Eurofins Scientific Sa

Ladies and gentlemen, welcome and thank you for joining Eurofins Q1 2025 Trading Update presentation. Please note that this call is being recorded and will later be available for replay on the Eurofins Investor Relations website. Throughout today's presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone to register for questions. For operator assistance, please press the star key followed by zero. During this call, Eurofin's management may make forward-looking statements, including, but not limited to, statements with respect to outlook and the related assumptions. Management will also discuss alternative performance measures, such as organic growth and EBITDA, which are defined in the appendices of our press releases. Actual results may differ materially from objectives discussed. Risks and uncertainties that may affect Eurofin's future results include, but are not limited to, those described in the risk factors section of the most recent Eurofins annual report. Please also read the disclaimer on page two of this presentation, subject to which this call and the Q&A session are made. I would now like to turn the conference over to Dr. Gilles Martin, Eurofins CEO. Please go ahead.

Thank you for joining our brief quarterly update call. Well, the first quarter has proceeded as we expected it. We've had longer discussions with many of you when we published our annual result for 2024. We've had good organic growth in most of our business. Our food testing, environmental testing business did very well. We were a bit affected in the US in environment due to the very extreme weather that we saw in Q1 and a couple of phasing in large programs, but we're We're very positive about the growth of that area. It remains a nicely oriented market, and we have a strong leading position in Europe and North America. In biopharma product testing, we continue to do well and register good organic growth. The areas that we had flagged as being affected continue to some extent to be affected. We have a very negative base effect in our central laboratory in biopharma. and our bioanalysis, where we've had some very large studies that ended in Q2 or Q3 of last year, but still are in the base, in the comparison base in 2024 for Q1. Agro-science continues to be soft and we flag that that might not change for a while. But of course, as we go towards the end of this year, the comparison base will be much lower. Overall, we are positive about our markets Of course, the world is undergoing a lot of change, a lot of uncertainty. To some extent, we've been there before. I've had the privilege, if you want, to go through a few economic crises or some, and I've observed through those crises that our core business is very resilient. Testing food, water, pharmaceuticals, those are important things that need to get done. And And we don't see that changing. We have had in the first quarter no sign of all the tariffs or other geopolitical aspects affecting our business. It is, of course, it's a war in Ukraine and the difficulty in Germany, for example, the German economy has not been doing well the last two years and we have less growth there than we used to, but still our business is solid. So overall, we are positive about the future evolution of our business and prepared to adjust to things that might affect our clients. But normally, wherever food comes from, it has to be tested. Whether it's imported or not imported, it's something that has to be tested. So we have no significant causes for worries, also clinical diagnostics, a very local business that needs to be done because people get sick and they need to be tested, and there is a lot of innovation, and new tests can help people stay healthy. So that's for the general presentation of the organic growth. On the pages four and five of the presentation, we give a bit more color on that. Of course, FX is very volatile too, so it's really hard to know what FX will be in Q2, Q3, Q4. We've seen very unexpected swings before in directions we didn't expect, sometimes positive, sometimes negative. So we cannot change or update anything regarding FX on a quarterly basis. We did it a bit last year, but actually Q4 of last year turned out to have a better FX result than what we thought when we adjusted our objectives for Q4 of last year. So we're not doing that guessing game anymore. Maybe you know better than us what effects will be in two, three, or four quarters. Organic growth, as I discussed on page five, you get a bit more color on this. Overall, we're still affected by these base effects, especially in the clinical parts of our biopharma business. But the bulk of our business is doing very well. And this thing in biopharma should pick up at some point. We're still bullish on the overall biopharma midterm orientation and growth and our positioning and the capacity that we have that will come online. Also in clinical diagnostics, we're adding capacity and that will lead to growth and profitability growth. We incur very significant costs when we launch new laboratories. capex cost and operating losses cost, and as those labs fill, we see the benefit of that. We've made a significant acquisition in Spain, and we closed that acquisition in the first quarter, at the end of the first quarter. It is probably the largest clinical laboratories network in Spain, added to our position, which was number two and number three. We are a strong leader. That network was not profitable. So we are going to have to make very significant integration to bring the two networks together. But we paid very little for it. So the upside for us in terms of value creation is very significant. Once we integrate our two networks and remove the very significant overlap and override overlap. So we're optimistic that we can