Full Year 2022 Grifols SA Earnings Presentation
Speaker 1: The.
Speaker 2: Hello everyone and welcome to Grifols full year 2022 conference call.
Speaker 2: Thank you very much for taking the time to join us today. This is Nuria Pasqual speaking, investor relations and sustainability officer, and I'm joined by Thomas Glassman, our executive chairman, Victor Griffiths-Deu and Raymond Griffiths, our co-seers, and Alfredo Arroyo, CFO of Griffiths. We anticipate that this call will last for about 60 minutes. There will be a presentation of approximately 35 minutes followed by a Q&A session. If you want to book a question, press start followed by five when the session begins. We will kindly ask you to limit your questions to a maximum of two. As a reminder, this call is being recorded and the materials for the call are on the investor relations sections of Griffiths.com. Before we start, I draw your attention to the forward-looking statement disclaimer on slide two in the slide deck of our release.
Speaker 3: thank Steve for the valuable work and contribution he made over the past month and 12 years as a Griffels board member. Needless to say I and the board wish him all the best as he moves on to another chapter in his life. For those that do not know me or I have not had an opportunity to meet at one of our investor meetings let me briefly introduce myself. I've been on the Griffels board for almost 17 years
Speaker 3: and in recent years was the company's vice chairman. I have been associated with a plasma and diagnostics industries since the late 1980s, and I have been a CEO , plasma, biologics, renal, and diagnostics companies during my career. In the past years, my focus has been on investing in startup companies with innovative new tech technologies and serving on a number of boards among them Alcon Inc., which I know some of you also know. Throughout my career, my priority has always been to build and grow companies sustainably and profitably, which I also intend to do in partnership and close cooperation with the CEOs, the GRIFFELS leadership team, and the board. GRIFFELS is on the rebound. After some tough years, we are now setting up once again for a sustainable and financially sound growth-oriented future with our operational performance plan and the recently announced restructuring. I want to recognize and thank Steve, the CEOs, and Alfredo for making the plans and addressing our challenges head on with tough but needed measures.
Speaker 3: and clear priorities to ensure that we again find ourselves on a winning path. In our presentation, we will update you on the progress and outlook which I personally think is very encouraging, although we as a leadership team recognize that we clearly still have work to do and be assured it will happen and it will get done. I am committed with the CEOs and Alfredo to state a course on all the plans, priorities and measures that we have announced and that currently are being implemented. There is no way back and as you will see in our presentation, we are visibly committing to targets and numbers associated with the announced measures. I would also like to spell it out once again and this is very important that we are laser focused on de-leveraging the company. We are also committed to providing measures with both improved operating measures and evaluating broader corporate initiatives which we expect.
Speaker 3: to complete in 2023. Together with the CEOs in Alfredo, we will be monitoring our progress on a weekly basis and if necessary, undertake immediate course corrections to ensure we deliver on our objectives. I am also committed to keep the open communication with you and we as a team will, as promised, be updating you regularly on our announced quarter calls of the business and financial status and its progress. Finally, I want to reiterate, and again, this is very important, that the board, which initiated and has guided the creation of the operational improvement plan, continues to be in full support of executing the plans and measures that we have announced recently. I know, that Alfredo, Noria, Danny and the investor team will continue to ask questions you have in between our calls, and I will personally meet a number of you as I will, on occasion, will travel with our investor team. As you can hear, we are committed to a seamless transition and optimistic about the future.
Speaker 3: I am excited to work with Victor, Raymond, Alfredo and the entire Gryffles team to make sure that we deliver our commitments to all our constituents. Let us now turn to our presentation that I will share with Victor and Alfredo and then we will be happy to take your questions. So let me start with an overview of our focus areas and Gryffles full year 2022 and your results which we show you on slide four. 2022 was a pivotal year for Gryffles and I want to give a lot of credit to the entire Gryffles team. We set clear action priorities and took important steps to improve the company's performance. Today we are executing on these priorities. Over the last month we've been focused on building an organization with a performance culture that is more efficient, effective, agile and decisive. With that in mind we have taken measures to become leaner.
