Q1 2026 Fagron NV Earnings Call
Speaker #1: Once first quarter 2026 trading update. I'm joined today by our CEO, Rafael Padilla, and our CFO, Karin de Jong. We will open the floor for questions at the end of the session.
Speaker #1: With that, I will hand over to Rafael.
Speaker #2: Thank you, Ignacio, and good morning, all. We're pleased to report a solid quarter, with revenues of €263 million, representing 10.3% growth. Results were driven by outstanding performance in LATAM and strong contributions from our M&A.
Speaker #2: Brands continue to perform well across the board, supported by our innovation capabilities and commercial strategy. Operational excellence initiatives also continue to deliver benefits. During the quarter, we completed the acquisition of Pharmavit in the Netherlands, strengthening our position in the nutraceutical ingredients market.
Speaker #2: Also worth mentioning is that the Pharmavit integration, together with all previously announced acquisitions, is progressing as planned. On guidance, we are maintaining our top-line outlook of mid- to high-single-digit organic growth at CR.
Speaker #2: On profitability, we expect a margin of circa 20% for the year, reflecting the Pharmavit acquisition. We also expect H2 to be stronger than H1.
Speaker #2: Moving on to the regional dynamics, ENEA reported a steady performance, with all segments contributing. BNE performance was driven by innovative product launches and the continued rollout of our global brand strategy.
Speaker #2: Compounding services benefited from strong demand and new customer wins across the region. Turning to LATAM, we've seen outstanding growth this quarter, mainly driven by brands in Brazil, together with contributions from Pre-Pharma and Pacom.
Speaker #2: Brands continue to deliver strong momentum, driven by our innovation power and targeted commercial strategy. In North America Pacific, organic growth was positive despite the absence of GLP-1-related revenues.
Speaker #2: BNE delivered strong growth, supported by new product launches, higher product availability, and improved operational performance. In compounding services, the underlying business remains strong and continues to benefit from portfolio expansion and new customer wins.
Speaker #2: And, as already explained, the GLP-1 comparatives will normalize throughout the year. Finally, our investments in the Las Vegas and Wichita facilities are progressing as planned.
Speaker #2: Moving on to our outlook, we are maintaining our revenue guidance of mid- to high single-digit organic growth at CR. We expect a profitability margin of circa 20%, reflecting the Pharmavit acquisition.
Speaker #2: Pharmavit brings €62 million in annual revenues, with an EBITDA margin of around 14%. And in line with our integration plan, we are confident in bringing the margins towards group’s level within 18 to 24 months.
Speaker #2: Our CAPEX will remain at around 3.5% of revenues, excluding the previously announced one-off projects. To conclude, the start of the year shows the resilience of our business model.
Speaker #2: Consisting of predictable growth and continued progress on quality and operational excellence. We also continue with our disciplined M&A strategy and are now heavily focused on integration and value creation.
Speaker #2: This performance builds on a long-term track record. We also remain confident in the underlying drivers of our end markets and our ability to deliver the mid-term targets.
Speaker #2: With that, let us open the line for questions.
Speaker #3: Ladies and gentlemen, we are now ready to take your questions. If you have a question, please press #5 on your telephone keypad. Our first question comes from Michael Haider from Badenberg Bank.
Speaker #3: Please go ahead.
Speaker #4: Yes. Good morning. Good morning, Rafael, Karin, and Ignacio. I have four questions, if I may. The first one is on the US market. Can you describe the underlying market momentum at the moment?
Speaker #4: Were there any other effects influencing your organic growth besides the GLP-1 recall or impact? Second question is, can you please give an update on the integration activities, especially Puripharma and Pharmavit?
Speaker #4: Third question, just a quick reminder: are there any acquisitions that are not closed yet? And then, last one—congratulations on the very strong results in Latin America.
Speaker #4: Can you give us an example of the innovative products and the commercial initiatives that you have taken in Latin America to support the growth there?
Speaker #4: Many thanks.
Speaker #2: Yes, thanks a lot, Michael. Good morning as well. Thank you for your nice questions. On the US market dynamics, we see that after the whole GLP-1 momentum that we had last year—I mean, the market in general—the compounding industry was strengthened by that fact.