create a lot of value over the next two to three years on that acquisitions. Although short term, it will cause us, and that's part of our budget for SDI this year, some significant one-off reorganization cost and some dilutive effect in the short term. But the impact, we think, within year two or three will be quite positive in terms of return on capital employed. So those are the significant news of Q1. We continue to make small Bolton acquisitions everywhere. So we are on plan and we think we will achieve our objectives in terms of acquisitions for this year, including this large acquisition in Spain. We might be above the target for this year. On page seven, we describe a bit where our cash goes to. And so we continue to build the group. We make every five year a plan. And now we are... well ahead in the third year of this five-year plan. By 2027, on our current markets, we will have built our complete laboratory network with hub and spoke network. We will have developed and deployed a complete new portfolio of IT solutions to fully digitalize your business, remove a lot of duplication, remove causes for errors, for potential mistakes, miscommunication. It is causing a lot of disruptions in our business, the rollout of such a new suite of IT system when you have IT changes. So we have costs for that. We have costs that are basically we can't even calculate them. They're not development costs. They're just disruptions to our business, people being busy learning, deploying a new system, entering the core data in a new system, fixing all the glitches and so on. Especially since at the same time, we are completely rebuilding our infrastructure, our IT infrastructure in a much more resilient manner. So we will end 26, probably 25 actually for the infrastructure with a completely new, super modern IT infrastructure, more resilient, more compartmentalized. And by 27, we are optimistic that we'll have deployed all those new IT solutions, which on the one hand mean less cost, and on the other hand mean much more efficient, faster, better run business. So this is a core of what we're doing, actually. You don't really see it in the numbers, except you see the cost in the numbers. And it impacted also a little bit on the top line from all those disruptions. that occur when you deploy a set of new IT solutions on a very broad network. But we think that will be very positive. In terms of balance sheets, Laurent can talk more about it if you have questions, but we are committed to our investment grade rating and to keep our leverage in the range that we have stated, 1.5 to 2.5. We reissued a new hybrid to replace the one we had in the same amount. This is about $1 billion of hybrid, which we think is a good component in our total balance sheet. And we are returning a lot of money to our shareholders. We are of the opinion that our share price is very depressed, has been very depressed for a while, for reasons we don't quite understand. And we have decided to deploy a significant part, not insignificant part, of our cash flow and our capabilities, our finance capability, within this leveraged to buy back shares. And as you see, we even canceled a significant amount of shares in the last few weeks. We will propose a dividend for payment at the end of this month for General Assembly, which is taking place this week. And Eurofins is slowly coming into a phase where we should generate a lot of cash and return a lot of that cash to our shareholders in different channels. Some people might ask, what about your leverage? And as I mentioned, we also have the possibility to raise the funds should the share price anomaly be sustainable by disposing some non-core assets. Not in a huge way, but it can be part of the financing if required. On page eight, we just repeated our objectives as they were When we published our 2024 results, based on what we see today, we don't see a reason to change them. And as nobody knows what the effects will be, we wouldn't be able to do anything for that. And on the operating, we see pluses and minuses of potential changes. And there again, it's very hard to know whether those changes will happen, when will they happen, how much it will affect our clients. And what are the positives? Because you know, in the way testing, the more duplication there is in production, the more testing you have to do. If you have three factories making the same thing rather than one factory, the three factories have to do testing. That's a very global and macro view, but testing is required. So if you centralize testing in one country for the whole world, you have in fact less testing than if you produce in three different places. Now, this is a bit science fiction because nobody knows exactly what will happen, but that gives a bit also some, if I look at the three to 10-year view, some color on how we think. We think actually if the world is efficient and produces in a single place, which is the most cost-effective, that reduces the need for testing rather than producing everything everywhere, which then need to be tested on smaller batches. That's a very general view, and I don't know how applicable this will be or come to be, but that's how we see. So overall, we don't see, in spite of the lot of changes in the world, the economy, the macroeconomy, geopolitics, we don't see major changes now from what we saw when we published our 2024 results. But of course, if you have specific questions, we'd be happy to answer. And now I'll turn back the microphone to you for questions.

Thank you very much. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove your question from the queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. Thank you very much. Your first question is coming from Remy Granu of Morgan Stanley. Remy, your line is live.

