The promises the Grifols had made for months in the transfer market were called into question by Gotham City in a devastating attack that began Tuesday morning and continued throughout the week. That morning it stunned the Grifols executives when they read in black and white the threat that came from the analyst house: their accounts were falsified, their EBITDA was lower than declared and the amount of debt was almost 1,000 million higher than that amount recognized by the pharmaceutical company.
First of all, Gotham ensured that the group’s EBITDA does not correspond to that published by Grifols. The explanation lies in the fact that the pharmaceutical company attributes the proceeds of two companies (Haema and Biotest US, which on the other hand also declares them as corporate assets) of which it does not own any shares. According to the analyst firm’s report, this causes EBITDA to be overhyped by about 30%. What Grifols does not do, according to Gotham, is also take responsibility for the debt generated by businesses.
Both the auditor and the pharmaceutical company confirm the thesis, but the shareholders maintain their doubts. And this indicator, depending on its use, may not adequately reflect a company’s specific situation. Indeed, the CNMV itself stated at the time that figures such as EBITDA should not be abused under threat of fine.
In this regard, Gotham also questions the debt figure. In its latest report the blood products company declared liabilities of 9,421 million euros. For the analyst house, 920 million euros were not accounted for, so the main Achilles’ heel of the pharmaceutical company would be greater. Of course, Gotham doesn’t clarify where this increase in liabilities would come from, so the statement raises questions.
Both indicators undermine Grifols’ main promise to its shareholders: the leverage ratio. The Catalan company eliminated dividends a year and a half ago and promised to recover them when they reached a ratio equal to four times EBITDA. If, as Gotham claims, the gross operating margin is much lower than declared and the liabilities higher, the goal for which Grifols has been fighting for more than a year is far from the nearest reality.
Before the release of the report, the entire market was waiting for the response from the pharmaceutical company. Questioning EBITDA and debt goes against the business plan started a year ago.
Grifols has assured the entire market that it will reach a leverage ratio of four times EBITDA by the end of 2024. To this end, as a first step, it has presented a restructuring plan that involves the closure of several donation centers of plasma and the dismissal of over 2,000 people with the aim of saving 450 million per year. At the same time, as announced by eleconomista.es, it began to explore disinvestment operations. A few days ago he closed the sale of Shanghai Raas shares for 1.6 billion euros and assured that the sum will be used exclusively for debt reduction.
But if neither the EBITDA nor the debt declared by Grifols are real, as Gotham reports, the industrial plan will be insufficient. If this were the case, the pharmaceutical company will have to look for new disinvestment formulas, since a capital increase is currently ruled out and there are many doubts about debt restructuring.
The pharmacist’s reaction
The first reaction of the management of the blood products company indicated this state of shock. In a brief statement to the National Securities Market Commission they only managed to ensure that everything was false, unfounded and published with spurious interests. The latter was true, as Gotham made 20 million in revenue in just a few hours, but the market wasn’t convinced by the response and continued to attack the company’s stock.
Hours later, the company responded in more detail, explaining the accounting details of some of the allegations. Although they partially moderated the decline, they failed to recover from the blow, except on Wednesday. The doubts created have surpassed the attempt to offer certainties. Every hour that passed became more and more bitter for both the pharmaceutical company and the Grifols family.
The Catalan company has practically not spoken about the amount of debt, beyond ensuring that Gotham’s claims were false. Yes, they did so regarding the ebitda, ensuring that the companies consolidated by them, in addition to being legal according to their explanations, represent only 2% of this indicator.
But where the hit to Grifols’ reputation has been most evident is in its business plan. Most of the market did not give credibility to the various explanations, especially those offered ad hoc to analysts on Thursday afternoon… The stock collapsed timidly just before the start of the conclave, but after that meeting it collapsed again to the levels of 16%.
And now? Uncertainty would be the most sincere response. The war drums still echo from Gotham’s tallest towers. There is talk of a second report that will once again upset the pharmaceutical company’s plans, but the Spanish regulator has also started investigating.
The analyst house underlined the relationships that the majority Grifols family has with one of the private investment vehicles, which is also the second largest shareholder of the Catalan company. There are many doubts and few explanations around this point. The president of Grifols assured that the family only owns 20% of the vehicle, but this percentage does not prevent there being links.
2024-01-13 06:05:08
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