(News Bulletin 247) – The manufacturer of stationery, lighters and razors achieved a third quarter better than expectations. Bic is revising its annual operating margin objective upwards, after a strong improvement in its profitability this summer.

With OVHcloud, the publication of Bic constitutes a pleasant surprise on the Paris Stock Exchange this Thursday. The specialist in stationery, razors and lighters disappointed in the second quarter, due to a lighter market in the United States that was much less flamboyant than expected. This forced Bic to significantly review its 2024 growth objectives at the end of June.

This time, Bic’s publication gives reasons for satisfaction. In the third quarter, the group published a turnover down 3.7% year-on-year in published data to 539.7 million euros. This level of income “generally corresponds” to the expectations of Oddo BHF (541 million euros) and those of the consensus cited by the research office (542.2 million euros).

But at constant exchange rates excluding Argentina, Bic’s quarterly activity increased by 0.2%, which caught the attention of Oddo BHF, which anticipated a decline of 0.7% on these same bases.

Sequentially, from one quarter to the next, Bic also gives reasons for satisfaction, notes the research office: “compared to the second quarter (-0.9% at constant exchange rates excluding Argentina), the group therefore returns to a slight increase in activity which is reassuring.”

Over the quarter, the group benefited from a gradual improvement in its lighters business in the United States. This improved orientation allowed the entire division to return to growth, at +0.7% at constant exchange rates, excluding Argentina, this summer.

An improvement in profitability

The “good surprise of this publication” comes mainly from the current operating result, also suggests Oddo BHF. Indeed, Bic was more profitable in the third quarter of 2024 than in the same period of the previous year.

Between July and September 2024, adjusted operating profit increased by almost 20% to reach 102.2 million euros. Here too, the manufacturer of pens and lighters exceeds Oddo BHF’s expectations by 21.6% at 84 million euros and also those of the consensus cited by the research office of 83.7 million euros.

The adjusted operating margin logically appreciated to stand at 18.9% compared to 15.2% for the same period of the 2023 financial year, an increase of 370 basis points (3.7 percentage points) . “This improvement in the margin over the third quarter is explained above all by a drop in operating expenses (impact +280 basis points), advertising expenses (impact +100 basis points) while the gross margin is almost stable (-10 basis points)”, underlines Oddo BHF.

The research firm explains that “most” of this difference between actual performance and its expectations in terms of current operating income “is explained by razors whose adjusted current operating margin increased by 930 basis points to 28% for a current operating profit of 39.8 million euros (we retained 29 million euros and the consensus 27.5 million euros)”.

On the Paris Stock Exchange, Bic is the star of the day, gaining more than 12% around 3:00 p.m., signing the largest increase in the SBF 120 this Thursday.

A raised margin objective

For its 2024 turnover, Bic confirms that it expects “low single-digit” growth at constant exchange rates, or roughly between 1% and 3%. The French group took care to exclude Argentina’s turnover from its objectives, due to the hyper-inflationary context facing the country.

The improvement in margins over the quarter allows Bic to raise its outlook for the whole year. The company is targeting an annual adjusted operating margin of around 15.5%, while management indicated to expect a slight improvement compared to 2023, i.e. more than 14.7%. The objective of generating net free cash flow above 220 million euros in 2024 is maintained.

“After the warning on the growth of activity in June, the company reassures about its profitability and the generation of free cash flow which is a particularly important asset”, appreciates Oddo BHF.

“Ultimately, our estimates are almost unchanged (appreciation of the operating margin offset by less sustained turnover due to currency effects) but the consensus should raise its estimates of current operating income by around 4%,” continues the research office, which reiterates its opinion of “outperformance” and its price target of 73 euros, pointing out the “low valuation” of the file on the stock market.