• Revenue: EUR3.6 billion for the first nine months of 2024.
• Operating EBITA: EUR403 million, a 3% increase on a constant currency basis.
• Gross Profit: EUR303 million in Q3, a 13% growth on a constant currency basis.
• Gross Margin: Increased to 25.4% of revenue.
• Free Cash Flow: EUR65 million decrease compared to last year.
• Cash Conversion Margin: 73%, lower than the previous year.
• Working Capital Days: Increased from 66 to 68 days.
• Full-Time Employees: 7% increase, primarily due to acquisitions.
• EMEA Operating EBITA: EUR186 million, a 1% increase.
• Americas Gross Margin: Increased from 24.1% to 24.7%.
• Asia Pacific Gross Margin: Decreased from 23.3% to 22.3% due to acquisitions.
• Net Debt: Increased by EUR300 million.
• Leverage Ratio: 2.8 times EBITA, below the maximum level of 4.25.

• Warning! GuruFocus has detected 4 Warning Sign with IMCDY.

Release Date: November 08, 2024

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

Positive Points

• IMCD NV (IMCDY) reported a 13% EBITA growth on a constant currency basis in Q3 2024, driven by both acquisitions and organic growth.
• The company strengthened its position across all operating segments and regions through 12 acquisitions year-to-date.
• IMCD NV (IMCDY) achieved organic gross margin and EBITA growth in all three regions, with notable growth in the Americas and Asia.
• The company maintained a healthy M&A pipeline and continued its digital investments and sustainability programs.
• IMCD NV (IMCDY) reported a 7% increase in ForEx adjusted revenue and an 8% increase in gross profit compared to the previous year.

Negative Points

• The company faces ongoing market volatility with limited visibility beyond six weeks due to low inventory levels and just-in-time orders from customers.
• Free cash flow decreased by EUR65 million compared to last year, with a lower cash conversion margin of 73%.
• The working capital investment increased, primarily driven by higher business activity, leading to a slight increase in working capital days.
• The conversion margin decreased to 44.3%, which is 2.5% below the previous year.
• IMCD NV (IMCDY) remains cautious with predictions due to the volatile environment and changing geopolitical landscape.

Q & A Highlights

Q: Typically, Q4 is weaker than Q3 due to seasonality. Do you see any reason for a different trend this year? A: Hans Kooijmans, CFO: Q4 is indeed usually lighter and difficult to predict due to factors like factory closings and stock replenishment timing. Currently, customers are cautious, preferring just-in-time deliveries. Historically, December is weaker, but it helps reduce working capital. We are positive about October but remain cautious for the rest of the year.

Q: How significant is your exposure to the beauty market within your life sciences business? A: Valerie Diele-Braun, CEO: We aim to increase our exposure to the beauty market, which has been growing well for us. In the third quarter, all business lines except pharma grew. Food and pharma are the largest segments in life sciences, with beauty and personal care being the third and growing nicely.

Q: Why didn't you target operating EBITDA growth in your outlook despite returning to profit growth? A: Hans Kooijmans, CFO: Although we have a positive outlook, the market remains unpredictable, with orders often shifting between months. We are cautious about making predictions, especially with some customers closing production earlier to save costs.

Q: Can you explain the SG&A growth outpacing GP growth and plans for margin expansion? A: Hans Kooijmans, CFO: The cost increase is mainly inflation-related. We are cautious about filling vacancies and focus on digital investments. We aim to align cost inflation with margin growth as we see improvements quarter over quarter.

Q: How is your US product supply chain affected by recent geopolitical events? A: Hans Kooijmans, CFO: Most of our imports to the US are from EMEA, with limited imports from Asia and very little from China. We haven't seen any significant impact on our supply chain performance.

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