Eurofins Scientific SE · EURONEXT:ERF
Eurofins Scientific — Investor Presentation (2012)
44 slides from Eurofins Scientific's investor presentation, 2012
Slide 1: Eurofins Investor Field Trip 2012
Eurofins A global leader in bioanalytical testing in the food, environment and pharmaceutical sectors Eurofins│Lancaster Investor Field Trip 2012 Dr. Gilles Martin Chief Executive Officer www.eurofins.com
Slide 2: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 2
Slide 3: Eurofins' Mission: Health, Safety & Environment with the best in bioanalysis
Eurofins‟ Mission is to contribute to global Health, Safety & Environment with the best in bioanalysis Founded in 1987 Eurofins provides testing services in three main areas: IPO in 1997 in Paris at EUR 1.83 per share Food Network of more than 170 laboratories in 32 countries Over 100,000 re
Slide 4: Strong leading global and local market positions
Eurofins has strong leading global and local market positions N°1 N°1 to N°3 N°1 10% worldwide worldwide worldwide Food & Testing for Market growth Feed Pharma/ rate Biotech Environment Testing Testing 5% (~ 40% of (~ 40% of (~ 20% of revenues) revenues) revenues) Market size ~ EUR 1.5 - 2.0bn ~ EUR
Slide 5: Drivers for long-term growth in Eurofins' markets
Drivers for long-term growth in Eurofins‟ markets Secular Underlying Fundamentals General Market Drivers Laboratory Market Drivers Consumer Demand for safe Increasing wealth expectations for pharmaceuticals, quality food and quality of Life protection and clean environment Consolidation of the fragm
Slide 6: Eurofins is reaping the benefits of the last investment cycle
Eurofins is reaping the benefits of the last investment cycle EUR Eurofins Growth Cycles 2,000 Revenues 2x in 5 years 15% CAGR Revenues 3x in 3 years 29% CAGR Revenues 4x in 3 years 38% CAGR * Company estimates 6
Slide 7: Investments made during the last cycle positioned Eurofins for growth
Investments made during the last cycle has positioned Eurofins well for further growth Eurofins 5 Year Report Card: 2006-2011 CAGR H1 2012: First half performance bodes well for FY 2012 2011 Achievements 9% organic growth generated during the 8% organic growth versus 5% objective 54.6% seasonall
Slide 8: Investments are starting to pay off
Investments are starting to pay off Earnings have not only recovered, but start to be significant Investments of the last 5 years have started to pay off 5€ 20% 18% 4€ 16% 14% 3€ Adjusted EBITDA Margin (%) Earnings Per Share (EPS €) 12% 2€ 10% 8% 1€ 6% 4% -€ 2% -1 € 0% 2007 2008 2009 2010 2011 8
Slide 9: International network of world class, standardised laboratories
An international network of world class, standardised laboratories is attractive for our customers H1 2012 revenue split : N. America 21.8% France 20.1% Germany 18.2% Nordic Region 14.3% Others 11.1% Benelux 9.2% Entry into high- UK & Ireland 5.3% growth markets with 17 start ups 80% of the world‟s
Slide 10: Exposure to big economies and fast-growing markets
Exposure to big economies and fast-growing markets Share of Eurofins revenues in various markets (H1 2012) Germany Benelux Germany & USA Germany UK Total France Italy Spain TOTAL Austria Nordic Region Northern Asia Northern Europe Excluding Greece Switzerland Europe EM USA + EM France & Portugal Sou
Slide 11: Strategy aims at building long lasting competitive advantages
Eurofins‟ strategy aims at building long lasting competitive advantages Leading technology Quality of customer service Competence Centres & R&D activities Extensive expertise in local regulations for all major markets, and one-stop contact for Proprietary technologies for proof of compliance i
Slide 12: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 12
Slide 13: The Food testing market has robust growth drivers
The Food testing market has robust growth drivers Food scares and Globalisation: Raw Consumers‟ Outsourcing of crises, widely materials sourced increasing awareness industry‟s covered in the from countries and demand for safe internal or state- media with different QC and high quality food owned pra
Slide 14: Most comprehensive Food & Feed testing offering
Eurofins‟ Food & Feed testing offering is the most comprehensive in the market Agricultural production, product Production Retail & Distribution development Microbiology Sensorial Dioxins Veterinary drug Vitamins Quality Control residues Authenticity Pesticides Organic residues POPs Labelling GMO My
Slide 15: High profile food scares have expensive consequences for producers
High profile food scares have expensive consequences for producers… Year Brand/ Contamination Impact Cost Country 2008 North Salmonella About 1,500 people sick throughout US ~ USD 100m America/ in tomatoes & Canada – pulling of products from – USD 250m Mexico and peppers shops & restaurants FreshPla
