Shares of Eurofins Scientific (EPA:ERF) fell by 2.3% as the company reported weaker organic growth in the fourth quarter. Although full-year revenues were broadly in line with consensus estimates, Eurofins' organic growth for the year was slightly below expectations at 4.7%, compared to the consensus of 5.1% and Jefferies estimate of 4.5%.
The fourth quarter saw organic growth slow to 3.3%, suggesting an underlying growth rate of approximately 2% when accounting for working days benefits.
Despite the slowdown in organic growth, Eurofins' adjusted EBITDA and adjusted earnings per share (EPS) were positive. The adjusted EBITDA for the fiscal year matched consensus estimates at €1,552 million, with a margin of 22.3%, showing a 140 basis points improvement year-on-year (YoY). Adjusted EPS outperformed consensus by 5%, reaching €3.37, a 24% increase YoY.
The company's free cash flow (FCF) was notably strong, reported at €954 million, up 52% YoY, surpassing both Jefferies' and the company's own guidance. This was partly due to a significant working capital inflow and slightly lower net capital expenditures. Eurofins also reported a net debt to EBITDA ratio of 1.9x, within their target range.
Looking ahead, Eurofins provided looser guidance for fiscal year 2025, targeting mid-single-digit organic growth, with additional contributions from mergers and acquisitions (M&A), and improvements in EBITDA margin and FCF. However, the company has moved away from its previous numerical EBITDA/FCF targets.
For fiscal year 2027, Eurofins reiterated an average of 6.5% organic growth and confirmed a 24% EBITDA margin target, although it has abandoned its €10 billion revenue goal and now expects further increases in free cash flow to be more back-end weighted.
Jefferies commented on the results, stating: "Headline FCFF also looks strong, but supported by big WC swing and easing capex, & we expect some questions on sustainability/quality of beat."
