(News Bulletin 247) – The former subsidiary of Sanofi announced that it anticipates a drop in its revenues on a comparable basis of 4% to 7% for the current year. The fault in particular is lower sales of active ingredients to its former parent company.

Since its IPO in 2022, Euroapi’s dependence on its former parent company Sanofi has been a recurring cause of fear. In 2022, the CAC 40 giant still represented more than 48% of its revenues.

The announcements delivered Wednesday evening by the former subsidiary of the pharmaceutical group (which still holds around 30% of the capital) will probably fuel these concerns.

The specialist in active pharmaceutical ingredients (API) – molecules used in the composition of a drug and which give it its therapeutic properties – has published its 2023 results.

Its revenues increased by 3.8% to 1.013 billion euros. Its key profitability indicator, “core Ebitda”, or gross operating profit restated for certain elements such as restructuring costs, fell by 22% to 93.1 million euros.

The company explains this decline by an increase in its operating expenses, an unfavorable mix (the distribution of sales) in terms of margins, and “less favorable absorption of fixed costs, due to lower sales volumes than those which had been anticipated. The corresponding margin increased from 12.3% in 2022 to 9.2% in 2023.

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A new illustration of dependence on Sanofi

But more than the results strictly speaking, it is the prospects announced by the company which seem to have investors gripped, with the stock falling 41% around 2:30 p.m. Euroapi also seems to be subscribed to the stock market heavyweights, having already lost 59% on a session in October, following a previous warning on results, as well as 21.8% on March 8 after a publication (already ) disappointing.

For 2024, Euroapi forecasts a decline in its sales of between 4% and 7% on a comparable basis, when the consensus was on the contrary forecasting growth of 2.5%.

This drop in activity is linked to the expected decline in sales to Sanofi. “Euroapi’s initial medium-term outlook took into account a steady low-single-digit percentage decline in volumes sold to Sanofi, which was expected to be offset by the ramp-up in sales to other customers,” explains the company. “However, at the start of 2024, the forecasts for API requests from Sanofi, cumulative for 2024 and 2025, are significantly lower than the estimates made at the IPO,” argues the company.

In terms of profitability, the company anticipates a further decline, counting on a “core Ebitda” margin of between 6% and 9%. Here again we are far from the consensus which anticipated a margin of 11.2%, according to Deutsche Bank.

“In addition to the reduction in volumes, the increase in raw material and energy prices, which could not be fully passed on through price increases in accordance with the current contract, weighs on the profitability of our business API Solutions,” says Euroapi.

All this “shows (once again) the strong dependence on Sanofi and the low visibility of Euroapi”, asserts Deutsche Bank.

Following this very disappointing publication, Euroapi announced that deputy general manager Ludwig de Mot, who joined the company in January, was appointed general manager, succeeding Karl Rotthier, dismissed in October.

The company also launched a transformation project called “FOCUS-27” to enhance its growth. This plan includes the elimination of 13 APIs with low or negative margins, as well as the rationalization of the company’s industrial footprint.