Eurofins knows. : With disappointing cash flow and a dividend halved, Eurofins sinks on the stock market

(BFM Bourse) – The pharmaceutical and food analysis group generated cash flow significantly lower than expectations in 2023 and slashed its coupon.

Once one of the big winners on the stock market in the fight against the pandemic via its range of tests to detect Covid-19, Eurofins has lost its luster.

Since its arrival on the CAC 40 in September 2021, its price has been divided by almost 2.5, weighed down by the normalization of the health environment but also by disappointing results, as in the first half of 2023.

This is still the case this Tuesday. Eurofins Scientific shares collapsed by 11.2% around 10:20 a.m., showing by far the biggest drop in the CAC 40, while the group unveiled its 2023 accounts.

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Disappointing earnings per share

Eurofins’ turnover was in line with expectations at 6.51 billion euros, down 2.9% year-on-year. Eurofins saw its revenues be weighed down by the decline in Covid-19 tests and reagents, which only represented 20 million euros in turnover in 2023 compared to 600 million euros in 2022.

Excluding these activities linked to the pandemic, Eurofins’ revenues increased by 7.1% on a like-for-like basis over the whole of 2023, supported in particular by North America where growth reached 8.7%.

Adjusted gross operating profit (EBITDA) fell 9.9% year-on-year to 1.36 billion euros, reflecting a margin of 20.9% compared to 22.5% in 2022.

Adjusted earnings per share stood at 2.71 euros, down 21% year-on-year and 3% lower than the 2.79 euros expected by the consensus.

A cash flow at half mast

But the big disappointment seems to come mainly from the cash flow statement. Many CAC 40 groups, such as Renault and Carrefour, have delighted the market with their cash generation during this results season. This allowed them to raise their dividend to a higher level than expected by analysts.

Eurofins does exactly the opposite. The laboratory generated cash flow

lower than expectations, by 626 million euros, down 7.6% over one year.

Jefferies points to “weak” cash generation, while the consensus was counting on 677 million euros. Above all, the company missed its own objectives since it expected to generate a cash flow of between 670 million and 720 million euros.

Oddo BHF notes that cash flow was penalized by an unfavorable variation in working capital requirements (WCR), which represented 5.1% of turnover in 2023 compared to 4.2% in 2022.

A disappointing dividend

The dividend proposed for 2023 also disappoints. Eurofins intends to pay 50 cents per share compared to a coupon of 1 euro for 2022. The group argues that this dividend remains 74% higher than that of the 2018 financial year, “the last dividend before the Covid-19 pandemic. 19,” he explains. But analysts again expected much more, anticipating a coupon of 92 cents.

For 2024, Eurofins Scientific said it expects revenues of between 7.075 billion and 7.175 billion euros, adjusted Ebitda of between 1.525 billion and 1.575 billion euros and cash flow ranging from 800 million to 840 million euros.

“The new guidance for FY24 appears broadly in line with expectations, but is unlikely to inspire confidence,” Jefferies said.

Eurofins also confirmed its targets for 2027, i.e. core revenues of 10 billion euros, an adjusted EBITDA margin of 24% and cash flow of around 1.5 billion euros.