Eurofins Scientific SE · EURONEXT:ERF
Eurofins Scientific — H1 2013 Earnings Presentation
43 slides from Eurofins Scientific's earnings presentation, 2013
Slide 1: Eurofins Corporate Presentation Half Year 2013
Eurofins A global leader in bioanalytical testing in the food, environment and pharmaceutical sectors Corporate Presentation Half Year 2013 www.eurofins.com
Slide 2: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 2
Slide 3: Eurofins' Mission and key figures
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 around 180 laboratories in 35 countries Over 100,000 relia
Slide 4: Leading global and local market positions
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 5bn ~ EUR 4bn estim
Slide 5: Drivers for long-term market growth
Drivers for long-term market growth 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 fragmented laborato
Slide 6: Eurofins is set to reinforce its global market leadership
Eurofins is set to reinforce its global market leadership Eurofins Growth Cycles Eurofins 2017 2,000 2000-2005 CAGR 2006-2011 CAGR 2012-2017 CAGR 36% 18% 14% * Company objective 6
Slide 7: Continued operating and financial growth momentum
Continued operating and financial growth momentum Eurofins 5 year Report Card: 2007-2012 CAGR H1 2013: Strong revenue and earnings growth 2012 Achievements 8% organic growth versus 5% 7.5%* organic growth generated in the objective seasonally slower first half of the year EUR 1bn revenue objec
Slide 8: International network of world class laboratories
An international network of world class, standardised laboratories is attractive for our customers H1 2013 revenue split : N. America 23.5% France 17.7% Germany 17.1% Nordic Region 13.4% Others 15.1% Benelux 7.9% UK & Ireland 5.3% Entry into high- growth markets with 17 start ups 80% of the world‟s
Slide 9: Geared towards strong economies and fast-growing markets
Geared towards strong economies and fast-growing markets Share of Eurofins revenues in various markets (June 2013) Germany Benelux Germany USA Germany UK Total France Italy Spain TOTAL Austria Scandinavia + + Northern Europe Excluding Greece Switzerland (Northern Northern AP & EM USA France & Portug
Slide 10: 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 11: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 11
Slide 12: 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 13: Food & Feed testing offering is the most comprehensive
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 14: High profile food scares have expensive consequences
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 15: ...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 16: Horsegate: need for more systematic testing
Horsegate: A reminder of the need for more systematic testing Well-known brands were caught-up in the scandal Results & Conclusions Dec 2012 Irish authorities become aware of the Of the 4,144 tests done to detect horsemeat, 193 adulteration in ABP Food Group tested positive (4.7%) burgers with 29%
Slide 17: Eurofins' response to help the industry
Eurofins‟ response to help the industry Eurofins’ response to aid the industry Roll-out of technical resources to support local labs Rapid capacity scale-up by allocating more of its DNA-testing resources to food analysis, and in particular, meat speciation Launch of relevant meat speciation and
Slide 18: 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 2012 Sales in 2012 Sales in Food and Beverage EUR billion Retailers EUR billion Nestlé Switzerland 76.2 Wal-Mart Stores USA 338.3 Unilever UK /Netherlands 51.3 Carre
Slide 19: 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 20: 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 21: Eurofins Pharma Services activity groups
Eurofins Pharma Services: 6 activity groups Genomics Discovery Pre-clinical / Clinical Registration Pharma Pharmacology Early (Central Products Development Laboratory) Testing / cGMP QC Sequencing High-throughput- Pharmacology Biomarkers Regulatory/Biocides/ Impurities Analysis Oligonucleotides scre
Slide 22: Top 10 pharma companies are all clients
The Top 10 largest global pharmaceutical companies are all 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 o
Slide 23: 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 24: Eurofins serves all 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 25: 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 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) Major pieces o
Slide 26: EU regulations a key driver: 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 27: Outsourcing adds to market growth
Outsourcing adds to market growth Examples of laboratories outsourced to Eurofins Company Outsourced Activity Country Danish Hydrology Inst. Official water reference lab Scandinavia Suez/Sita Envirolab The Netherlands Danish farmers association Steins‟ water/environment laboratory Denmark Southern W
Slide 28: 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 29: Contents
Contents Introduction Market & Strategic Positioning Finance & Outlook Summary Appendix 29
Slide 30: Laboratory Network Investments (1/2): start-ups
Laboratory Network Investments (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 start-up 3 India Pharma, Food 4 Japan Food, Pharma Japan: Radioactivity lab set up and
Slide 31: Laboratory Network Investments (2/2): modernise sites
Laboratory Network Investments (2/2): Expand / modernise laboratory sites 70 new/expanded modern state-of-the-art sites to enable consolidation / closure of smaller or old sites Total of ca. 200,000 m2 added or brought to most modern standards between 2005 – 2012 (20,000 m2 in 2012) Major facili
Slide 32: 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 2012 2013 X = Market Entry X No 1 Denmark: Food and Env. Brazil: Food Testing No 1 France Environment X No 1 USA: Pharma Products Testing X No 1 Sweden, Nor
Slide 33: Heavy investment in new markets 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 34: Sustained earnings momentum despite heavy investments
Sustained earnings momentum despite heavy investments for future growth HY 2013 HY 2012 Adjusted Separately Statutory Adjusted Separately Statutory +/- % EURm (unless Adjusted otherwise Results disclosed Results Results disclosed Results items items Results stated) Revenues 570.3 570.3 480.4 480.4 1
Slide 35: Growth and Profitability are critical objectives
Growth and Profitability are critical objectives Group Profitability Objectives++ 3-tiered margin support towards mid- term profitability objective 1. Start of profit contribution from start- ups (FY 2012 break-even) 2. Proportion of companies in restructuring becoming smaller compared to the size
Slide 36: Solid Balance Sheet
Solid Balance Sheet Covenants applicable to financial instruments: OBSAAR Jun‟13 Dec‟12 Max.limits issued March 2006 and June 2010 Net Debt/ Clean EBITDA 2.0 x 1.7 x 3.5 x maturity: 2006 fully repaid 2010 bond EUR 176m across Net Debt/ Equity 1.1 x 0.8 x 1.5 x 2015, 2016, 2017 interest rat
Slide 37: High Degree of Financial Flexibility
High Degree of Financial Flexibility Debt ratios remain well below Net Debt/ Adjusted EBITDA: covenant limits despite EUR 120m max 3.5x cash invested in the business in H1 2013 Gearing covenant dropped in the new bank facilities High financial flexibility with fairly long debt maturity OBSAA
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 5 Year Objectives Food safety & contamination issues Unique technological portfolio of over 100,000 methods New regulations (e.g. FSMA, REACH) EUR 2
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
e% 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 158.5 as of 26 July 2013) Total equity raised in 4 offerings: only EUR 56m Since IPO Eurofins: +8,556% (32% CAGR) CAC 40: +43% (2% CAGR) SBF 120: +62% (3% CAGR) S&P 500: +93% (4%
Slide 43: Post acquisition and integration, sales and profits increase
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