(News Bulletin 247) – The manufacturer of stationery, lighters and razors achieved a better-than-expected year in 2023, thanks to the launch of new products and its upmarket strategy. Bic is counting on a new year of growth in its activity, accompanied by a slight improvement in margins. The title jumped on the Paris Stock Exchange.

At the end of October, UBS bank anticipated “a strong end to the year” for Bic.

The financial intermediary hit the nail on the head as the pen manufacturer achieved a fourth quarter that was generally better than expectations. As a result, investors are enthusiastic about the title of the septuagenarian group, propelling it to the top of the Parisian market. The stock thus rose 7.5% to 67.20 euros around 12:15 p.m. to return to its one-year highs, thus bringing the capitalization to nearly 2.70 billion euros.

In the fourth quarter, the group published almost stable turnover in published data and growth of 2.4% in comparable data, at 526.1 million euros, which is close to Oddo BHF’s expectations. (525.4 million euros).

Above all, Bic was more profitable at the end of 2023 than over the same period of 2022. Over the last months of 2023, adjusted operating income jumped 68% to €72.7 million. euros. Here too, the manufacturer of pens and lighters exceeds both Oddo BHF’s expectations at 70.2 million euros as well as the consensus cited by the design office of 71 million euros.

A paid move upmarket

The adjusted operating margin logically appreciated to stand at 13.8% compared to 8.2% for the same period of the 2022 financial year. “This improvement in the margin over the fourth quarter (51.6%) is linked to the evolution of the gross margin (+540 basis points) due to the improvement in price and mix, the reduction in the cost of raw materials and the improvement in production processes”, underlines Oddo BHF.

In recent years, Bic has strived to evolve its operating model. The group is developing new products and reorienting its range towards value-added items, i.e. better margins. In January 2023, the company notably launched in France (after the United States) its EZ Reach range, which is similar to a utility lighter, allowing you to light candles or grill, while having a system safety for children.

A little further down in the accounts, the improvement is also notable with regard to net profit. Between October and the end of December, Bic’s profits almost quadrupled to stand at 45.1 million euros, compared to only 12.4 million euros in the fourth quarter of 2022.

Throughout the year, the lights are also green. In 2023, Bic’s turnover increased by 9.2% at constant exchange rates, to 2.26 million euros, thanks to the combined effect of price and volume increases. The group has also outperformed its own outlook announced in February 2023. These targets then provided for a 2023 revenue growth objective at constant exchange rates in a range between 5% and 7%.

In detail, the “human expression” division (stationery, editor’s note) (+10.2%) was driven by distribution gains in all European countries, very good commercial execution in Latin America and double-digit growth in the Middle East and Africa. The “blade excellence” division, in other words razors, contributed to performance (with growth of 17.8%) thanks to market share gains in Bic’s key regions, and strong interest from consumers for “high value-added products” and “new products” marketed by Bic.

“On razors, we have new products that work very well,” explained Kimberly Stewart, head of investor relations for the group cited by AFP, who takes the recent launch of scented razors as an example. Finally, the “flame for life” division, i.e. lighters, grew slightly, by 3.3% at constant exchange rates.

A little further down in the accounts, adjusted operating profit increased by 6.9%, to 333.1 million euros. The adjusted operating margin increased to 14.7%, from 14% in 2022.

Management is pleased with the “solid performance” of its group, including “an improvement in the gross margin”, achieved “through the optimization of [son] purchasing process and by improving the reliability and sustainability of our supply chain.

A little further down in the accounts, the adjusted net income group share increased by 8.1% to stand at 243.4 million euros after 225.2 million euros at the end of December 2022. Adjusted net profit per share jumped 11.3% to 5.70 euros after 5.12 euros in 2022.

A “very modest” stock market valuation

For 2024, Bic intends to continue this favorable dynamic. The company expects its revenue growth this year to be between 5% and 7% at constant exchange rates, thanks to the effect of volumes and its upscaling policy. The French group took care to exclude Argentina’s turnover from its objectives, due to the hyperinflationary context facing the country.

This growth objective is appreciated by Oddo BHF, which considers that such progress would constitute “a good performance”.

Also for the current year, the company expects a slight improvement in adjusted operating margin, “thanks to positive leverage on operating costs.” Oddo BHF uses an assumption of 15.1% for this indicator, an increase of 0.4% compared to 2023. Bic also expects a generation of net free cash flow of more than 220 million euros in 2024.

“We will continue our efforts to increase operating margin to support long-term profitable growth, in line with our objectives for 2025,” says management.

In September 2023, the company provided an interim progress update on the progress of its Horizon 2025 strategic plan. By the end of 2025, the company intends to achieve growth at constant rates of between 5% and 7% – against a previous forecast of around 5% – and an operating margin around 15.5%.

Remember that Bic presented this roadmap in November 2020 by launching a series of strategic initiatives to expand the market for its various products, in order to return to a growth rate in line with 5% per year.

“Ultimately, this publication and the outlook for 2024 confirm our investment argument,” welcomes Oddo BHF, which renews its outperformance opinion as well as its price target of 79 euros.

According to the financial intermediary, Bic’s valuation on the stock market remains “very modest”, with a 2024 price-to-earnings ratio of 10.7 whereas it was 14.5 over the last 10 years. An anomaly even though the group is returning to growth in its turnover, its profitability and its free cash flow, (including approximately 8% returned to shareholders via ordinary and extraordinary dividends and share buybacks)”, concludes Oddo BHF.