Good afternoon and thanks for taking my questions, just three if I may. So the first one is on on the weather impact in Q1 in environment in the U.S. that you're calling. Can you help us quantify that? And if you are expecting any kind of catch-up effect in the second quarter of the year? So that would be the first question. Then the second one, I think you previously flagged that these early-stage clinical activities in agro-science, which is the pocket of weakness, declined 10% in 2024. So wondering whether the momentum in this business has improved against the minus 10% last year and whether the recent engagement with clients and your Q1 publication has made you more confident in the potential beginning of recovery later this year. And the third one is just housekeeping, if you can give us your view on the work and the impact we should expect for the second quarter this year. Thanks.

Thank you. US teams in the environment are quite positive for the remainder of the year, and they do think there will be a catch up, especially some large contracts that maybe started a bit later should be spent or carried out within the remaining part of the year. I don't have the exact number of this early stage reduction, But as I mentioned, we have a big base effect from the central lab and from the bioanalysis, also in genomics. And that base effect will finish when the comparable periods in 2024, where those studies were still running, will run out. And then we have the other thing is when do new studies start, for which... There is always a bit more uncertainty, as usual, because it depends on biopharma processes and biopharma advancements of developments, etc. So that could boost even more the growth in addition to the end of a very strong base effect. And we still think that within Q4 of this year, we should start to see the positive trends in biopharma. Agro-science is depressed and might stay depressed for a while. Again, we have a base effect of things having gone down. We don't think it will go down a lot from there, but we don't think either it will pick up in a big way in the short term. In the mid-term, of course, the world needs agrochemicals and it's a challenge because more and more agrochemicals become a question of controversy. For example, in the topic of PFAS, one of the the related compounds called TFA, we start to find it everywhere. So it was found yesterday, there was publication, it was found in wine at fairly high level. We already found out it was product. This is a PFAS derivative, and that could mean a lot of testing is required. How fast this will be required and so on, we don't know. but there is a lot of things that could happen that could push the testing requirements. On the working day impact, I don't have it in front of me, but Laurent can answer.

Yeah, it should be negative still in Q2 by 0.7%, but it should be after that flat for the remainder of the year in Q3 and Q4.

Okay, understood. Thanks very much.

Thank you very much. Our next question will be asked by Suasini Varanasi of Goldman Sachs. Suasini, your live is online.

Hello, good morning or good afternoon. Thank you for taking my questions. Two from me, please. In the U.S., do you have any exposure to any pharma projects or health projects that are subject to federal funding by the government and which are potentially at risk of cuts? That's the first one. Second one, at the end of last month, you issued the press release that discussed the potential purchase of related party leases. First bucket, I think, of seven sites, potentially as soon as this year. Second bucket, subject to a consultative non-binding shareholder vote. Can you help us understand how you're thinking about the timing of these purchases and what implications should we see for depreciation charges as a result on an annualized basis? Thank you.

Thank you. Yes, so far we have not seen much, you know, biopharma linked to budget costs in the U.S. by the U.S. government. Our biopharma work is, I would say, almost exclusively for either biotech companies or pharma companies. In our genomics business, we work a bit for academics, so universities and so on, and we did see some effect. That's a relatively small business for us. Our whole genomic business worldwide is something... is smaller than 100 million, and the U.S. part is maybe 40 million. So we saw a bit of an effect on that genomics testing for the academic part. But at the size of Eurofin, 7 billion, it's really a drop in the ocean. And what the general, I mean, the question you haven't asked, if the FDA do or not do, this is, of course, hard to know. They were saying yesterday they want to outlaw a lot of dyes in food. Whether that will happen, of course, nobody knows. But, of course, to take that out completely in all products and make sure it's not there, it's going to be also a testing challenge. Pharma products, in the end, have to be safe. And vaccines, we need vaccines, as we see in Texas. But it's very hard for us to predict anything. Our view and the view of our clients, more importantly, is that they are bullish about the potential of developing new products and medicines that really help us live longer and better. And leases. Yes, leases. We have asked our investors for a consultative vote. We have engaged since we had those slanderous attacks. Of course, we've had a dialogue, an increased dialogue with our investors to try to find out what they want. seems to be clear that our investors would like this problem, potential problem, which is more premium, matter of appearance than anything, to go away as soon as possible. So our investors would like that, but they of course don't want us to have too much leverage. And that will guide basically our decision as to the timing. The timing from the point of view of our investors is generally, if I can summarize it as I understand it, yes, it should be done. It should be done as soon as possible while not being to the detriment of the other needs for use of capital. So in other words, if we need our capital to buy companies, if we need our capital to buy back shares because they are really very depressed, if we need our capital for other things, then that should take precedence over the buyback of the buildings. But if we have headroom and we can afford to do it without without damaging or preventing us from doing the things we need to do, they would like this problem to go away and this to be dealt with. And this will be the guiding principle that we follow. The easiest would be to do all in one transactions and still this year and be done with it. That's the optimistic scenario, assuming we have enough cash and maybe your share price recovers a bit and so on, which makes buying back our shares right now a bit less attractive. There are a number of moving parts that we will consider, that the board will consider when making that decision. But the direction is, and I think it will be confirmed on Wednesday, tomorrow, yes, by our shareholders' vote, to which my holding will not participate, so you will have a clear view of what the non-related shareholders think. Our... recommendation to get this done. So it will get done. And the sooner we can do it, the better. But if there are other places where we should invest our shareholders' money, including buying back our shares as a priority, we will also do that. So the decision will be in flux until the end of this year, depending on a number of factors. Also, I mean, any other use of capital, M&A, et cetera, or potential small divestments or of non-material or businesses that are not core to our business. So all those aspects will play into deciding the exact timing of this.

