Capricorn 35 | Grifols stuck with Biotest acquisition due to restructuring costs

Grifols presented annual results for 2023 last Thursday, reducing net profit by 71.5% compared to the previous year to 59.3 million euros. Such a significant decrease in profit is due, according to the company, to “non-recurring costs in the amount of 147 million euros, mainly related to restructuring costs.”

Renta 4 Banco analyst Alvaro Aristegui claims that “The (net profit) figures were below our expectations and consensus forecasts market as the company reported new extraordinary expenses both internally and at Biotest in the fourth quarter amounting to €48 million.”

Restructuring costs mainly relate to costs incurred by a company when merging with another or buying a competitor, as Grifols did with its German subsidiary Biotest in 2022. A mega-operation through which the Catalan company paid 1.453 million euros -2.000 million, including debt- with the aim of creating the largest private European network of plasma donation centers.

This purchase was intended for Grifols. suspension of dividend payments to its shareholders and an increase in debt by 7.1 times EBITDA. In fact, 2023 ended with a lower leverage ratio to 6.3 times, mainly due to improved EBITDA, but net financial debt increased by 2.5% to 9,420 million.

Biotest is its second-largest subsidiary by revenue: 142 million, a far cry from Biophama’s 523 million. Grifols’ forecasts for 2024 suggest revenue growth of more than 7% year on year, with the support of Biopharmawhich is estimated to grow by 8-10% and adjusted EBITDA will exceed 1,800 million euros. The company ignores its second-largest subsidiary in its forecasts for the current year.

Two years of negative cash flow

According to the Grifols report, operating cash flow increased by 300 million euros, reaching 351 million euros, while Free cash flow will return to positive in the second half of 2023, excluding extraordinary expenses. However, for the year as a whole it is negative and accumulates for two years in a row with red numbers.

In this sense, XTB analysts note that “the business is not generating the same profits as it did in previous years. Such figures are important for a company that is accused of falsifying its accounting records because Earnings can be “adjusted” for accounting purposes, but cash flow reflects the true picture. company.”

Unaudited accounts

Grifols has been in the spotlight among investors since Jan. 9 after U.K. investment fund Gotham City issued a report accusing the company of manipulating its accounts by acknowledging debt reductions and consolidating the results on its balance sheet of subsidiaries of Scranton, the purported holding company of the company’s founding family.

In addition, the accounts submitted last Thursday have not been audited by auditor KPMG and do not have a director’s signature. James Costos, former US Ambassador to Spainwithout attending the meeting where they were analyzed. Grifols in its reports assures that the KPMG audit will take place before March 8 without any reservations.

Grifols drops 42% compared to Ibex 35

Grifols shares are down 41.92% on the Ibex 35 this year, making them an Ibex 35 red light after a very turbulent start to the year. The family-owned company has a capitalization of 3.825 million euros and has a bearish position in its shareholders of two funds such as WorldQuant (0.49%) and Qube Research & Technologies (1.32%).

These declines come despite the company’s attempt to clear up Gotham’s allegations through three filings with the National Securities Market Commission (CNMV), an investor conference attended by President Thomas Glanzmann, and changes announced to its leadership with the appointment of a new CEO and departure Raymond Grifols, Albert Grifols and Victor Grifols Deu from their management positions.

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