Speaker #2: So this means that there are more resources to invest in the underlying market by the compounding industry. Remember, there are around 4,000 compounding pharmacies—it's the biggest market in the world in terms of value.
Speaker #2: Volume is Brazil. As you know, this, together with the fact that in the hospital market you see that quality and regulation is improving, as we have been discussing during the conference last time, some weeks ago.
Speaker #2: Remember, we said that the FDA is increasing the quality and regulation standards? So this means that hospitals need to push more outsourcing, also for some small players.
Speaker #2: So you see that this is a clear tailwind for us. So when you take this one together with the fact we were saying in the beginning that there are more resources for those customers of us to increase their market exposure, visit to doctors, also investing a lot in platforms, telehealth platforms.
Speaker #2: So, you see that the underlying market is increasing. So, we see now a good momentum there. And we are, of course, benefiting from that.
Speaker #2: And also remember as well that we are challengers in the segments that we operate. We have clear three segments where we operate. The first one is the BNE, so the raw materials and our branded products.
Speaker #2: And we are here a clear challenger behind Medisca. Then we have, of course, the health and wellness—so prevention and lifestyle. And here, of course, we are number two as well.
Speaker #2: So we also have an opportunity to gain market share in those two segments. And the third one, the hospital outsourcing, we also have a possibility to grow there because we are clear number two.
Speaker #2: So, next to the fact that the underlying market is growing, we also have a chance to grab market share.
Speaker #3: Yeah, good morning, Michael. So on the second question on the integration status of Puripharma and Verpakkung—so, let's start with the Brazilian one. Puripharma is a big one.
Speaker #3: So, approximately 200 million REIs of sales with a 10% EBITDA margin—so well below the group average. There's a clear synergy case for that, and it has to do with the centralization of logistics, but also manufacturing back-office activities.
Speaker #3: And we're well on track with the integration of Puripharma, and we expect to realize some synergies initially in H1, but most of them will be realized in H2.
Speaker #3: We're on track with the plan. If we look at the Dutch one, Pharmafit, we just recently acquired them—so, at the end of February, early March.
Speaker #3: So we have an integration plan there, and we're working also there to realize synergies, also, that will be mostly embedded in H2 and next year.
Speaker #3: So overall, also if you look at the guidance and the profitability guidance, one of the elements that plays in there is the synergies effects that we expect to contribute as of H2.
Speaker #3: And therefore, we also expect H2 to be better than H1. So that's on the second question. The third question—not closed acquisitions, there are two.
Speaker #3: There's one in Asia Pacific, Amber Pharmacy. And there's one in Brazil in G+. And in G+, it's a packaging company. So there are some licenses that we need to obtain.
Speaker #3: So it's a bit outside of our control, but we're working on that, and we anticipate closing them this year. Amber, probably in H1.
Speaker #3: And in G+, we have to wait a bit on the regulatory aspect of that. But we're also positive that we can close that.
Speaker #5: Yes, and on your last question, Michael—an example of one of our brands—and we really like these questions because then we can talk about our products.
Speaker #5: Remember, the molecule that you can find in wine, that's resveratrol. They say that only wine glass, of course, only one glass of red wine brings resveratrol.
Speaker #5: So resveratrol, as an example—we launched PLATEY items, and we're going to talk about this item as an example—is a molecule that is widely used in the compounding industry in the prevention and lifestyle segment for chronic inflammation.
Speaker #5: And the difficulty of this molecule, as an example—the resveratrol—is that it's not getting well absorbed in the body. So everything that you take in, it gets out of the body.
Speaker #5: So, together with a partner in the Far East, we have there some strategic partnerships with some product developers. We have developed one adjustment in the molecule that is able to let this molecule stay.
Speaker #5: So resveratrol stays in the body. We call it Resvitec. So you can imagine that then almost the whole market turns into our molecule—of course, with studies, with viability studies, with pharmacotechnical studies.
Speaker #5: So, meaning that then the whole market sees us as an innovative player, they also see when the doctors prescribe and the patients take it that there is an immediate effect.
Speaker #5: There is an improvement in their life conditions. So you see how the whole market turns into our product. And this is one example again, we launched around 20 items on a yearly basis in Brazil.
Speaker #5: And remember, during the first week of July, there's a big fair called Consul Pharma, where we launched all our innovations for the year.