Speaker 3: and more cost effective, which combined with strength and financial discipline and cost controls will drive margin expansion. On February 15th this year, the company also announced an operational improvement plan that will generate 400 million euro in annualized cash cost savings. This initiative, which are ready underway and in the implementation phase, will reinforce Griffel's competitiveness, reduce the global cost base and enhance organizational accountability, efficiency and effectiveness. Once we have fully executed this plan, which was initiated and endorsed and now closely tracked by the board, we will have a solid foundation for profitable future growth. This plan is supported by a commitment to invest in our talent through the implementation of new and improved short and long term incentive plans, which we are about to roll out. At the same time, a key priority is the implementation of aggressive measures to increase operating cash flow and reduce our debt. As previously stated,
Speaker 3: The company continues to evaluate potential transactional opportunities and is committed to reduce our leverage in 2023. As we focus on our commercial and innovation priorities, we continue to see significant opportunities for our high margin alpha-1 product for last in and our subcontainers IG product, SembyFi. In addition, a significant effort is going into accelerating the approval and preparation for a successful launch and commercialization of the new biotech proteins. These proteins, once launched, are expected to have a substantial positive impact on Griffel's financial profile in the coming years. Bringing these products to market with a biotech team
Speaker 3: is a key part of our ongoing integration of biotests. Let me now turn to slide five on our 2022 performance. In the third quarter business update, we provided guidance for the fiscal year 2022. And as I'll free to will explain in more detail later, I am pleased to confirm that we have met our guidance and even exceeded in some cases. Griffels delivered a solid result for the fiscal year 2022 across key metrics and this demonstrate the strong fundamentals of both the company and the industry. The figures on this chart speak for themselves. However, I would like to emphasize the sequential improvement of every key figure shown. Revenue growth, EBDA and leverage ratio. It is clear that as we leave the impacts from COVID-19 behind us, the investments that we made in the past are now bearing fruit and delivering positive momentum. And our focus on improving leverage is making a difference. We are confident that this trend will continue and that we will meet the guidance, which I'll freighter will share with you later in the presentation. Turning now to slide six. 2022 was also pivotal year for the company with the achievement of several key milestones that should continue to positively impact our future performance.
Speaker 3: I would like to highlight the closing of the biotest acquisition in April . Biotest is a transformational and unique opportunity to integrate and accelerate an attractive pipeline of innovative plasma derived therapies with exceptional growth and profit potential. It will also enable us to have more of a balanced global footprint by expanding operations and revenues in AMIA and broadening biotest product footprint in the United States. In 222, biopharmus growth momentum was strong underpinned by a 25% plasma collections increase. Collections are back to 2019 levels a year which itself marked record levels for griffles. The negative impact of COVID is now clearly behind us as donor compensation and cost per liter as a whole also continue to decrease. Since its peak in July of last year, donor compensation dropped by 20% in Q4 driving a 10% cost per liter reduction over the same reference period.
Speaker 3: Our recently announced operational improvement plan aims to further address the plasma related cost through measures that will result in more than 300 million euros in annualized savings. You will hear more about these initiatives later in our presentation. In the third quarter of 2022 and as part of Griffel's growth strategy, the company also signed a pioneering long-term agreement with Canadian blood services to significantly increase the country's self-sufficiency in immunoglobulin. It is the first ever agreement of its kind and a testament to how Griffel supports self-sufficiency and the access to treatment for patients around the world. During 2022, Griffel's also made good progress with our focus on innovation. We met numerous innovation milestones, which will support further growth and margin expansion in the coming years, including the European approval of Sembify and biotests, Emugos and Germany and Austria, as well as some remarkable agreements with third parties to collaborate on R&D developments. Before turning the call over to Victor, I do want to reiterate that it is of great importance to me personally that we further accelerate our progress and meet our commitments across all areas of business while driving for operational organization and performance excellence. Needless to say, the whole Griffel's executive team has been committed to achieving meaningful impact and results for all our stakeholders, including creating value for our shareholders. With that, I will now turn over the presentation, Director. Thank you, Thomas.
Speaker 4: Good morning or good afternoon to everyone and thank you for joining us today. Now we will turn to slide number eight to talk about the performance at high level of griffles. I am very proud to say that griffles perform strongly in 2022 while operating in a challenging macroeconomic environment. Griffles of other revenues grew by 12.4% at constant currency, 23% on a reported basis, reaching record levels of sales of 6.1 billion euros and 5.7 billion euros if excluding biotes. Driven by a firm as performance, robust underlying demand, favorable pricing in product of msq and a notable biotes contribution plus an FX tailwind. Now turning to slide number nine.
Speaker 4: to make a deep dive on biofarm. Biofarm has stood out with full-year robust operational growth of 10%, 22% on a reported basis, driven by a strong fourth quarter. In Q4, it delivered a 14% increase in revenues, which was close to 30% on a reported basis. Please note that all those numbers on the slide excludes biotesque. We remain positive as we see this momentum reinforced. Evidence by a strong fourth quarter across all key proteins, especially IG, our flagship, which grew by 18% in the fourth quarter.
Speaker 4: and by 13% in the full year. This was driven by a significant increase in plasma supply with a strong growth recorded in our leading IGG brands. The man has been robust, and this is expected to continue backed by the fact that many patients remain and the ignores while the man for treatment for primary immunodeficiency and secondary immunodeficiency continue to grow. Also, ?????
Speaker 4: new products continue to increase their contribution, driven by our plan to grow our subcutaneous immune globaling, Chambifi, market share and revenues. This product in particular offers an improved patient experience for those wanting the convenience of home-based treatments. The increase in plasma supply also contributed to our albuming portfolio growing by 5%, with higher demand in Asia-Pacific area, driven by China and improved product meets supported by the launch of albuming.