Slide 16: ...and destroy market value
…and destroy market value 2007 example: Menu Foods is the largest maker of wet cat and dog food in N. America Contamination Direct impact Indirect impact Melamine contamination of pet 48% drop in share price in first week. Tens, possibly foods due to illegal use of a plasticiser hundreds of Threat o
Slide 17: Eurofins is meeting the demands of global players
Eurofins is meeting the demands of global players The largest global food & beverage producers and retailers are clients of Eurofins 2011 Sales in 2011 Sales in Food and Beverage EUR billion Retailers EUR billion Nestlé Switzerland 68.6 Wal-Mart Stores USA 322.6 Unilever UK /Netherlands 46.5 Carre
Slide 18: The Pharma testing market is healthy and full of potential
The Pharma testing market is both healthy and full of potential Need for big pharma Rapid technological change & companies to expand increasing complexity in testing new drugs pipelines require ongoing investment in technology & expertise The increasing complexity of clinical trials leads to incre
Slide 19: Underlying trends are increasing
Underlying trends are increasing Global Drug R&D Spending (USD billion) CAGR 8% Large pharmas need to refill their product pipeline 116 119 as the „blockbusters‟ start to come off patent 100 68 84 Drug development expenditures have increased substantially in recent years Total R&D is over USD
Slide 20: Eurofins Pharma Services: activity groups
Eurofins Pharma Services: 5 activity groups Genomics Pre-clinical / Clinical Registration Pharma Early (Central Products Development Laboratory) Testing / cGMP QC Sequencing Pharmacology Biomarkers Regulatory/Biocides/ Impurities Analysis Oligonucleotides Bioanalytical Bioanalysis Chemicals/Agro- St
Slide 21: 8 out of the 10 largest pharma companies are clients
8 out of the 10 largest global pharmaceutical companies are clients of Eurofins Top 10 pharma companies Country Pfizer USA Global CRO Market Sanofi Aventis France Market GlaxoSmithKline UK CAGR* Breakdown Novartis Switzerland USA 60% 12% AstraZeneca UK Europe 20% 9% Merck & Co USA Japan 8% 18% Rest
Slide 22: The Environmental testing market continues to grow
The Environmental testing market continues to grow Rise in Progress in epidemiology contamination & & medicine has identified pollution issues more compounds as toxic Increasing demand by citizens for a clean environment EU expanding regulation (e.g. REACH) Increasingly long list of products i
Slide 23: Eurofins serves all the main environmental testing markets
Eurofins serves all the main environmental testing markets With Lancaster, Eurofins is the No.1 environmental testing service provider in the world Lancaster Environmental Consulting and Testing is the laboratory sampling companies of choice for Fortune 500 are natural partners companies in the USA
Slide 24: Global trends in regulation support the business
Global trends in regulation support the business Strong regulated markets (EU, USA) are still amending and adding regulations (no slowdown) Eastern European rules catching up with EU Fast development of regulation in Asia Regulation used for support of trading blocks (e.g. EU, NAFTA, ASEAN)
Slide 25: EU regulations a key driver – e.g. REACH directive
EU regulations a key driver for the testing industry – e.g. REACH directive Objectives Examples of affected products or industries Listing and assessing the safety of 30,000 Metals, resins, acids, solvents, oils, fibres in textile, car chemical substances used by industries in components, toys, co
Slide 26: Outsourcing adds to market growth
Outsourcing adds to market growth Company Outsourced Activity Country Novartis Medinet The Netherlands Danish Hydrology Inst. Official water reference lab Scandinavia Suez/Sita Envirolab The Netherlands Danish farmers association Steins‟ water/environment laboratory Denmark Southern Water Water test
Slide 27: Strategy builds high barriers to entry
Eurofins‟ strategy builds high Barriers to Entry Offering a premium quality service … ... and leveraging internal efficiencies Portfolio: over 100,000 reliable methods – Industrialising the laboratory process: unique in the world and ahead of rationalisation of sites and personnel competition
Slide 28: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 28
Slide 29: 5 years of heavy investment (1/2): laboratory start-ups
5 years of heavy investment (1/2): Laboratory start-ups to enter high-growth markets Country Market Operational achievements 1 Singapore Pharma 2 China Food, Pharma India: Food Lab profitable in year 2 of Asia 3 India Pharma, Food start-up 4 Japan Food, Pharma Japan: Radioactivity lab set up and pro
