Grifols falls after failing to update on China deal
MADRID: Grifols SA shares fell in Madrid after the company released an upbeat full-year earnings report that didn’t include details on a pending deal in China.
The stock fell as much as 6.8% after the results release, which showed profit increased 27% in the fourth quarter, a result that had been expected to help the embattled company recover from fraud allegations by a short-seller.
While the maker of plasma derivatives and IV therapies announced 2024 guidance just below consensus, it didn’t provide an update on the sale of a stake in Shanghai RaaS to Haier Group, a deal expected to give Grifols 12.5 million yuan ($1.7 billion) to pay down debt.
The earnings come in the wake of a critical report by hedge fund Gotham City Research LLC, which sent the shares into tailspin in early January. To assuage markets, earlier this month Grifols announced that it’s hiring a new chief executive officer and improving corporate governance by removing members of the founding family from management.
Grifols has sued Gotham in a New York court and denied any wrongdoing. Still, the accusations have placed the company’s accounting practices and governance in the spotlight — in particular, dealings with Scranton Enterprises BV, an investment firm controlled by former company executives that’s the firm’s second-largest shareholder.
Barcelona-based Grifols yesterday posted adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda) of €442 million for the quarter ended Dec 31. Analysts had expected an average of €430 million, according to a survey by Bloomberg.
The firm also said it will address its 2025 maturities, totaling €1.8 billion in the first half of this year, and will take into account both planned disposal proceeds and “various other options” including refinancing.
Grifols announced a profit outlook for the year, calling for adjusted annual Ebitda of more than €1.8 billion.
The firm also repeated that it would use the proceeds from the deal in China to repay debt, and that it expected its leverage ratio to fall to 5.4 times earnings before interest, taxes, depreciation and amortisation after the transaction is completed.
If the company wants to use the cash to cut leverage, it faces a hurdle with creditors as it will need all lenders to support a change in the credit agreement governing its loans, Bloomberg reported in late January.
Among other accusations, Gotham has claimed that Grifols and Scranton understated their respective debt-toprofit ratios, in part because they both consolidated profits from two companies that are owned by Scranton.
Gotham issued another report last week that challenged Grifols to clarify outflows of €321 million included in its first-half 2023 earnings report and to explain who owns and controls Scranton Enterprises.