Speaker #4: Fantastic. Many thanks. Very clear.
Speaker #5: Thanks. Thanks, Mike. Bye-bye.
Speaker #3: The next question comes from Frank Klasse from Frankfurt Telecom. Please go ahead.
Speaker #2: Yes. Good morning, Garen, Rafa, and Ignacio. Two questions, please. First of all, on the rising oil price—how are you dealing with it?
Speaker #2: And what kind of impact do you see? Do you already see API prices rising and higher logistic costs? And how are you dealing with that?
Speaker #2: That's my first question. And then, secondly, you’re talking about improved product availability. Does that mean that you have higher inventories? Or, could you elaborate on your working capital situation?
Speaker #2: Thank you.
Speaker #4: Yes. Thanks a lot, Frank. Very important question. Nowadays, and indeed, we've seen an increase of all bales raw materials. The market, that's what the market is showing us.
Speaker #4: Also transportation costs, both in and in advance. What does it mean for us? Likely, we're lucky because our replenishment moment throughout the year starts in January and February.
Speaker #4: So we plan the year. And we have quite a decent inventory position with all prices. And next to this, when the conflict started, we decided to take strategic moves to take some of these items to get still good conditions.
Speaker #4: Of course, as you know very well, we take our global volumes to negotiate better conditions as well. So we are also pushing back when we see some increases in our replenishment moments.
Speaker #4: We have inventory for four and a half to four months, so that's also something that we need to take into account. And last but not least, remember also during the last years, with the pandemic and then other macroeconomic developments, we have been able to have a nice pricing pass-through exercise.
Speaker #4: So, we have shown, out of our ability, to do that.
Speaker #3: Yeah, and maybe to add on the working capital and improve the availability: so the last couple of years, there’s been a lot of focus on operational excellence initiatives.
Speaker #3: And that sets on procurement, for instance. But it’s also related to demand planning and forecasting, and to have a better sight into what is happening in the different markets.
Speaker #3: And we're seeing that we're benefiting from that if we look at product availability. We also had some initiatives to leverage our global footprint—for instance, producing some excipients in Brazil for the American market.
Speaker #3: And you also see that we're benefiting there from an increase in product availability. You saw that in the performance on the brands in Essential in the first quarter in North America.
Speaker #3: So those initiatives help. I also have to state that, indeed, we anticipated a bit of additional inventory in the first quarter of this year, which helps.
Speaker #3: In the current macroeconomic environment, we don't expect, overall for the year, that working capital will be higher than the guidance that we have in S12.5 to 13.5% of sales.
Speaker #3: So, overall, we don't expect, for the full year, an increase in working capital.
Speaker #2: Okay, that's clear. Thank you very much.
Speaker #3: Thank you, Frank.
Speaker #5: Thanks, Frank.
Speaker #4: Hi, good morning, team. Thank you for the opportunity. I just have, like, two basic questions. One is more financial-related; one is more in general.
Speaker #4: So could you just provide a recall, first split, in terms of what margin buildup you expect for 2026? So I understand that the 20% guidance is largely because of pharma, of it.
Speaker #4: So all the dilution would be expected in the EMEA region. Is that correct? And my second question is a little bit more general. There have been a lot of changes in the Medicare payment in the health insurance space in the US.
Speaker #4: I do understand that you're insulated from it. But is it something that is going to affect your future plans going forward? In terms of expansion into the US, or do you really think that it's just Fagron is totally not affected or impacted by it?
Speaker #4: Thank you.
Speaker #3: Yeah, good morning, Osama. So, to start with the first question on the guidance for profitability: indeed, while the acquisitions are expected to have a modest dilutive impact in 2026, synergies are realized.
Speaker #3: We initially anticipated a slight improvement in profitability versus 2025. And 2025, as you know, is at 20.3%. But after the acquisition of Pharma Fit at the end of February, we expect a slight decrease due to that dilutive impact in the first year.
Speaker #3: And the impact of Pharmafit is roughly 30 bps. So that results then in an EBITDA margin of circa 20%. So that's what you will see, indeed, in the EMEA region.
Speaker #3: Latham, we also expect a small dilutive impact due to the acquisition of Beauty Pharma, but this will be partly offset by Fupakum, which has an EBITDA margin that's above the group average.
