Gerresheimer Reports Good Third Quarter

Gerresheimer AG sustained its successful trend through the third quarter of the financial year.

In more than 40 plants worldwide, Dusseldorf-based MDAX-listed Group manufactures glass and plastic pharmaceutical packaging together with products for safe and convenient drug delivery such as insulin pens and asthma inhalers.

Gerresheimer AG CEO Uwe Röhrhoff said: "I am pleased with the performance of our business in the third quarter.

"Revenue growth and earnings are up as expected.

"We have now completed the acquisition of Centor in the US.

"This means that Centor, which leads the US prescription plastic vial retail market for oral drugs, will be integrated into our group as soon as the fourth quarter."

Gerresheimer kept up its revenue growth in the third quarter of financial year 2015 (1 December 2014 to 30 November 2015).

Revenues increased by 6.2% to €344m. On an organic basis, meaning adjusted for exchange rate effects, acquisitions and divestments, revenues grew by 3.1% compared with the prior year quarter.

The group generated strong business with medical plastic systems such as asthma inhalers and lancets for diabetics, as well as plastic pharmaceutical packaging. Engineering and tooling revenues, which were high in the prior year, were back to normal levels as expected.

Business with glass primary packaging went better than in the prior year quarter. Following the downtrend of preceding quarters, US revenues in injection vials, ampoules and cartridges turned around and showed strong growth. Growth in Europe was driven by strong cosmetic glass sales.

The glass plant in Millville, US, was closed in the third quarter of 2015 and the entire US moulded glass production was concentrated in Chicago Heights. After a furnace repair and enlargement together with infrastructure improvements, operations at the Chicago Heights plants resumed in September as planned.

Laboratory glassware revenues were up due to strong development of the US dollar versus the euro year-over-year. On an organic basis, laboratory glassware revenues were slightly down. The company generated adjusted EBITDA of €68m in the third quarter of 2015, significantly outperforming the prior year figure of €62.1m.

The adjusted EBITDA margin was 19.8% in the third quarter, above the 19.2% margin in the prior year quarter.

All three divisions contributed to the favourable margin growth. Net income for the third quarter of 2015 totalled €20.2m, €0.4m higher than in the comparative prior-year quarter.

Adjusted net income stood at €29.2m in the third quarter of 2015, compared with €22.7m in the prior-year period. Adjusted earnings per share came to €0.85 in the third quarter of 2015, versus €0.67 a year earlier.

Operating cash flow performed favourably in the first nine months of financial year 2015, improving on the prior year period by €58.6m to €104.5m. Gerresheimer’s capital expenditure in the third quarter of 2015 was €37.9m as against €22.4m in the prior year quarter.

The lion’s share of capital expenditure was accounted for by glass primary packaging plants and related in most part to the renewal and enlargement of the Chicago Heights plant.

Alongside this, there was further capital expenditure on vial and cartridge machinery. Production capacity expansion for medical plastic systems, such as inhalers, also continued in the Czech Republic and the US.

On 27 July 2015, Gerresheimer signed the agreement for the acquisition of Centor. The transaction was completed on 1 September 2015. Centor, which in 2014 generated (pro forma) revenues of $167m and employed 220 people, is the market leader in plastic packaging for oral prescription medication in the US end consumer market.

The $725m debt-free purchase price was financed in its entirety out of borrowing.

Outlook

For reasons of comparability with the prior year, Gerresheimer’s outlook for 2015 includes neither the Centor acquisition or potential closing of the sale of the glass tubing business before the end of the 2015 financial year.

Leaving both these transactions out of consideration and assuming constant exchange rates (assumed rate: €1.00/$1.30), the group’s forecast is that for the financial year 2015, Gerresheimer continues to expect organic revenue growth of 1% to 3%.

This corresponds to a revenue corridor of €1,300m to €1,330m. Regarding adjusted EBITDA, the group expects an increase in a target corridor of between €255m and €265m.

Capital expenditure in financial year 2015 is forecast to represent 9% to 10% of revenues at constant exchange rates.

Gerresheimer has formulated initial indications for the financial years 2016 to 2018, based on the assumption that both the sale of the glass tubing business and the acquisition of Centor will have been completed in financial year 2015.

On that basis, annual organic revenue growth is expected to average 4% to 5%. For the adjusted EBITDA margin, the group has set a target of approximately 22% for 2018.

Capital expenditure will be in the range of between 8% and 9% of revenues at constant exchange rates.

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