DÜSSELDORF (dpa-AFX) - The reduction in inventories by pharmaceutical customers has slowed down the packaging manufacturer Gerresheimer at the start of the year. This comes as no surprise, as many pharma and biotech companies had filled their warehouses during the coronavirus pandemic and are now using up surplus material for the time being. Gerresheimer's management is now continuing to focus on better business in the second half of the year and is sticking to its business outlook. The company's shares fell by 1.5 percent in the morning.

The reduction in inventories is declining, but will still be felt in the second quarter, explained CFO Bernd Metzner in an interview with the financial news agency dpa-AFX. By the end of the quarter, however, the worst will probably be over.

Metzner therefore also expects growth to pick up in the second half of the year. However, the basis for comparison from the previous year will then also be lower, as corona-related income had collapsed back then.

In the past first financial quarter (to the end of February), Gerresheimer increased its sales by 1.8% year-on-year to a good EUR 466 million. On an organic basis - i.e. excluding portfolio and exchange rate effects - growth amounted to 2.8 percent, as the MDax company announced on Thursday.

Adjusted for special effects, earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 3.7 percent to 80.9 million euros. The bottom line for the Düsseldorf-based company's shareholders in the first quarter was a surplus of a good 13 million euros, almost one million more than a year earlier. Gerresheimer's sales exceeded analysts' average estimates and operating profit met expectations.

The reduction in inventories was felt above all in the PPG division's pharmaceutical primary packaging business involving glass vials, cartridges and ampoules. By contrast, the Plastics & Devices division, which focuses on plastic packaging, prefillable syringes, inhalers and pens, among other things, grew significantly.

However, investors and analysts are also likely to focus on the smallest division, Advanced Technologies, explained analyst James Vane-Tempest from investment firm Jefferies. Here, earnings fell by a good 80 percent to just EUR 0.6 million due to lower sales in the project business. This resulted in a loss of 5.1 million euros before interest, taxes, depreciation and amortization and special effects. However, Gerresheimer emphasized that development projects such as digital platforms for therapy support, body-worn drug pumps and the company's own autoinjector platform would continue as planned.

There is a lot of interest in the pump in particular, but a little patience is needed, Metzner said. He also expects the US Food and Drug Administration (FDA) to approve the drug furosemide in combination with a micropump for the treatment of edema in heart failure before the end of this year. Gerresheimer is working together with the Swiss biopharmaceutical company SQ Innovation. Metzner also emphasized once again that the Advanced Technologies segment is not included in the company's outlook.

In his initial assessment, analyst David Adlington from US bank JPMorgan focused primarily on the company's business outlook. The fact that Gerresheimer had confirmed its targets for 2024 and 2025 signaled confidence in accelerating growth.

For the financial year 2024, Schott Pharma's competitor is aiming for organic sales growth of 5 to 10 percent. The operating result (adjusted EBITDA) is expected to reach 430 to 450 million euros organically. According to CFO Metzner, the targets could be narrowed down and specified when the figures for the second quarter of the year are published in July.

With a view to its growth targets, the Group also wants to benefit from a high order backlog and the expansion of production capacities. "Over the next few months, further new lines for major long-term orders will start up as planned," explained CEO Dietmar Siemssen according to the press release.

The profitable business with sensitive biopharmaceutical drugs, which require special packaging, will play an important role. The business with packaging, syringes and auto-injectors for GLP-1 drugs for the treatment of diabetes and severe obesity is also gaining momentum.

Against this backdrop, Gerresheimer is still targeting organic revenue growth of 10 to 15 percent for 2025. The adjusted operating margin should reach at least 22 percent. In the medium term, the management is aiming for annual sales growth of at least 10 percent and a margin of 23 to 25 percent./mis/stw/nas