Speaker #3: And so for the Latham, as I said earlier, we expect H2 onwards. We expect the synergies to start contributing to the margin improvement. And North America, we expect that they continue to benefit from the operational leverage and operational excellence initiative.
Speaker #3: And we do expect a slight margin improvement in 2026 for that region. So, overall, we guide for an EBITDA margin of circa 20%.
Speaker #5: Yes. And on your second question, you answered it perfectly while you were questioning the question. So we are not affected. And this is because, when we look at each one of the three segments in the US, we have on the BNE side, the raw materials and the brand; it's a 100% transactional, cash-based business.
Speaker #5: The same goes for prevention and lifestyle. That's Anaseo, CareFirst, and UCP now that we are bringing them together. And then on the outsourcing part, that's being paid out of the hospital budgets.
Speaker #5: And remember, Osama, that it's an important medication, an acute medication for emergency rooms. So we are not affected by this Medicare plan.
Speaker #4: Very, very great. And if I may just squeeze a very small question on M&A going forward. So, last year we've had more than 12, 13, 14 different acquisitions being now fully integrated or in the process, being approved or integrated.
Speaker #4: What is the appetite for the remaining part of 2026? And yeah, okay, 2027 is a little bit far. Would you still be open for smaller acquisitions, or have you internally said, 'Okay, this year we're going to just integrate them all and maybe look for options in 2027,' or something?
Speaker #4: I just want to check what I mean—how much appetite do you still have? Thank you.
Speaker #3: Yeah, to answer that one, we do have appetites for acquisitions. So there's a pipeline, and if we feel that there's a deal to be made, with a disciplined approach, we will consider doing that.
Speaker #3: So, there are a couple of ones in the pipeline in the different regions, aligned with the acquisition strategy that we have. So, we anticipate doing some deals in 2026.
Speaker #3: However, as you can imagine, the integration part has our first priority now. So we don't expect to do the same number of deals that we did last year.
Speaker #3: But we do expect to do some deals this year.
Speaker #4: Thank you. That will be all. Thank you very much.
Speaker #3: Thank you.
Speaker #5: Thank you, Osama. Thanks, Osama.
Speaker #3: The following question comes from Stein and De Meester from ING. Please go ahead.
Speaker #2: Yes, yes. Good morning. Thanks for taking my question. Three, if I may. The first one is on US compounding, excluding the impact of GLP-1 and potentially some other ones in the first quarter.
Speaker #2: How should we look at growth momentum in that segment in US compounding in the periods to come, and more specifically, how would you say growth in FSS compares to the more health and wellness-driven business at Anaseo?
Speaker #2: Secondly, related, is it fair to say that growth at Anaseo is a bit more tied to discretionary spending? Given the lifestyle or the health and wellness-related part of the business, and what percentage of Anaseo would you say is tied to this wellness segment?
Speaker #2: And then the last one is a clarification. Karen, did you mention a 7% margin at Purifarma? Or did I misunderstand? Because my impression was always that it was about a 10% margin business.
Speaker #2: But maybe that has shifted. These are my questions.
Speaker #6: Yeah. No. Okay. Maybe to start with the last one, Stein. No, it's 10%. So I said if I, but it's absolutely 10%.
Speaker #2: Okay. Understood. Thanks.
Speaker #6: Yeah, so then to go back to the first one, if we look at the performance of FSS in the first quarter, as you know, the performance reflects indeed the phasing out of the GLP-1s.
Speaker #6: There was $11 million in the first quarter, and there will be $9 million in the second quarter. So that has a severe impact on the US performance.
Speaker #6: On top of that, we saw in January some slowdown due to the weather conditions. As you know, in the last weeks of January, it was very cold.
Speaker #6: So it was difficult to ship some products, so we had some impact from that. And then we had a nationwide recall of Fresenius Kabi feedbacks, which impacted the output in Q1.
Speaker #6: And we also expect to have some impact in early Q2 of that. But of course, as you know, most of it is the phasing out of the GLP-1s.
Speaker #6: The underlying market remains strong, and we have good expectations for the rest of the year. As you also know, North America is currently producing in the 500B facilities to ship to their 500A facilities.
Speaker #6: That's an opportunity that opened up for us on the back of the guidance of the FDA. And this means that if we provide a split, it does not always contribute to a fair understanding of the performances of the businesses.