Speaker 4: in plastic container. Alpha one and specialty proteins deliver tamid to high single digit growth due to favorable customer mix, higher demand and price increases. Supplement to the main franchise as growth, I would like also to highlight the increasing contribution to the business, unit growth of the recent new launches like Fibre and Zealand and Thramin in the surgery and bleeding control market.
Speaker 4: tablets and hyperimmune portfolio. Now moving to slide 10, continuing in bioforma, but deep diving into plasma specifically. As mentioned, plasma collections positive evolution continues increasing by 25% in 2022. This habit trend was driven by greater plasma volumes from existing centers complemented by new and recently acquired plasma centers. The lifting of the US border restrictions in mid-September delivered an increase in volumes of plus to a 3% in that area compared to 2021. As plasma collection volumes are meaningful increasing, we are now focused
Speaker 4: on cost per liter reduction, tackling donor compensation and optimization of labor as well as thick costs. Since it's speaking July this year, donor commitment compensation declined by 20%, driving total cost per liter down by 10%. Managing other plasma operations costs is also key. At this represent close to 65% of the plasma costs.
Speaker 4: This also contributed either to a lesser extent to this cost per liter reduction. We firmly believe that this is a positive sign to up for ourselves, especially in this challenging macroeconomic context, including an annual inflation impact of around 8 to 10%. Looking forward, we are confident on a further cost per liter reduction with the aim to re-base it, amplified by our ambitious operational improvement plan in the plasma area.
Speaker 4: focused on driving higher efficiencies in our donor centers, I create and creating a linear and more efficient plasma organization. In summary, we have moved away from a plasma, from the plasma security of supply mindset. We have to adopt during the pandemic to provide life saving medicines to our patients. We now have evolved into a sustainable plasma collection operation, focused on donor center productivity, carefully tailoring volumes to meet self growth and to drive margin expansion.
Speaker 4: focused on driving higher efficiencies in our donor centers, I create and creating a linear and more efficient plasma organization. In summary, we have moved away from a plasma, from the plasma security of supply mindset. We had to adopt during the pandemic to provide life saving medicines to our patients. We now have evolved into a sustainable plasma collection operation, focused on donor center productivity, carefully tailoring volumes to meet self growth and to drive margin expansion. Now turning to slide 11.
Speaker 4: to cover innovation for bioforma. We continue to advance on our innovation pipeline. Personally, I believe that Griffo's R&D pipeline has never been in such a strong position for all clinical trial phases. Representing a key lever for sustainable and profitable growth in the short, medium, and long term. There are several expected milestones marked in capital letters in our 20-23 agendas. We expect final results from CHENB-5 by weekly dosing study. The FIS patient enrolled and treated in the CHENB-5 secondary immune deficiency CLL study, as well as final results of our IVIG-PEC study. We also expect to finalize enrollment of the presiosa trial in the FIS health of 20-23, while the SPARTA trial for alpha-1 in the second half of 20-23. For the biotrace-train modeling escape phase-3 trial, we expect study initiation during half-1 of 20-23. Well, we expect to submit the FDA BLA application for e-mobo.
Speaker 4: For the biotesque, February Nogin Trial, we expect completed a top line data in the second health of 2023. And also, I would like to mention the milestone for the two gigasome projects, the 5, 64 and the 23, 39. As we expect to iron this submission and pre-iron this submission, respectively during the second health of the year 2022. The financial reading from all those developments achieved in innovation in 2022, plus the one suspected for the year 2023, is a very solid combination of life-cycle management strategy to reinforce leadership position in our most sole proteins in terms of plasma leadership.
Speaker 4: together with the robots and the undiversified pathway to bring new proteins, such as trimodulin, fibrenosion, or 83 in-sepsis. That we expect to have a significant contribution in the midterm to the companies, plus economics and hence to its gross margin improvement. Now turning to a slide 12 for the agnostic.
Speaker 4: The agnostic performance has been impacted due to non-recurrent sales of the NIT technology to detect COVID-19 and the termination of mandatory Zika virus testing, which was partially upset by a year from blood-typing solutions which delivered a strong revenue. Excluding these two items, the business unit declined by 4.6% at constant currency in 2022.
Speaker 4: impacted by pricing in exchange of extending a large contract with a key NIT donors screening costumer for 15 years. Copped with we performance of recombinant proteins resulting from the enjoying business collaboration on a new R&D project. Block typing, block typing solution was the main driver of the business unit. Recording a robust double-digit growth across most geographies. Of node US and Mexico with
Speaker 4: obviously gaining market share globally for that division. As I mentioned in the third quarter business update, I would like to emphasize the importance of launching Alpha ID at home, an OTC free service to assess genetic risk of developing Alpha 1 deficiency in the US, as well as the new DGGL 8-Card in the US market.
