Fleury SA Q1 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ricardo Boiati - J. Safra Corretora de Valores e Cambio Ltda, Research Division - Analyst : I have a question about margins. When we look at the projections, we see pressure throughout the years. This is aligned with what the company is saying, which the new links have lower margin, so we could have that pressure on margins. But the incorporation of Saha, which happened this quarter brought less pressure, especially in the materials line than expected at first. So I'd like to understand if your view is changing somehow when it comes to the margin perspective for the company. I'm looking at -- I'm talking about Fleury here but not considering the synergies with Pardini. But is your view changing from now on as you start to manage the new assets? Or do you see improvement opportunities by gaining scale in those operations? Or it would be wise to consider that the new links should pressure Fleury's consolidated margin? I'm not considering the synergies. I believe that the synergies should improve the combined margin of the group in a relevant way. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 05, 2023 / 2:00PM, FLRY3.SA - Q1 2023 Fleury SA Earnings Call Now my second question is about genomics. This is a small division considering the whole, but it has been growing consistently and fast. It accounted for 2% of the revenue a year ago, and it's now at around 3%. So can you give us a bit more details about this. You're talking about internationalization going into other markets in Latin America. Can you tell us a bit more about the genomic division and its perspectives? Jose Antonio de Almeida Filippo - Fleury S.A. - Executive Director of Finance, IR and Legal & Member of Executive Board Thank you for your question. Well, talking about margins and looking at Fleury ex Pardini's perspective for now, I think that this is very aligned with what we expected and we have been sharing with you. Diagnostic Medicine, which is our core business, is growing, and new links is also growing. But new links has a lower relevance for now as we saw accounting for 10% of the revenue. But this can have some type of influence like in a quarter with Saha coming in 1 quarter, and it's now going into the expected regime. When Saha came in at first, things were not well organized. But now with the increased number of infusions, as we mentioned, we were able to get what we expected, which was gain of productivity in this segment. So summing up, new links is within what we expected. It generates a different mix. But it is consistent with our plans. New links has a lower margin than Diagnostic Medicine, but as it grows, it has the potential of gaining productivity an increase in the mix and diagnostic medicine continues to grow, and we're well positioned, as we said earlier. So overall, this combination creates a more robust portfolio and a larger company in terms of revenue and management capacity, we don't lose our focus on cost management. We have recurring programs of cost reduction assessment and optimization. That's part of our management. We have weekly meetings on that. So at the same time that we're growing, we're seeking cost reduction and efficiency gains. So this is pretty much how we see this. Our margin reflects exactly this in Q1 with all of these aspects of mix, but it's actually quite constant with recent quarters. And every time our revenue growth grows, we have also possibilities of gaining efficiency and diluting costs with new links and therefore, a greater margin contribution. So that trend should not change. And this is how we see the coming quarters playing up as well. About genomics, I'll turn the floor over to Jeane.