Speaker #6: And therefore, we decided not to report the numbers, and we report them as combined. If we take out the impact of the GLP-1 for North America, we're at low double digits, which is in line with our long-term guidance.
Speaker #6: And we're very positive about the prospects of that part of the business continuing. And maybe, Rafa, on the lifestyle part for Anaseo.
Speaker #5: Yes, for sure. So good morning, Stein. And as we were saying previously, we were saying previously, we see a clear tailwind in the prevention and lifestyle market, not only in the US, but also in the rest of the world, even in Europe.
Speaker #5: As you have pointed out many times, one thing in the US that is quite remarkable are the telehealth platforms, which contribute massively to the underlying growth in the market.
Speaker #5: And of course, you know that very well—the new Tampa facility is helping us a lot. So, we are setting records week on week in terms of new scripts that are coming in.
Speaker #5: Just to refresh, we invested in a new facility in Tampa, 503A, that's patient-specific with an ability to produce daily 15,105,000 scripts, and we can ship nationwide.
Speaker #5: So that's helping. Then we have Kerfers, that we acquired last year. And now we have acquired UCP, so that means that we have presence almost in all parts of the US.
Speaker #5: And we are now integrating those three facilities. We're also building, as you know, on the 503B side in Las Vegas and in Wichita with the current Wichita plant.
Speaker #5: And the Boston plant. So, as you see, we are now having a strategy from an operational perspective to bring all these facilities together. So, we're opening up the company, if you will.
Speaker #5: So we're bringing those things together. And then we have one dedicated sales force going into our customers. So we are cross-shipping, if you will, the items.
Speaker #5: Therefore, we're bringing compounding services into one segment.
Speaker #2: Thanks, thanks. It's very helpful, and I appreciate it's difficult to split the two businesses. But would you say that the health and wellness part grows faster than the sterile business?
Speaker #2: Does it grow in line? Or does it grow, or do you expect it to grow, at the rate below sterile? Is that possible to indicate?
Speaker #4: Sure. 100%. Stein, that's a very good question. And when you look from a macro-strategic perspective, the underlying market in health and wellness grows faster than the hospital market in terms of product usage.
Speaker #4: So, the number of units being used daily in the US grows higher in the prevention and lifestyle than in the hospital market. What happens here is what we have commented for the last five, seven, eight years, is that quality and regulation increases.
Speaker #4: So this means that hospitals are outsourcing more. We now have a rate of almost 60 to 70 percent of hospital outsourcing, so meaning that that market is now getting to a mature part.
Speaker #4: Also, think that we are challengers, so we can gain market share. And one element that is also happening, that you see with smaller 503Bs, is that sometimes there are recalls, or some products or production lines are being stopped.
Speaker #4: And then we clearly benefit, as we believe that we invest and we evolve on quality and regulation.
Speaker #2: Okay. Understood. Thanks. This is very helpful.
Speaker #4: Thanks a lot, Stein.
Speaker #5: Thank you, Stein.
Speaker #6: The following question comes from Eric Wilmer from Hollands Hot Camper. Please go ahead.
Speaker #7: Hi, good morning, everyone. I had a couple of questions. I wanted to press a bit more on the implications from the current Middle East situation on your business.
Speaker #7: I can imagine that you have to push through product price increases and transportation cost increases. Could you give us a rough sketch of the cost inflation you now need to pass on?
Speaker #7: And are your customers willing to accept this pricing, given that it might be temporary? I believe that in the Netherlands, remembering the COVID pandemic, it may take some time to pass it on, given contractual agreements.
Speaker #7: So I was wondering if this is still the case. And then, second question: this is moving over to the US. Could there be a risk that customers may switch away from the Fresenius Kabi IV bags now that they perhaps have gotten used to alternatives in March and part of April?
Speaker #7: And then finally, also on the US, there has been quite some recent talk about RFK wanting to legalize injectable peptides in the US. Could you give us a flavor of how this may support your US business and perhaps some wording regarding your readiness, if at all, should this indeed happen?
Speaker #7: Thank you.
Speaker #6: Yeah, thank you, Eric. So maybe to start indeed with the prices—yeah, what we see is that transportation prices are indeed increasing. So what we're able to do is, we have outbound transportation.