And especially concerning the impact on the depreciation, we pay about 35 million of rent to related parties. The two buckets are more or less of equal size, so it's quite linear, the impact, depending on the timing of repurchase of this related party asset.

Very clear. Thank you very much.

This will increase a little bit leverage, but increase also EBITDA by the amount of rent that will go away. I understand. Thank you. And I think if you look at what the expert who valued those buildings, and I was not involved in any way in that, by the way, I think it's something between 7% or 8% cap rate. So that gives you an idea of the impact, financial impact.

Yeah.

So it's not the priority investment to spend money, but considering it gives us like, those are buildings that we will use, Europeans will use forever. They are a very low risk investment because we know we would have to pay the rent no matter what.

Thank you very much. Okay, thank you very much. Our next question is coming from Delphine Lelouet of Bernstein. Delphine, your live is live.

Thank you. Hello, good afternoon everybody. Laurent, three questions on my side. I just need a valuation of the U.S. impact regarding the bad or the poor weather condition you had over the first trimester. Was it something around 20 million more or less in Q1? And the other question is how are you going to mitigate that? in terms of EBITDA impact. The second question deals with the French day reimbursement into the lab testing, and I was wondering if you can also quantify that and give us more granularity regarding the evolution of the mix in France regarding that division in between the reimbursed and the non-reimbursed testing. And finally, can we have an update on the arbitrage procedure regarding AGS agro-science business, please?

Thank you. I think I will answer because I don't think the impact of the weather is 20 million. It's a few million, but single-digit millions. But on a quarter and just one 500 million business line issue, that's 125 million per quarter. 125 million. So 5% 125 million is 5 million.

Okay.

Type of math. In France, all our clinic, I think you mentioned the clinical testing business. It's pretty much all reimbursed some by private insurance, some by the state, but mostly by the state. But we do specialty and the, the reimbursement cuts were less for specialty than for, than for routine. So we, And we can introduce also much more tests and specialty in the genomic area. And the arbitrage of SGS, it still goes on. We believe that the deal should have completed as planned. We will see the timeline is a year or two, I think, to get to resolution on this one. And we will continue to pursue it aggressively as that are ongoing.

Okay, thanks.

Thank you very much. Our next question is coming from Neil Tyler of Redburn Atlantic. Neil, your line is live.

Thank you. Good afternoon. Just a question on environmental testing, and I think particularly in the US, the sort of medium term outlook and how you see the vulnerability or exposure of that business to, you know, to GDP, but more specifically, I think, I suppose, you know, construction trends. Can you help us understand which components of the environmental testing business, you know, US and elsewhere, we should consider to be sort of linked to construction trends, please? Thank you.

