(News Bulletin 247) – Star company of the Covid period, Eurofins Scientific has reduced its forecasts for the current year after having published 2022 accounts in sharp decline.

The annual results season is soon coming to an end for CAC 40 companies. While a majority of the residents of the star Parisian index have succeeded in their appointment with the market, this is far from being the case for Eurofins. Scientific.

Big winner of the Covid-19 pandemic in 2021, the world leader in the testing of food, environmental, pharmaceutical and cosmetic products disappointed last year. Its 2022 results are clearly below its forecasts and analysts’ expectations, penalized by the drop in Covid tests and the effects of inflation on its profitability. And for 2023, Eurofins Scientific expects a slight contraction in its income.

The title is heckled Wednesday in reaction to its annual results and the announcement of disappointing prospects. Among the worst performances of the entire tricolor quotation around 11:20 a.m., the Eurofins Scientific share dropped nearly 11%, below 60 euros, showing its biggest drop since its integration into the CAC 40 in September 2021.

A decline in sales resulting from Covid tests

In 2022, the French giant of medical analysis laboratories indeed recorded stable sales compared to 2021. They were displayed at 6.712 billion euros against 6.718 million euros in 2021. This level of turnover is in line with the group’s forecast and “broadly in line” with the consensus, Jefferies explains in its memo for the day.

The group’s annual performance was marked by a decline in sales of tests and other products linked to the Covid-19 pandemic. Revenues from these products amounted to 600 million euros in 2022 compared to 1.4 billion euros in 2021, a record year for the company.

The group was however able to count on the dynamism of its “core business” activities, that is to say revenues excluding clinical tests and reagents linked to Covid-19. They recorded organic growth of 5.8% in 2022. This is slightly above the consensus cited by Jefferies (+5.7%) but in line with the expectations of the research office (+5.8% ).

Adjusted EBITDA (Adjusted EBITDA) contracted to €1.51 billion in 2022, from €1.90 billion in 2021. The corresponding margin rate also suffered, dropping to 22, 5% against 28.3% a year earlier. On this point, Eurofins Scientific disappointed the market. The adjusted EBITDA level is 6% lower than the consensus. As for the margin, the expectations cited by Jefferies were lodged at 23.8%.

The French tests and diagnostics giant’s profitability has been hurt by less generous reimbursement rates for Covid tests.

Eurofins Scientific also attributes this drop in profitability to a strike episode that affected the medical analysis laboratories at the end of 2022, but also to difficulties in the food testing division due to the disruptions linked to the war in Ukraine.

The company’s adjusted net income fell by more than a third to 683 million euros, where adjusted profits exceeded one billion euros in 2021 at 1.04 billion euros.

2023 forecasts also disappointing

On the sidelines of the publication of its 9-month business update, Eurofins Scientific had warned investors that it was going to adjust its forecasts for the 2023 and 2024 financial years. The group was waiting to gauge “the potential impacts of the war in Ukraine, supply chain disruptions, the sale of Covid-19 tests, inflation and exchange rates” to give the market a clear roadmap.

Given these multiple headwinds that Eurofins Scientific is facing, the company’s management anticipates for 2023, a turnover of between 6.6 billion and 6.7 billion euros and a gross operating surplus ( Ebitda) adjusted between 1.35 billion and 1.40 billion euros.

The forecasts updated by Eurofins Scientific highlight a slight contraction in turnover compared to 2022, while on the adjusted EBITDA side, the disappointment is also palpable. Management was still counting a year ago on an Ebitda of 1.58 billion euros for the current year. Based on this midpoint, the margin would stand at 20.3% precise Jefferies (against 1.57 billion euros and 23.2% margin, previously expected by the consensus).

For 2024, the company has not communicated the slightest forecast, preferring to project itself to 2027. By this horizon, Eurofins Scientific plans to achieve 10 billion euros in turnover and an adjusted EBITDA margin of 24%.

The company explains that achieving this margin target will depend on the state of health of the agri-food industry market and the company’s ability to pass on rising costs to its customers. This margin objective will also depend on the speed at which “initiatives in terms of innovation, productivity, digitization and automation” will be carried out, explains its Chairman and Chief Executive Officer, Gilles Martin.