Gerresheimer reports strong Q3 earnings growth

Gerresheimer AG has reported strong results in the third quarter, as expected.

“We delivered very strong earnings in the third quarter. Improvements in our operational business and the success of our most recent acquisitions and divestments are plain to see in double-digit earnings growth. Now we are about to sell our laboratory glassware business. This means we are focusing even more on our core competency—on our business based on primary packaging and products for safe and convenient drug delivery,” said Uwe Röhrhoff, Chief Executive Officer of Gerresheimer AG.
In the third quarter of financial year 2016 (June 1 to August 31, 2016), the pharma packaging manufacturer boosted revenues by 8.4% to EUR 373.1m. On an organic basis, meaning adjusted for exchange rate effects, acquisitions and divestments, third-quarter revenues were up 1.4%. The business with glass products such as vials, ampoules and cartridges sustained the positive trend from the preceding quarters, especially in the USA. Growth was held back slightly by the scheduled expansion of a large furnace at the cosmetic glass plant in Tettau, Germany. In medical plastic systems, sales of inhalers did particularly well. Development and tooling revenues from new medical plastic systems projects were also higher in the third quarter than in the comparative prior-year period.
The Company generated adjusted EBITDA of EUR 84.4m in the third quarter, compared with EUR 37.9m in the same period of the prior year. Capital spending in the last few months once again focused on standardizing and modernizing machinery for the manufacture of injection vials and cartridges worldwide. There was also the scheduled expansion of a large furnace at the cosmetic glass plant in Tettau. Smaller capital expenditure outlays related to expansion of the medical plastic systems plant in Peachtree City, USA, and inspection technology for syringe production in Buende, Germany.
Outlook
Gerresheimer’s strategic focus is the manufacturing of pharmaceutical packaging and drug delivery products. In line with this strategy, Gerresheimer announced on September 12, 2016 that it is to sell its Life Science Research Division to Duran group, a portfolio company of One Equity Partners. The Company does not expect that the transaction will be closed before the financial year-end on November 30, 2016.
Given that the division will be accounted for as a discontinued operation in accordance with IFRS 5, the guidance for financial year 2016 must be revised accordingly. In simple terms, from the time of classification as a discontinued operation, all income and expense items in the consolidated income statement are adjusted for the current year and retrospectively for all comparative periods to be reported upon and are shown in a separate item. The assets and liabilities of the discontinued operation are each shown from the time of classification as a discontinued operation in separate items on the assets and liabilities sides of the consolidated balance sheet. For the Company’s guidance in relation to revenues and adjusted EBITDA, this means that the revenues and adjusted EBITDA for the current year and the prior year have to be deducted from the expected figures. The figures for financial year 2015 have therefore been adjusted for the results of the Life Science Research Division (2015 revenues EUR 100.7m and 2015 adjusted EBITDA EUR 15.3m) as the basis for comparison, and the guidance for financial year 2016 has been adjusted accordingly.
The Group revenues of around EUR 1.4bn (plus or minus EUR 25m) correspond to revenue growth of some 10% at constant exchange rates compared with financial year 2015 (adjusted for the Life Science
Research Division) and organic revenue growth of between around 4% and 5% as before.
Adjusted EBITDA is expected to increase to some EUR 305m (plus or minus EUR 10m) in financial year 2016, compared with EUR 262.6m in financial year 2015. This is likewise excluding the Life Science Research Division in each of the two financial years.
Capital expenditure in financial year 2016 will, as before, account for around 8% of revenues at constant exchange rates. As has already been communicated, average net working capital is expected to improve by about two percentage points in financial year 2016 to around 17% of revenues at constant exchange rates.
The Company gives additional guidance as follows, in each case assuming constant exchange rates. Gerresheimer is aiming for average annual organic revenue growth of between 4% and 5% for the period 2016 to 2018. For the adjusted EBITDA margin, the Company has raised its target from about 22% to over 22% for financial year 2018. To achieve these targets, Gerresheimer continues to assume a capital expenditure goal of approximately 8% of revenues at constant exchange rates.
The full quarterly report is available here: www.gerresheimer.com/en/investor-relations/reports.