Thank you. Yeah, there is some level linked to construction. I'd say a lot, especially in Europe, to infrastructure. So big infrastructure programs have an impact. And of course, all those programs have long timelines. When government in Europe has allocated money for infrastructure, it can take five to 10 years to get that money spent and build the roads or the bridges or whatever. For private construction, the timelines more three to four years. But also all the transactions on existing buildings require environmental testing, phase one testing, and so on. There is also big decontamination programs of known contamination. There has been assessments, and there are ongoing assessments of potential contamination. Once contamination is detected, it has to be remediated. A lot of testing is carried out as part of the remediation of sites that were already identified as being contaminated. I don't have the exact component on the new build. We also do a lot of building testing, existing building testing. For example, asbestos in buildings, that's often due to renovation, but if you do energy protection of buildings while making buildings more environmentally friendly, then you also have a lot of asbestos testing and other contaminants testing, mold testing. A lot of testing and building can be also recurring, like water. The water testing part is, of course, of the environmental testing is probably half of the market. I don't know if it's half for us exactly, but in total spend might be half. It's all completely recurring. If you're testing drinking water, swimming pool water, all those things are not really linked to the economic cycle at all because they... Just ensuring the water we drink or the water of the rivers and the sea and so on is not polluted. But we can research that. It's an interesting point and try to get those data points.

Thank you. That would be helpful. And then the second question on the European food testing.

release mentioned that that had been stable, which feels, perhaps I'm wrong, feels like a sort of loss of the recent momentum, you know, that had recovered quite healthfully during the second half of last year. Can you perhaps expand a little bit on what you see happening in European food testing?

Well, I think we have differences from country to country, but I think, I mean, specifically, it's about linked to our overall growth. both or all growth for the first quarter. And again, one quarter doesn't mean so much. I've always said that. Don't overemphasize one quarter. But we have areas where it's softer, like the areas where the economy is more challenged, like Germany, and areas where it's more dynamic within Europe. When we said stable growth, continued stable growth in Europe, food and feed testings means basically around mid-single digits. which it was higher, and we've had periods where it was high single digits for our food testing in Europe, but the economic climate, and that gives you an idea of, you know, Germany has been in recession for two years, and we still have a positive growth in food testing, not as big as it was before, and it shows a bit how not recession-proof, fully recession-proof, but relatively little affected by recession our business can be.

That's great. Thank you very much. That's very clear.

Thank you very much. Our next question is coming from Arthur Truslove of Citi. Arthur, your line is live.

Good afternoon. Thank you very much for taking my question. Three, if I may. The first question, I heard that a number of drug companies have been pulling forward drug shipments to North America. Has that pulled forward revenue within your biopharma business on the basis that those shipments would need to be tested before being sent over to the US? Second question, on the margin, obviously US dollar hasn't been performing especially well against the Euro. If you take rates as they are today, what impact or what kind of impact does that have on the margin that you're likely to have? What kind of impact on the margin is that likely to have on a full year basis? And then third question, clearly the FDA in America have seen quite a few people let go. Is this impacting your customer's willingness to conduct biopharma testing? And if so, which stages of the process? Is it more at the beginning, the middle, or the end of the clinical trials process?

Thank you. Thank you very much. On the first question, drug companies pulling forward shipments, I think it wouldn't have affected us at all or very minimally. That would come maybe from Ireland, where we have some operations, maybe marginally, but the bulk of our testing is actually for the development of drugs, for the phases where the clinical trial phase, we have the discovery. So the discovery is very early stage, and that was affected like starting two years ago after COVID when companies were re-evaluating their investment in early stage. The bulk of what we do is on products that are not so far from being on the market, that are three, four, five years from being on the market, and that's not what gets cut. This is like the research that needs to go on because it's going to be monetized. Whether, coming to your last question, whatever the FDA does creates a huge bottleneck. So the FDA cannot approve products. I would doubt that it would go that far. There's certainly the whole US biopharma industry, the local biopharma industry will be massively affected. And they are paying for it, by the way. The people at FDA who are doing the drug evaluation, there are fees that the pharma industry pays for those things. So we haven't heard from our clients that they would want to test less or do less or develop fewer products because there is a harm wrestling about reimbursement of pharma products and the pharma industry says, well, if you cut reimbursement, they will do less research. But in reality, research is done because companies know their products will go off patent and if they want still to be there in five or ten years, they need to have new products. Otherwise, everything goes generic. And it's more driven by the fact, will this research lead to new products? And the end, how much profit those products bring, the profit won't be negative. The profit will be positive. So we don't see a real issue there. On the US dollar impact, frankly, you can model it. What you can, we'll give you some data points and you can model whatever you want with whatever hypothesis you would like to put in your models. We've shown the profitability of our business in 23 and 24, Europe, US. We have segment, and that's why we think segments by geography are more meaningful than segments by activity, at least for Eurofins. And by type of activity, we have higher margin in the US. This difference has started to reduce in 2024 compared to 2023. As our European business improves, and it's improving this year, we think this gap of margin between US and Europe will also reduce. And the translation effect of the US, if the dollar were to completely collapse, would be visible, of course, in our consolidated numbers. Whether the dollar will completely collapse on average throughout the year, I have no idea. But you are welcome, of course, to simulate whatever you think might happen. And it might happen this year and be reversed next year. or in one quarter and be reversed the other quarter. That is something that we, I mean, we have no basis to make any better hypothesis than saying what we planned at the beginning, what we set as an objective at the beginning of the year is as good as we can make now. But midterm, because in the end, if you look as an investor midterm, we should improve our profitability in Europe to levels that should be in the same order of magnitude than the US. Once we're done, we will have unspoke IT developments. So the impact should not be so material. But of course, in the translation impact on the margin level, I mean, on the total size consolidated in euro, currencies will do what they do. They will vary. And it's hard to say what will happen in two to five years.