Speaker 4: Now turning to slide 13 to comment on by your supplies. By your supplies increased by 13% at constant currency and by 26% on a reported basis. Following the acquisition of the remaining 51%
Speaker 4: capital of faxes biologicals, which positively impacted performance of biosupplies, cell-culture media and plasma for diagnostics. The rational acquisition of faxes biologicals was to achieve higher margins through vertical integration, to gain commercial knowledge to grow in the cell-culture market in vitro diagnostics.
Speaker 4: capital of access biologicals, which positively impacted performance of biosupplies, cell culture media and plasma for diagnostics. The rational of the acquisition of access biologicals was to achieve higher margins through vertical interagition, to gain commercial knowledge, to grow in the cell culture market, in vitro diagnostics and the agnosticar and the solutions.
Speaker 4: And to enhance the relief, the unreinforced the biosupply portfolio with a more robust offering of biological products, while boosting reflux, standing as a reputable supplier of biological products. We are firmly convinced of biosupply potential, and it will be a high future growth engine for the company. And now I will turn now a hand on to Alfredo on the financials. Thanks Victor, hello to everyone. When it's life is teemed, in Q3 earnings school, we provided guidance on revenues, EVDA and leverage for the year 2022. And now we can confirm that we met and even exceeded the targets, 6.1 billion revenues, 20.6% margin and 7 times leverage.
Speaker 5: Slide 16 shows the 2022 P&L with an accelerated growth and improved profitability. Revenues on Q4 revenues were up by 20.9% at cost and currency versus prior year reaching 1.7 billion euro. On reported basis, this growth represented a 34.7% increase. Top line for the full year increased by 1.0 billion euro reaching 6 billion, representing close to 23% increase versus prior year, 12.4% growth at cost and currency.
Speaker 5: on the back of strong organic growth, bioforma, positive, biotech, contribution and positive ethics. On the gross margin, the gross margin was impacted by high plasma cost collected in 2021 and the first half of 2022 due to the ten month lack inventory account. Higher plasma cost mainly coming from.
Speaker 5: on the back of strong organic growth, bioforma, positive, bio-test contribution, and positive ethics. On the gross margin, the gross margin was impacted by high plasma cost collected in 2021 and the first half of 2022, due to the 10 month lack inventory account. Higher plasma cost mainly coming from higher donor fee and labor cost inflation.
Speaker 5: Also, the determination of COVID-19 and sick attest in business impacted total gross margin by 200 basis points in 2022 versus prior year. Reported TVDA grew up to 1.2 billion euros, 16.5% gross at cost and currency with a 20.6% adjusted margin. Improvement based on operational leverage including asian 8 cost savings and R&D prioritization that partially offset higher cost of plasma and lower diagnostic margin. Net profit increased by 10.4% up to 208 million euros hit by higher financial expenses linked with biotest acquisition. Now moving into a slide 17, the 2022 EVDA reported increased by 237 million euros to 1.2 billion with 21% margin. Positive contribution to EVDA from all business units except diagnostic coupled with OPEC.
Speaker 5: Saving. Zlighted team, the leveraging remains a top priority with a four times target by the end of 2024.
Speaker 5: The reported leverage declined to seven times at the year-end. Leverage will further decline in 2023 on the back of higher VDA and the leverage transactions. Astronomically, the position amounting to 1.6 billion euros at the year-end will no significant dead materialities until 2025. Moving to slide 19 and 20, in the next couple of slides, I'm going to provide you with some details about the comprehensive improvement plan that we just unveiled a few days ago that will bring more than 400 million euros of analyzed casavings. This plan is already in deployment and expected to be completed throughout 2020.
Speaker 5: nation, purification, filling, packaging and product release. This ten month inventory accounting treatment is in line with the industry accounting standards. Cast savings of 250 million euros will be captured in 2023.
Speaker 5: 75% will come from lower plasma cost that will impact in our inventory. So our inventory will be lower thanks to this lower plasma cost. The majority of the analyzed cost savings, 300 million euros, will be recognized in 2024.
Speaker 5: will come from lower plasma cost that will impact in our inventory. So our inventory will be lower thanks to this lower plasma cost. The majority of the analyzed cost savings, 300 million euros, will be recognized in 2024. So...
Speaker 5: Out of the 400, again, 100 million will be booked in 2023 and 300 million will be booked in 2024. This plan will deliver more efficient, effective and competitive organization to support GRIFOR's long-term strategy. The plan focuses on three major projects. Optimizing plasma cost and operations, streamlining corporate functions and capturing over-efficiencies across the organization. For the first project, our goal is to create the most efficient technological advance, donor-friendly, highest-quality world-class plasma procurement operations. To this end, some of the key initiatives being currently deployed and in deployment are driving efficiencies in our plasma centers by creating more digitalized and efficient set of processes to reduce.
