Grifols: Fluid And Complex But Net Positive Today

Grifols (GRF SM) conf call is over and three key points which both highlights the degree of investor suspicion around the firm now but also that the situation remains fluid and complex. Overall, we see some positives in here and note the key ’25 lines are both trading tighter today.

• S-RAAS sale to Haier: due diligence on the deal closed today (29-Feb) which has to be taken as a positive but we would caution this neither means a deal won’t be terminated by Haier or by a regulator. Nor that terms won’t be renegotiated.
• Audit opinion: it was noted that KPMG has not yet signed off the audit. The results do state that the opinion will be completed by 8-Mar-24, ahead of the local regulatory deadline and mgmt went further on the call to state it would be a “clean and unqualified” opinion.
• Cashflow conversion and leverage: guidance given on the call does indicate that FY24 FCF (after interest costs) will be around zero, which appears to have disappointed some. This is a combination of flat capex but higher tax costs (as profits should be meaningfully higher). Mgmt is clear leverage should drop to 4.0-4.5x organically by end-24 (from 5.4x including the S-RAAS disposal) and it is open to further divestments to bring leverage down inorganically.