Shares of Azelis Corporate Services NV (EBR:AZE) fell by 13% today after the company reported a first-quarter EBITA that decreased by 4% to €119.7 million, coming in 9% below the consensus estimate of €131.0 million.
The decrease was attributed to a lower gross margin and increased operating costs, despite modest organic revenue growth.
The specialty chemicals distributor saw its organic revenue grow by 2.5%, slightly above the 2.4% growth in the second half of 2024. The growth was uneven across regions, with EMEA achieving a 4.5% increase, the Americas at 2.8%, and Asia Pacific experiencing a decline of 2.1%.
However, the improved revenue was overshadowed by an 80 basis point drop in gross margin to 24.0%, compared to the consensus of 24.7%. This margin contraction was primarily due to a higher contribution from the Industrial Chemicals segment, which led to a 95 basis point reduction in EBITA margin to 10.9%, versus the consensus of 11.8%.
Despite these challenges, Azelis reported a 5% increase in free cash flow (FCF) to €120.3 million, indicating a significantly higher FCF conversion margin of 99.7%, after accounting for an increase in working capital to 14.7% of revenues. The company’s leverage ratio remained stable at 2.9 times EBITDA compared to December 2024.
In light of the current financial landscape, Azelis management has expressed confidence in the company’s ability to manage the volatility associated with global trade discussions. The company is set to prioritize cost control measures to maintain a balance between growth and profitability, aiming for targeted cost savings of €20 million per annum.
Analysts at Jefferies commented on the results, stating that they expect mid-single-digit FY25E consensus EBITA downgrades, which are likely to further weigh on shares in near term.