Speaker 5: donor flow time increasing throughput, decreasing staffing costs and opening hours why enhancing donor experience. Another one with the donor compensation optimization. Another initiative will be closing and consolidating and the performing donor centers with 18 centers already closed in the fourth quarter of 2022 and several additional centers scheduled to be closed or to be consolidated in the first half of 2023. This initiative together with others will increase the productivity by center, the collections by center. Also to create a linear, more accountable and more effective plasma organization. Total analyzed savings in plasma will amount to 300 million. The second project of this plan that amounts 60 million euros analyzed for savings focused on streamlining corporate functions, reducing direct spin and headcount and covering over cost savings initiatives, including center licensing.
Speaker 5: Automation of functions, enhance services across functions and business units, consolidating vendors, the theme line reporting and structuring, delaying the organization and eliminating redundant activities. And the third part of the plan that amounts to 40 million euros, analyzed savings, targets, direct and indirect procurement on the strategic sourcing, also target logistics, capturing cost improvements through creator, supply, chain flexibility, through new routes and also in falsalities by rationalizing the real estate footprint. A one-time charge of approximately 140 million euros will be required to deliver these cost savings initiatives. These charts will be booked in Q1 2023. Moving into the slide 21, 2023, 2023 guidance. We're confident on these guidance.
Speaker 5: Strong states growth and further margin expansion were most of these improvements will come in the second half of the year Due to the facings of the initiative's implementation and non-immentary accounting cycle has already explained We expect a total revenue growth of 8 to 10% at cost and currency and 10 to 12% for bioforma the main drivers for this will be plasma supply Strong underlying demand pricing and product mix in the first half of 2023 we expect a BDA standard margin around 20%
Speaker 5: still impacted by high plasma cost from 2022 considering the inventory accounting of these 10 months. However, this will be followed by significant margin expansion in the second half of the year when we expect the Navy DA margin of 2325 percent.
Speaker 5: The main reason for this improvement is the meaningful plasma course decline already started in Q4 2022 plus the continuous reduction in 2023 accelerated by the execution of the operational improvement plan. As I already mentioned, we expect to recognize
Speaker 5: 100 million Euro-Core savings in the P&L of 2023, mostly in the second half. All in all, respect the full year 2023 Adjusted TVDA margin.
Speaker 5: of range 21, 23% reaching 1.4 billion. Considering the 400 million euros analyzed cascors savings, we estimate that the EVDA will boost up to 1.7 billion euros with the 27, 28% margin. With this now, I hand over to Thomas for the closing remarks. Thank you, Alfredo. Thank you.
Speaker 3: In closing, I want to first thank our entire Gryffelt team for making it all happen. Without everyone's efforts, focus and dedication, we would not be able to make the progress we're able to report today. We are delivering a step change in performance. And as we enter 2023, we are very well-positioned and confident that we will keep building on this positive momentum. Looking at 223, we believe the company has a solid foundation.
Speaker 3: to build Griffel's future with an organization that is more accountable, efficient, agile, and effective. I want to make it clear that both Griffel's long-term strategy and the measures in place have not changed at all, and we are executing in our plans and commitments with the full support and at the direction of the board. Our focus for 223 is also crystal clear. We will execute in our operational plan and deliver the Euro 400 million in cash and cost savings. We will deliver in our guidance, and you should see a significant margin improvement in the second half of 223. And finally, 2023 is the year where we will deliver the company.
Speaker 3: You should know that there is no back for us as they say the train has left the station and is accelerating Management and the board are fully invested and laser focused on creating value and making our commitment the reality In closing Gryffelt is on the rebound and we are excited about taking the company forward and writing another successful chapter in the company's long-growth history With that also goes our commitment to keep you informed of our progress with these calls which I hope you find a value
Speaker 2: So finally, let me thank you for your attention and I now turn it back to Nuria who will open it up for questions. Thank you Thomas and thank you all for your time. Let's start the Q&A session to remind you that you need to press the start five if you want to ask a question and to limit it to two questions if you have follow-ups, we'll try to accommodate and to go to the end of the list again. After you place your question, we may need to put you on mute to avoid background noise. Okay, so let's start. We have the first question coming from Peter Fadoul from City. Please, Peter.
Speaker 2: Let me thank you for your attention and I now turn it back to Nuria who will open it up for questions. Thank you Thomas and thank you all for your time. Let's start the Q&A session to remind you that you need to press start 5 if you want to ask a question and to limit to two questions if you have follow-ups. We'll try to accommodate and to go to the end of the list again. After you place your question we may need to put you on mute to avoid background noise. Okay, so let's start. We have the first question coming from Peter Fadoul from City. Please tell them. Thank you. Newer key. Newer key. Newer key.
Speaker 6: Thanks, thanks, thanks, been the call. I'm actually needed. Just on the mid-term targets, historically they've been for EBITDA margins exceeding 30% of Thomas and Seahmeer if you execute to your plan, when do you see this target being reached at the early stages? Is it something that is 25 and beyond? Or could it come sooner? And then Thomas, your last line about looking at accelerating delivery, I know there's been discussions around a dual share structure collapse, a rastake sale, or maybe even options with diagnostics. I think they've been put off the table at least near term, but given your comments about the train leaving the building and really being committed to accelerating delivery, could either of these options still be undertaken in 2023? Thank you. You know, you and my name is your first question, regarding the mid-term guidance on the, as I said, the 1.7 billion, which you know will account for the annualized 400 million, that's 27, 28%. So if we think about operational improvement in 2024, we can get to 28, 29% back to, you know, to come back to the 30s, this will come, you know, from 2025. And I think it's while, you know, at the time that we will launch the two new products from biotest.