Great. Thank you.

Thank you very much. Our next question is coming from Alan Wells of Jefferies. Alan, please go ahead.

Hey, good morning, Gilles. Good morning, Lauren. Good afternoon, sorry. A couple from me, please. Firstly, just on the guidance, I noticed that at the full year results, you had some comments around the shape of the year where you talked about stronger second half waiting. They seem to be um i've been taken off the slides and the announcement today is anything we need to read into that about your view on waiting first half versus second half will it be a bit more more even that's my first question and then secondly i i just wanted to get some thoughts and some background on the synlab acquisition and just how dilutive you think that's going to be on a full year view if i just do the basic math on a break-even number that's about 40 bits dilutive obviously your full year guidance is for improving margins i'm just mindful that um you know are you expecting that business to improve from the loss making position by the end of the year or do you think the rest of the business just can fully offset um the the dilution for that um in there and maybe then just as a follow-up on synlab i know you've mentioned it it's loss making Any comment on the growth rate of that business? Is it growing still, growing broadly in line with the group or above or below group levels, just in terms of how dilutive or accretive that will be to group growth over the mid-term? Thank you.

Thanks a lot for your questions, Alan. It's nice to see that someone reads our releases word by word. If it had not occurred to me that this thing about second half waiting might have been erased, it's not intentional in any way. We still think we have, as I mentioned earlier in the call, we have some bad comps in the first half at least, in the first few quarters, and that those comparable should weigh less, definitely on Q4 and a bit on Q3. So we stand by what we wrote. We're going to investigate why that maybe common got erased or fell through, so that's a mistake. Then SynLab. SynLab is significantly loss-making. How fast this will turn depends on things. We need to remove costs and that means also, unfortunately, removing some headcount. We're not fully in control on how fast those things happen in Europe. There has to be consultation, etc. So we're going to, of course, try to do it as fast as possible. I think the main impact will mostly be visible next year. I don't expect a huge impact this year. So there will be a dilutive effect. On the other hand, the rest of our business should improve. And that's probably part of why we didn't set objectives for massive profitability increase this year. And we guided or we set an objective for very modest profitability increase this year, including that company. And on growth, I think it is also in the lower end of our growth range. So what is the term? A bit below mid-single digit. So low to mid-single digit is maybe the historic growth rate of that business. So hopefully within our control, it will grow faster, but we'll have to see. We do this acquisition because we do believe that our local management in Spain has... has done a good job in improving our own business in Spain, and we think they can do that job to an even greater effect on the combined business of SynLab and Eurofins. And again, we look at investments on a return on capital employed basis. We don't necessarily look at margin or growth, providing the growth is positive and the margins can be sufficient. We more decide, okay, we deploy so much capital year one, and it's going to be worth so much in year three because the profits will be at that level in year three. And that's rational for making those acquisitions, which, indeed, I agree with you on the initial impact of our consolidated numbers for this year is not a positive thing. But we run the company like shareholders and not only looking at each quarter's margin or growth. To buy the share today, to have in three years something that's going to be worth a lot more.