Slide 30: 5 years of heavy investment (2/2): expand and modernise sites
5 years of heavy investment (2/2): Expand / modernise laboratory sites 60 new/expanded modern state-of-the-art sites to enable consolidation / closure of smaller or old sites Total of ca. 180,000 m2 added or brought to most modern standards between 2005 - 2011 Programme to build, modernise or e
Slide 31: Reach leadership position within 5 years of entering a new market
Objective: Reach leadership position within 5 years of entering a new market New Markets 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 X = market entry Denmark: Food and Env. X No 1 Brazil: GMO X No 1 Pesticides, Veterinary residues, etc. X No 1/2 France Environment X No 1 USA: Pharma Produ
Slide 32: Heavy investment in new markets and resources for future profits
Heavy investment in new markets and resources for future profits Building corporate Bringing recently Under development resource for future size acquired labs to group perimeter and growth standards Start-ups: 17 start ups Recruitment of top Deploy IT systems between 2006 and 2010 leadership e
Slide 33: H1 2012 results reflect benefits of the last investment cycle
H1 2012 results reflect benefits of the last investment cycle and impact of restructuring of certain recent acquisitions EUR m 2011 Q2 2011 Q2 2012 -/+ % H1 2011 H1 2012 -/+ % Organic Growth 8% 8% 8% 7% 9% Sales 828.9 207.8 256.3 +23% 372.1 480.4 +29% Adjusted EBITDA 151.6 38.1 44.5 +17% 57.5 73.2 +
Slide 34: Strong improvement in underlying profitability
Strong improvement in underlying profitability Annual Improvement Sequential Improvement 34
Slide 35: On track to achieve profitability objectives
On track to achieve profitability objectives Group Profitability Objectives++ 3-tiered margin support towards mid- term profitability objective 1. Narrowing losses from start-ups (EUR 0.6m in Q2 2012 versus EUR 1.1m in the previous quarter) 2. Reduction of non-recurring costs related to reorganiza
Slide 36: Solid Balance Sheet with headroom
Solid Balance Sheet with headroom OBSAAR Covenants applicable to financial instruments: issued March 2006 and June 2010 Jun‟12 Dec‟11 Max.limits maturity: 2006 bond EUR 15m left for 2013 Net Debt/ Clean EBITDA 1.9 x 1.7 x 3.5 x 2010 bond EUR 176m across Net Debt/ Equity 2015, 2016, 2017 0.9
Slide 37: Debt ratios remain well below covenant limits
Debt ratios remain well below covenant limits Debt ratios remain well below Net Debt/Clean EBITDA: max 3.5x covenant limits despite multiple acquisitions Solid balance sheet EUR 121.5m cash at 30.06.2012 OBSAAR issue in June 2010 and Schuldschein issue in July 2011 Net debt/Equity: Lengthe
Slide 38: Outlook: becoming the world leader in bioanalytical testing
Outlook: becoming the world leader in the bioanalytical testing market Sustainable Market Growth Drivers + Key Success Factors = Solid Outlook Food safety & contamination issues Unique technological portfolio of over 100,000 methods 2013 revenue objective New regulations (e.g. REACH) of EUR
Slide 39: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 39
Slide 40: Conclusion: our sustainable competitive advantage
Conclusion: our sustainable competitive advantage Best in class technology and quality give best brand High-growth, non-cyclical markets driven by secular protection mega-trends No. 1 or 2 worldwide in most business lines Advancing globalisation but with very few global Strong international presence
Slide 41: Appendix / Back up slides
«= eurofins Appendix / Back up slides 41
Slide 42: Eurofins has vastly outperformed the market since its IPO
Eurofins has vastly outperformed the market since its IPO and each of its 3 equity offerings (based on share price of EUR 102.4 as of 27 August 2012) Eurofins: +5,491% (31% CAGR) Since IPO CAC 40: +24% (1% CAGR) SBF 120: +40% (2% CAGR) S&P 500: +61% (3% CAGR) Since SPO 1 Eurofins: +1,199% (20% CAGR)
Slide 43: New reporting format to better reflect core Group economic performance
New reporting format to better reflect core Group economic performance H1 2012 H1 2011 H1 2012 EURm Adjusted Separately Statutory Adjusted Separately Statutory +/- % Results disclosed Results Results disclosed Results Adjusted items items Results Revenues 480.4 480.4 372.1 372.1 29.1% EBITDA 73.2 -9
Slide 44: Post acquisition and integration, sales and profits increase significantly
Post acquisition and integration into Eurofins, both sales and profits increase significantly Illustration Growth drivers post acquisition: 1) Sales increase through cross selling of Actual example of an acquired lab: Eurofins lab specialities internationally 2) Cost reduction – focus on most freque