Speaker 3: Thank you for the question on the leveraging and let me just say first of all all options are on the table and we are looking at them as we go forward here and the collapse of the shares is also something that we committed to and will do but the trading values got to be right and it's got to be valuable for all shareholders that are involved in such a transaction but we are you know very much looking at everything at the moment and and working very hard to to make it happen here and we will make it happen in 2 23.
Speaker 7: Thank you very much. We have now a question from Rosy Dunner from Jeffries. Hi Rosy. Hi, thank you very much for taking my questions. Maybe we could go back to the leverage target. I think you said so four times by the end of 2024. What does that mean in terms of the past this year? And I suppose that four times does that rely on a transaction coming through and then just to clarify on your comments to Pete. So does that mean you said that there will be a collapse the share closet. So I can just confirm is that this year or that's just at some point in the future. Thank you. So Rosy, thank you for the question. I will just address the piece on the collapse and then I'll pass it on to Alfredo to pick up your other point. So on the collapse, it all depends on the trading value of the shares and right now where we are, that is obviously...
Speaker 8: of business units that you have, but can we just triple check on a straight equity raise? And then maybe you can help us understand a little bit more as to what's driving that 250 million of cash savings you're expecting this year. We see your peers reporting, we cash flow as they're rebuilding inventory, perhaps you can remind us.
Speaker 3: where you are in terms of level of inventory that you hold and if you expect to return to pre-coded level. Thank you. I will just address briefly the first part of your questions and then pass it on to Alfredo. As I said before, everything is on the table and it all depends on the value that we can create and what makes the most sense for the company. Regarding the cash savings and this year, the 250 million, around 80% will come from plasma cost, plasma cost reduction that, as I said, it takes time to go through.
Speaker 5: has flow here, the inventory growth will be very limited because we have, you know, we're already, you know, in line with the inventory that we need to, you know, to commit, you know, our sales. Okay, so that's an inventory site, you know, we'll see, you know, I would say positive, positive trend and versus previous year.
Speaker 9: Okay, and we have next question coming from Don Jones at Verenberg. Hi Don. Oh, hello, thank you for taking my questions I had to. Firstly I was just wondering if we could come back to one aspect of the guidance for 2023. You talked about 10 to 12% conste currency growth in your plasma business.
Speaker 9: But I wonder how you reconcile that with the growth in collections that you've seen. You've been running probably 20, 25% up on collections yet. You're only pointing to 10 to 12% growth on the Plasma revenue side. Given the pricing environment, the demand environment, that seems fairly conservative, given the amount of Plasma you've got. So I was just wondering if you could sort of reconcile those two figures for me. And then the second question, maybe one for Alfredo. I guess it contains to the leverage, but it's only to clarify exactly how you calculate.
Speaker 4: the EBITDAI number that you've used to calculate your year-end leverage ratio, I think it caught us by surprise, and it probably caught you by surprise, giving you a guiding to 7.9 times mid year, and you came in at 7.1 times. So the debt hasn't changed much, but obviously some has gone on with EBITDAI. So if you could just clarify exactly how you calculate the EBITDAI that you use in your leverage ratio, that would be helpful for us all, I think. Thank you Tom. This is Victor. I will be answering your first question about the linking that 25% volume growth in plasma for 2022 compared to that 10 to 12% sales growth in biofarma for 2023. The 25% volume growth that we have seen and realized during 2022, basically as Alfred was saying the previous question has been devoted to rebuild our inventories that were...
Speaker 5: affected very highly by the pandemic. So basically this is going to build, has been financing the inventory build up. So part of that, 20% growth, go over to that. And then as I have said, some centers are going to be consolidated. Therefore, we don't need that much amount of plasma for 2023 to meet our sales. So that is really, we are now tackling sales, really directed to the volume needed. Hi Tom, I would talk to you again regarding the leverage calculation at the same point one times for the year 2022. I mean, we are consistently calculating the leverage ratio based on the current credit agreement that clearly states that in addition to, I would say the standard adjustments related to IFR 16 and others, they specifically disclose the non-recording items on one hand, basically restructuring charges and transaction cost and all these things.
Speaker 5: And as you can see, they allow you to include a part of the ABDA covenant, the amount of cost savings associated to operational improvement plans like this one on a run rate basis for the upcoming 12 months with a cup of 10% of the ABDA. So that's the way that is being calculated, but happy to provide you with a detailed reconciliation in case that you needed.
