Huvepharma EOOD

The positive rating outlook reflects S&P Global Ratings' expectation that Huvepharma will successfully execute its investment plan, which should translate into strong future growth within a short timeframe. Huvepharma has developed strong know-how in the fermentation process and produces high-quality APIs. Thus, we believe the current investments in increased capacity will meet strong demand from the pharmaceutical industry, with a limited ramp-up period. Growth should also stem from product launches and synergies from the recent acquisitions. We forecast strong revenue growth of at least 16% in 2019 and 20%-22% in 2020, combined with improving profitability, which should allow the group decrease its adjusted debt to EBITDA significantly below 3x over the next 12-18 months, while restoring solid FOCF. We could

...Huvepharma is conducting strategic investment projects, which are necessary to fuel the future growth of the company. Although large capex is putting FOCF as well as adjusted debt to EBITDA under pressure, we believe that if the growth plan is executed successfully it should enable the group to materially increase its EBITDA, reducing its financial leverage below 3x in 2019 and restoring positive FOCF. Huvepharma aims to improve the diversity of its product range, progressively reinforcing its presence in the veterinary cattle segment and increasing its vaccine offer. The company has invested 53 million on bolt-on acquisitions in 2018. This allows the group to enlarge its offer, which is an important sales argument to gain customers. Furthermore, we note that the acquisition of Agrilabs positions Huvepharma in biological innovation. The product range of the subsidiary includes licensed and custom vaccines, a proprietary DNA platform, and adjuvant technologies. The demand for veterinary...

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