Speaker #6: So, towards our customers, we are able to increase that, whether that's with a surcharge or embedded in the price. Customers understand, of course. So we're well positioned to do that.
Speaker #6: Inbound, it depends a bit whether it’s air-freighted or whether it’s overseas. So, air-freighted is way more expensive than overseas. So there you see a mix in the region of transportation.
Speaker #6: And we're also there, increasing prices if needed. As said, you know our business very well. The B&E is more transactional business, so we're able there to increase prices a bit more quickly than the contracts that we're having.
Speaker #6: But it depends a bit on the type of contract, whether we're able to increase, yes or no. So, in Europe, there are some contracts where we are able to increase.
Speaker #6: And in some, there's maybe a bit of lagging. But we're on top of that. So, in case we are able to increase, we will increase immediately.
Speaker #6: Of course, it helps that we have, as Rafa mentioned earlier, a stock position of a couple of months. So that will also offset the impact partly.
Speaker #6: But as you know, it's a situation that's very fluid. So we'll monitor on a daily basis to see what we are going to do with prices.
Speaker #6: What we do believe is that we are well positioned to offset any price increases that we face by increasing prices towards customers.
Speaker #5: Yes, good morning, Eric. On your second question relating to FK, nationwide recall, we believe that customers won't switch because FK has been very professional. They act quite diligently to replace those batches in the marketplace.
Speaker #5: So the situation will last a few weeks, end of Q1, as Karen said, beginning of Q2. And then on peptides, when this happens, because we believe that this will happen, it will be a clear tailwind for the compounding industry when those peptides, of course, are greenlisted at the end.
Speaker #7: And maybe that's on the last one. Maybe just something on readiness. Is there anything you can say there? I understand this is competitively sensitive, but anything on just a flavor or a sense on if you would be ready.
Speaker #4: And sorry, Eric. I think the line was a bit distorted. If you can repeat, sorry for that.
Speaker #7: Yeah, sorry. No, of course. Can you hear me now? Can you hear me well?
Speaker #4: Yes. Now. Now better. Yes.
Speaker #7: Yeah, just regarding readiness—so, on the latter point, the last—yeah, readiness regarding peptides, anything you can say there?
Speaker #4: Yes, for sure. For sure. Sorry before. Yes, 100%. So, we believe that we can act quite quickly, quite agile—first of all, because of our global network in the sourcing market.
Speaker #4: So remember, we have also people working in the Far East. We are mapping all producers, of course. We know what would be the demand, of course, from our end customers.
Speaker #4: So that's one. And then secondly, as we saw at that time with GLP-1s, we introduced them quite quickly because what we are doing in the current clean rooms is to bring the product in, compound, and then ship the product.
Speaker #4: And that's the flexibility that this industry has, of course, with the highest quality standards. So we believe that would be quite agile.
Speaker #7: Very helpful. Thank you, Rafa and Karen.
Speaker #6: Thanks, Eric.
Speaker #4: Thanks, Eric.
Speaker #5: Thank you.
Speaker #6: Ladies and gentlemen, just as a reminder, if you wish to ask a question, please press #5 on your telephone keypad. The next question comes from Martin Verbeek from The Idea.
Speaker #6: Please go ahead.
Speaker #8: Good morning. It's Martin Verbeek of The Idea. A question regarding your remedial margin. This year, it will have a bit of a negative impact with respect to acquisitions made.
Speaker #8: You also stated that you will continue making acquisitions. For 2027, you have stated you target a remedial margin of 21%. So it looks like a bit of a balancing act.
Speaker #8: How do you cope with these two elements?
Speaker #6: Yeah, it's a very good question. Good morning, Martin. So our long-term guidance remains unchanged. We see that our RM&A strategy typically has an initial dilutive impact.
Speaker #6: A consolidation in the execution of the identified synergy initiatives is expected to support a step-up in performance over a reasonable time frame, usually 12 to 24 months.
Speaker #6: Of course, subject to the acquisition and the pace of the integration. So, based on the plans we currently have, we anticipate being broadly aligned with our 2027 guidance.
Speaker #6: Thank you, Martin.
Speaker #5: Thank you. And with this, we have come to the end of the Q&A. Thank you very much for your participation today. I will remain at your disposal should you have any further questions.