Speaker 9: So just to follow up question on the leverage, you obviously gave us a target at the CMD for leverage this year and you've given us a target for leverage in the end of next year. Would you be prepared to give us any kind of steer for what you expect leverage to look like at the end of this year? And I guess it probably includes whether you do a live transaction or not, but maybe some qualitative commentary you can give us around the sort of stepping stones between the 7.1 and the 4.0.
Speaker 5: I mean, obviously, I mean, there is, you know, you can do a quick mark, you know, with the with the idea that I provided to you, with the adjustment that may need to be include. But as you said, you know, clearly said that it will, it will depend on the size of the transaction and it is going to be one or two. So finally, that, you know, those will be the one that will be that will move the needle in 2023, but, you know, but we will reiterate the four-time leverage target for 2024. Okay. Let's move now to James Gordon with JP Morgan, hi, James.
Speaker 6: Hello James Gordon of the Jason Morgan. Thanks to taking the questions. I think some of the key ones have been asked. So I just do three quick clarifications. One was on the bio farmer revenue guide so that the 10 to 12 percent growth, even though you could grow quickly than that in that you'd have enough plasma to do so. Is that because that's where demand is that demand is actually the limiting factor and there isn't even off the easy comments, there isn't more demand than that. Or is it more about the fractional economics that you could grow more quickly than that, but you wouldn't be able to maintain the sort of EBITDA margins that you want to now get to. And that was the first one. The second one I think you said 28 to 29 percent EBITDA margin next year. Is that with or without biotext please. And could that be a bit conservative if you've also got operational leverage and underlying improvement and the 400 million of savings?
Speaker 6: And then the final classification was just divestment. I think you said that everything's on the table. But is it now less likely that you look to divest some of all the Shanghai Reds, given you want to retain exposure to China for strategic reasons, or is that still unlikely is doing a share collapse? James, this is Victor. I may take the first question about the 10 to 1% by your farmer, revenue growth for NGIA. This is a combination of many factors.
Speaker 4: We have, as you know, our Emophilia franchise, for instance, has been in the recent years impacted and this continues to do so. Meaning by that, IG, which is the lion's share of our sales and alpha one, both are growing and nicely, in a way above this 10 to 12%. So this kind of vision indication that really that is solid demand there. We have the plasma that we need to fulfill those sales. And...
Basically, this is the answer to your question. That's the first one. To your question regarding the margin, the 29% for next year, which could be 1.7, 1.8, with organic growth, biotest contribution up to the time that we will launch the new products will be the minimum. So it's all about, you know, standard on and combined is pretty much the same. The operational level, yes, obviously this 400 million is basically as you said, you know, this is the result of a bunch of initiatives, initiatives, you know, to achieve operational level, you know, especially on the plasma cost and across the whole organization.
And let me just come back on the questions saying in high-ros and any of the other transactions that we are looking at or contemplating or that you might consider. We will obviously do nothing if it doesn't create value and that also goes for the capital raise because obviously we're looking at this very carefully to make sure that we create the most value for the company. So I just want to make sure that we're very much aligned on the fact that you know it is one of the options but it is not necessarily...
to functional techniques.
And the second question is about the 400 million savings. Should we think about them on gross terms or in net terms, including perhaps potential needs to reinvest in the business that you might have? Thank you.
I will take the first question. Again, now with the results we are in a stage regarding plasma collection that we have the availability to collect the plasma volume that we need to meet our sales growth for the year. So on that side we are...
basically now focusing on improving the productivity per cent there, meaning that we get the same plasma volume that we need, but if possible, at a better efficiency and productivity levels to help out the margin expansion. You're writing your question 400 million, there are net and no additional measurements.
1.7 billion which at first sight could look low. But obviously you are not including by a test, a VDA or any incremental VDA coming from sales growth in 2024.
would it be fair to say that when you add up these levers, also product mix and others, the FDA could be more closer to 1.9 billion FDA or at least close to the consensus in 2024, which is right now 1,850 million. The second question would be regarding the donor fee.
how much downside from current levels to the disease? So is there room for further improvement or cutting the donor fee more? And final question regarding freak-as-flow generation in 2023, how should we think about that figure? If you can provide any kind of magnitude range or at least qualitatively, how do you see the freak-as-flow improving this year? Thank you very much.
Okay. The first question on the DVD levels for the, you know, unannounced basis, as I said, this is 1.7 billion for 2023. For 2024, you need to add, you know, the organic growth. So clearly, you know, it will exceed, you know, by far this 1.7 billion. So maybe it will be close to your, to your expectations. The, the donor fee. Yes, we, we see that, you know, donor fee can be...
further optimized by discrimination of donor centers, depending on the area, depending on competitors across the street or not. So this is like any other business with spicy management. So there is a room for improvement on the donor fee.
On the cash flow generation, this year is going to improve significantly versus 2022. First of all, because on the back of a higher VDA, for number one, for number two, you know, local working capital consumption, because the inventory growth will be very limited. Lower capics, the 1 million lower capics that previous year.
