchange rates)
- Gross margin decreased 140 bps to 58.4% due to temporary COVID-related impact
- REBITDA1 decreased 11.0% to € 56.0 million
- REBITDA margin decreased to 20.2% (H1 2020: 22.6%)
- EBIT decreased 11.9% to € 40.7 million
- Operating cash flow increased 15.1% to € 31.3 million
- Net financial debt /REBITDA ratio of 2.18 at 30 June 2021
- Outlook for 2021: Further turnover growth with a REBITDA between € 118 and € 124 million
Strategic and operational highlights
- Wichita compounding facility on track, thanks in part to product launches and new contracts
- Ramping up to two shifts in anticipation of growth acceleration
- Acquisition of compounding activities of US Compounding (turnover approximately US$ 6.5 million); turnover target raised to US$ 125 million (run rate) in 2022
- Transition to new repackaging facility in Poland started in April 2021, completion expected by end-2021
- New GMP sterile compounding facility (Compounding Services) operational in Tel Aviv in June 2021
- Higher strategic inventories to safeguard product availability
Organization - Management
- More compact Executive Leadership team to further strengthen effectiveness
- Constantijn van Rietschoten appointed Area Leader EMEA
- Johan Verlinden appointed Head of Legal & M&A
Rafael Padilla, CEO of Fagron: “As expected, the developments surrounding COVID-19 still strongly dominated our markets in the first half of 2021, although the second quarter brought a recovery in all regions. This resulted in an organic turnover growth at constant exchange rates of 4.9% in the second quarter of 2021. Measures were relaxed in almost all the regions in the second quarter and elective care resumed, albeit not yet at pre-pandemic levels. Whilst new measures were imposed in many markets towards the end of the second quarter due to the rise of the Delta variant, increasing vaccination rates provide support for the future. There is significant pressure to scale up elective care again and at Fagron we are ready to support our customers to do so.
Another effect we saw occurring in the first half of the year was the rapid rise in the price of certain raw materials and packaging materials, partly as a result of COVID-19 and the global vaccination programs. Transport costs have also risen substantially. Under current contracts these cost increases cannot always be passed on in full or only with a delay, resulting in a temporary negative impact on our gross margin and therefore on REBITDA.
Towards the end of the second quarter the results in EMEA were clearly showing the effect of the recovery in elective care. The number of prescriptions (first dispensations) in the Netherlands showed a clear recovery in the second quarter. On the other hand, last year Brands and Essentials were still able to benefit from the increased demand for COVID-related products whereas now this was no longer the case. These developments resulted in a 6.3% decrease in turnover in the EMEA region in the first half of the year. Furthermore, in April 2021 we made a start on the transition to the new repackaging facility for raw materials in Poland, which will result in an annual margin improvement of € 2 million. However, costs will temporarily be higher during the transition because both the Dutch and the Polish facility will be fully operational until the transition is completed.
In Latin America we also saw the relaxation of COVID-19 measures translating into an increase in the number of doctor’s visits. The activities in Latin America showed strong turnover growth of 25.2% at constant exchange rates.
In North America the second quarter also showed the recovery accelerate compared to the first quarter of 2021 although the picture varied strongly from state to state, partly due to differences in vaccination rates. Turnover in the first six months of 2021 increased by 12.3% at constant exchange rates. Especially Compounding Services in the United States showed a good underlying performance. We are particularly proud of the progress we have made at our sterile activities in Wichita. New SKU launches, newly concluded contracts and the acquisition of the US Compounding activities have resulted in accelerated growth, and we have raised our turnover target to USD 125 million (run rate) in 2022. To facilitate this growth, we decided to move to two shifts sooner than planned and have hired 60 new employees in Wichita to enable this.
The ongoing global vaccination programs will allow increasing normalization of our markets. How fast this happens will differ strongly from region to region and will partly depend on potential new outbreaks. This means that visibility is still limited by the pandemic. Fagron’s focus areas have become even more relevant as a result of COVID-19 and we are excellently positioned to benefit once the healthcare sector returns to normal. In this context we are also actively looking at acquisition opportunities, in EMEA and North America in particular.
Based on these developments our outlook for the 2021 full year is for further turnover growth with a REBITDA between € 118 and € 124 million.”
1 EBITDA before the non-recurring result
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