• Revenue: EUR277.9 million, a 2% increase (3% on a constant currency basis).
• Biopharmaceutical and Diagnostic Solutions Segment Revenue: Grew 6% to EUR233 million.
• High Value Solutions Revenue: Grew 17%, representing approximately 36% of total revenue.
• Gross Profit Margin: Decreased to 26.8%.
• Operating Profit Margin: Declined to 14.8%; adjusted operating profit margin was 16.3%.
• Net Profit: EUR30 million.
• Diluted Earnings Per Share (EPS): EUR0.11; adjusted diluted EPS was EUR0.12.
• Adjusted EBITDA: EUR63.7 million with a margin of 22.9%.
• Engineering Segment Revenue: Decreased 15% to EUR44.8 million.
• Net Debt: EUR284.3 million.
• Capital Expenditures: EUR58.8 million for the third quarter.
• Free Cash Flow: Negative EUR28.4 million.
• 2024 Revenue Guidance: Maintained at EUR1.090 billion to EUR1.110 billion.
• 2024 Adjusted EBITDA Guidance: Lowered to EUR257 million to EUR263 million.
• 2024 Adjusted Diluted EPS Guidance: Lowered to EUR0.47 to EUR0.49.

• Warning! GuruFocus has detected 10 Warning Signs with APO.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Stevanato Group SpA (NYSE:STVN) reported a 2% revenue growth in the third quarter of 2024, driven by a 6% increase in the biopharmaceutical and diagnostic solutions segment.
• High value solutions revenue grew by 17%, with high value syringes contributing significantly to this growth.
• The company achieved a major milestone with the successful launch of commercial production at its Fishers facility, generating its first commercial revenue.
• The Latina project became profitable at the gross profit level in the third quarter, indicating progress in scaling production and improving utilization.
• Stevanato Group SpA (NYSE:STVN) remains confident in the long-term demand landscape for its engineering segment, supported by trends such as the rise in biologics and the adoption of drug delivery devices.

Negative Points

• The company lowered its full-year 2024 guidance for adjusted EBITDA and adjusted diluted EPS due to higher costs in the engineering segment and increased validation activities in the US.
• Gross profit margin decreased to 26.8% in the third quarter of 2024, impacted by vial de-stocking and underutilization of vial lines.
• The engineering segment experienced a 15% revenue decline, with higher costs related to complex projects and expenses tied to the business optimization plan.
• Net cash from operating activities was EUR18.3 million, resulting in a negative free cash flow of EUR28.4 million in the third quarter.
• The company faces uncertainty regarding the timing and pace of recovery in vial demand, which remains below 2019 levels.

Q & A Highlights

Q: The Street is modeling mid-to-high single-digit growth on the top line for 2025. Is this a good starting point for 2025 as we stand today? A: Marco Lago, CFO: We will provide formal guidance next quarter. The uncertainty is related to the pace of recovery in EZ-fill vials and bulk vials. However, we continue to see favorable tailwinds, particularly in high-performance syringes and other product categories. We also anticipate improvement in the Engineering segment alongside our business optimization plan.

Q: Can you provide visibility on destocking easing and customer order trends? A: Franco Stevanato, CEO: The market is normalizing, but it's still mixed. We started to see gradual improvements in vial orders in the second half of 2024, with customer forecasts indicating increased demand for vials in 2025. The timing and pace of recovery remain uncertain, but we are cautiously optimistic.

Q: How much of your ability to hit expectations is under your control, especially regarding the Engineering segment? A: Franco Stevanato, CEO: We are seeing initial benefits from our optimization plan in Engineering. We are focused on optimizing our footprint and improving operational structure to drive cost savings and productivity gains. We believe we can return the segment to profitable growth by mid-next year.

Q: Was the 38% decline in vials in line with expectations, and is there any improvement in bulk vials? A: Marco Lago, CFO: The decline was in line with expectations. We see some good signals in order intake, but improvements are more for revenue in 2025 rather than Q4 2024. The decrease is more pronounced in EZ-fill vials, impacting our margins.

Q: Can you elaborate on the additional costs for validation in Fishers and optimization in Engineering? A: Marco Lago, CFO: Higher costs in Fishers are related to validation, which can vary depending on customer processes. In Engineering, we are executing our business optimization plan to improve profitability. These actions are largely within our control.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.