SCHOTT Pharma AG & Co KgaA Q2 2024 Earnings Call Transcript

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

Question: Falko Friedrichs - Deutsche Bank AG - Analyst : Thank you. Good morning, everyone. So, my first question is on destocking. I think if I understood you correctly, you said it has largely concluded. Can you maybe elaborate a little bit on if it has actually ended? And then related to that, can you comment a bit more on this lower safety stock level at your pharma customers? How long do you think they can keep it lower than the normal levels? Then my second question is, you kindly provided a bit of color for Q3. I think I understood that you mentioned a sequential improvement in sales in the third quarter. Can you elaborate a little bit on the magnitude here and also your visibility into that sequential improvement? I'm just trying to get a feeling for how back-end loaded this year is. And then my third and last question is on mRNA and how much of a risk you see that your other mRNA partner might also opt out of your polymer syringes? Thank you.

Question: Falko Friedrichs - Deutsche Bank AG - Analyst : Okay. Thank you.

Question: Curtis Moiles - BNP Paribas Exane - Analyst : Hi. Yes. Thank you for taking my questions. I'll just ask, I think, three, please. First one, when you're talking about the guidance for the full year, I think you previously pointed towards the lower end of the 9% to 11% range. Is that still where you feel most comfortable or is there a little bit of wiggle room to the upside now? Number two, I understand that you're expecting, I think, vials to fully recover in 2025. I'm just curious, can you give a little bit more precision about when? Are you expecting early 2025 or could it maybe take a little bit longer than that? And then my last question is on the polymer prefilled syringes for mRNA customers. When we hear the big players in the space talking about moving towards refrigerator-stable formulations for the mRNA drugs, should we take that to mean they're moving to glass or is that not necessarily the case? Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 27, 2024 / 9:00AM, 1SXP.DE - Q2 2024 SCHOTT Pharma AG & Co KgaA Earnings Call

Question: Curtis Moiles - BNP Paribas Exane - Analyst : Okay. That was the last one for me.

Question: Curtis Moiles - BNP Paribas Exane - Analyst : That's right. Thank you.

Question: Veronika Dubajova - Citi - Analyst : Hi, guys. Good morning. I hope you can hear me okay. I have three, please, if I can. The first one is I just want to understand the FX hedging impact a little bit better, almost, if that's okay. If I look at the delta in the dollar and the Swiss franc versus the euro quarter on quarter in Q2, it was really quite small. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 27, 2024 / 9:00AM, 1SXP.DE - Q2 2024 SCHOTT Pharma AG & Co KgaA Earnings Call I mean, I think one of the currencies was at 1%. The other was minus 1%. So I'm just really surprised by the magnitude of the hedging loss that you have booked. So if you can help us understand why it was so large. And out of the EUR23 million, what was the hedging versus the revaluation impact? And I guess as we look forward, if you have any guidance on what your expectation is for FX hedges, gains or losses in the back half of the year, that would make our life a lot, lot easier to move forward. So apologies. I know it's a pedantic and detailed question, but it's quite important. The second question I just want to circle back onto is the RSV vaccine for Moderna. And if you guys could discuss what your expectations are embedded for this product within the guidance, I think the ACIP committee that met last night was fairly dismissive of the efficacy of Moderna's RSV vaccine and also they narrowed the potential patient pool in terms of vaccinations. So just curious how much you have embedded in for '24 and '25 for this specifically and whether this is something that we need to worry about over the next 12 months to 18 months in terms of the guide. And then my final question is just a follow back on the destock. You said your visibility remains low. What do you think needs to change among your customers to improve your visibility when it comes to the bulk file market? Any thoughts you can share on that would be great. Thanks, guys.

Question: Veronika Dubajova - Citi - Analyst : Okay. Thank you so much. And Almuth, can I just check, the fiscal '24 guidance, does that include any prepayments or take or pay income from the cancel contract that you announced in May?