So basically, due to those, I would say key three levers, the cash flow generation will be significant, but at this point of time, we will not provide with specific details. Thank you. We are close to the final time of this call, but we have four questions. Four persons are still willing to, as we will try.
our best to answer your questions for these four at least. So now it's a table with the ring from Morgan Stanley . Hi, table. Yes, thank you for taking my question. On the plasma collection, 1433, so I understand that you are managing the level of plasma. You're going to collect, going forward with the closure of some centers and the improvement of your productivity in the remaining centers.
But, and I guess, you know, if you think about the growth rate of collection in 23, probably on the first half of the year is going to be relatively high because your base is lower. But from the normalized base that you achieved in the fourth quarter of 2022, what is your ambition to grow collection further when you think about, you know, beyond 23? So, basically should we, you know, see again an ambition to grow the volume and, for example, expanding to New Santos, are we going to remain in the mode where you're trying to manage it?
to manage a product key by Santiago Hazel, and trying to expand, having a belt and stuff. It's about, we will manage volume, of course, by existing centers, but especially through productivity. We are not back to pre-pandemic levels productivity-wise.
So there is plenty of room for improvement to use the level of productivity per cent there to get the volume that we need. And to align the volume needs with the sales needs. So this is now, it has been in the past and now we expect this to be the case. And the parenthesis has been the pandemic.
Thank you, Lester. We go now to Charles Pittman from Backlist. Hi, Charles. Hi, thank you very much for your question. Two quick ones from me. Firstly, just on the deliveraging options, can you just talk about the potential considerations you'll have to think about when thinking about exiting by the path of all of the Shanghai Rastic? Are there any limitations there? Would you have fun with a local player to sell?
potential, you know, some high-rass divasement.
And regarding the competitive landscape in the immuno-modulation,
market, FCR ends, blocker, precisely on CADP to be more precise. Due to the mechanism of the disease itself, it's a very complex disease. Many factors are implied in the disease modality. And we really don't expect that this may have a huge impact in our CADP franchise.
Therefore, we are not modeling as well that impact in our mid-term projections. We expect this to be limited for the CIDP. Okay. And now from Alandra Equities, we have Alvarolence.
Hi, thanks a real quick. Just if you could give us some indication of the 300 million expected cost savings on the plasma site, how much of this could come from lower donor fees and the overall operating leverage of recovering volumes and how much from the actual layoffs.
and the more inorganic measures so to speak in the restructuring. So how much organic, how much the actual restructuring? OK. Will we 50% come in from optimized donor fee and 50% from the rest, basically, as I said, already give you some details about the different initiatives. 50-50. OK.
Okay, thank you and Juan Rose from ODOVHS. Hello, thank you for taking my questions. I have three very quick ones. First one is regarding plasma collection centers. You've been adding new centers in the last few years and you've saved in the past that those or some of those centers had kind of legacy contracts with higher costs and I'm wondering what's the impact of the renewal of those contracts once this part and they are renegotiated with better terms. The impact of those already embedded in your in your cost saving guidance. Second regarding the surprise collapse, sorry to the bothersome with this. Do you have any kind of
a surprise level at which you'll start considering the collapse. Is it 15% or is it 20%? Finally, another bothersome question just to clarify. Could you please tell us if you are involved in any kind of talks, even if they're very preliminary to dispose any business of the Riffles Group? Thank you.
I take the first one. Thanks for the question. Yes, the operating performance improvement plan on plasma contemplates is a blended of these kind of new centers that we have acquired during the pandemic plus some third party contracts to get plasma from it. So yeah, everything is contemplated.
And as I said, in previous questions as an answer regarding the footprint, whatever center that makes sense to consolidate or to close, we have, yes, done or we will continue to be doing during this year 2023 to really fine tune precisely this balance with the volume and productivity. Okay, so I take the others regarding the AMV unification.
Obviously, we need to look for the right spot. The right time, the right spot will be with the right gap and the right stock price for the time being. We have not decided to get these two factors. And then, of course, we will not disclose any talks for potential delivery transactions. Now, take the last one, and that is your specific question on where we are in on naming transactions. And obviously, that's very confidential. And I cannot go there. However, I want to again reiterate one point just to be very, very clear. And is that we are not considering a capital race.
at all, and that's not a favorite option at the current valuations that we have. So unless something dramatically changes in the valuations of our trading prices going forward, that is not really on the table. So it's not something that we are putting that really as a very last option.
Okay, and very quickly we have one follow up from Peter from City. Please, Peter, but be really fast. Well, I think we're very fast because I was looking for a clarification because I got worried about the comments last year at the CMD being no capital raise to all options being on the table. But I think Thomas is clarified that in terms of his previous comments. So I won't waste any more time. Thanks for the call.
Thank you. Thank you anyway. So and with that we'll end the call I work with today. You know that any other questions? The IA team it's always available and any other conversations we can follow up in the next few days. Thank you very much for taking part. Bye.