Makes sense. And can I just ask one quick extra question? Just obviously a lot of the pricing discussions happen in Q1 for a number of your businesses. Can you maybe just say a few qualitative comments around the pricing dynamics in the business? Obviously, we had a couple of years of reasonably strong inflation. I feel like there's been some catch up. How do you think about pricing or the pricing discussions for 2025? Thank you.

Well, thank you. Well, this has changed dramatically. I remember running this business. I've been running this business for more than 30 years. It would be a tradition that we would increase prices every year by 2%, 3%, 4% at the beginning of the year, and that was normal. Then inflation came down to almost zero, and everybody lost that habit of increasing prices. And then came the war in Ukraine and massive inflation in Europe, and we got caught by surprise because we had lost the... the habits of increasing prices every year. Not everywhere, but to a large extent. And now we're back in that habit. It's normal for all our businesses to do that. It's normal for all our clients to accept that. The amount will vary by country, whether we get 2%, 3%, 4%. We still have a few pockets where we are still catching up, historically too low pricing, and we continue to pursue that aggressively. But yes, now the discussion on pricing and price increase, they do happen every year.

Right. Thank you.

Thank you very much. And our last question is coming from Pablo Cuadrado of Kepler. Pablo, your line is live.

Yes. Good afternoon, gents. Just two quick questions. This one will be on the Forex again. And I don't know if the question is for Laurent. I assume or presume that basically the bulk of your debt is based on growth times. So the question would be, do you have currently in place any kind of hedging or forward forex that you can use in order to benefit or to reduce the impact at top line that you can gather on the financial expenses or cash flow on that front? And the second question is on the share cancellation. I mean, a few weeks ago, you announced that you were canceling the shares, but the separate back has been ongoing and you still have the shares that you have been buying back. So we assume that, you know, with the current plan ongoing and the pending amount that you have, again, the idea is that you will cancel those shares again.

Okay, the forex, we do edge our short term. Let's say we win a contract in dollar and it's performed in euro cost country, which is very rare and marginal for us, but that would be edged. We don't edge our balance sheet because you cannot edge forever anyway. So we don't edge our debt in dollar or euro. And actually, so far, it was pretty good because we did borrow in euro mostly. Share cancellation, buyback ongoing. Well, you know, our buyback, it depends on a number of parameters. First, we don't want to have too much leverage. We want to stay strictly within our leverage range, but also depends on the share price. I mean, we thought the last few months that our share price was extremely underpriced and that it presented a no-brainer opportunity to deploy capital. Because we know what we buy. When we buy companies at 13, 12 times EBITDA, or 10 times even for smaller ones, or eight times, we don't know what we buy. Every time you make an acquisition, you discover things, and sometimes it's good, sometimes it's less good. When we buy Eurofins share, we know what we buy. We know how well invested our business is. We know what we're going to do. I mean, we think we know what we're going to do in profit next year. So it's, in our opinion, a low-risk investment, and that was a bargain. And depending on valuation of share price, we will decide on how much we buy back and what we do to make sure we stay in our leverage range.

All right. Thank you.

Thank you very much. This is all the time that we have for today's question and answer session. We would like to turn the conference back to Dr. Gilles Martin for closing remarks.

Well, thank you very much to all of you for joining this call. And what you have with Eurofins is a fairly diversified company, both geographically and by activity in sectors that, in my own professional experience of more than 30 years, have proven very resilient. But this is not to say that global changes and radical changes will not affect us in some way. In some ways, my experience has been our sector is usually much less affected than other sectors when those things happen. We are not fully decoupled from the economic evolution, but we have proven over time to be very resilient. That's for the macro, and for the micro, we are continuing our work. We have a very large number of streams we are working on that should lead to improved cash flows, improved profitability, reduced capex. um and and we're we're looking forward to delivering a very good result by the end of our five-year plan in 2027 and we are as convinced as before that we will deliver on that and and within the general economic climate i'm not saying we're going to be completely spared but we we probably will will show to be more resilient than potentially other sectors thanks a lot for your support i'm i'm happy to take more questions when we meet in in other conferences in person, and have a very nice day. Bye-bye.

Ladies and gentlemen, the call is now concluded. You may disconnect your telephone. Thank you for joining, and have a pleasant day.