Question: Veronika Dubajova - Citi - Analyst : Okay. Okay. Thanks. Thank you, guys.

Question: Olivier Calvet - UBS - Analyst : Good morning, all. I just have a couple of questions left. I wanted to come back on the value stocking topic. Could you perhaps point to an explanation on why your view seems to slightly differ versus what other players in the industry are saying in terms of the value recovery this fiscal year or this calendar year? Maybe is it explained by your exposure in specific customers or is it related to your exposure to specific geographic markets? The second question would be just to come back on the mRNA customer cancellation. I'm not trying to get you to name the customer in particular. I just was wondering if you could perhaps tell us whether the customer cancellation was due to a change on the drug product side or due to a change on the device side. I think that wasn't covered a month and a half ago. And then the last one was on within DDS. I was just wondering if you could talk about the growth of polymer versus glass syringes in the segment in the quarter, please.

Question: Olivier Calvet - UBS - Analyst : Okay. That makes sense. And if I can squeeze the last one, I think in the release and in the presentation, you were talking about this collaboration you had with KORU Medical Systems. Just pardon my ignorance, but just wondering if these formats are likely to be produced on the same lines as the smaller vaccine polymer syringe formats.

Question: Olivier Calvet - UBS - Analyst : Thanks.

Question: Victoria Lambert - Berenberg Bank - Analyst : Thanks for taking my question. I just have two with regards to your CapEx spend. The first one is just, so you've had a pullback in your CapEx guidance for 2024. Where exactly will you be cutting back? Is this more in the drug containment solutions? Which countries? Just a more color there would be helpful. And then just on your new North Carolina site, how should we think of the phasing of that CapEx spend if you're looking to do groundbreaking in 2025? Is most of the spend falling into next year then? Thank you.

Question: Victoria Lambert - Berenberg Bank - Analyst : Great. Thank you.

Question: Gaurav Jain - Barclays Investment Bank - Analyst : Hi. Good morning. Thank you for taking my question. So two from me. One is on CapEx. You have cut the CapEx guidance for this year. Is this sort of the new run rate that we should model for the next few years, given that your growth projections are lower, or should we be cutting them? And then the second question is on your EBITDA margin guidance long term, which is in the low 30% at constant currency. So what's that constant currency? Is it currencies that existed last year or as they exist today? Because clearly a margin today is down versus last year because of the adverse impact of currency. So I just want to understand that constant currency comment on the mid-term guidance.

Question: Gaurav Jain - Barclays Investment Bank - Analyst : Right. But then does it mean that your percentage margin expansion is higher because your margin today is lower versus what you expected last year because of the adverse FX movement?

Question: Gaurav Jain - Barclays Investment Bank - Analyst : Sure. Thank you so much.

Question: Edward Hall - Stifel Financial Corp - Analyst : Perfect. Thanks, guys. Thanks for taking my questions. Just a couple. One on the North Carolina facility. I think I heard 3x syringe capacity. I wonder if you could confirm this. And you could confirm if it's more skewed towards increasing glass syringes versus polymer. And then another question would be on the DCS business. Maybe around Q2 to H1, which I think around 60% of this business is about vials. And I was wondering if you could just allude to the growth in the non-vial products if possible. And then the quantity of the decline growth of the vial portion as well. Thanks.

Question: Edward Hall - Stifel Financial Corp - Analyst : Perfect. And I'll just follow up just on the first question. It seems that you've got some flexibility, given customer visibility and what they need in terms of glass versus polymer. So I was wondering sort of the speed and the price of your ability to switch the lines between glass and polymer syringes.

Question: Edward Hall - Stifel Financial Corp - Analyst : Okay.

Question: Edward Hall - Stifel Financial Corp - Analyst : Perfect. Thanks, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 27, 2024 / 9:00AM, 1SXP.DE - Q2 2024 SCHOTT Pharma AG & Co KgaA Earnings Call