Eurofins Scientific Sa

Good day, ladies and gentlemen. Welcome and thank you for joining Eurofin's first quarter 2026 trading update conference call. Please note that this call is being recorded and will later be available for replay on Eurofin's 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 a 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, Eurofins 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 footnotes of our press release. 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 Eurofin's annual and half-year reports. Please also read the disclaimer on page 2 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 Chief Executive Officer. Please go ahead.

Hello, everybody, and welcome to our quarterly call. So in the first quarter and the third quarter, we only publish sessions. It's a limited comment that I will make today. In Q1, what a continuation of last year, we've had a softer revenue growth with a big impact on weather. Those who live in North America, in the Midwest or the East Coast, and even in the South will remember that January and February were particularly harsh with storms and unprecedented Weather in Northern Europe, we had similar situation. I read somewhere that Finland had the worst winter in 40 years this year. You can all do your research about that. How does that impact us? Well, when we don't, when there is snow and storm and we don't get samples coming into our labs, we can't test. When an environment, when people cannot go and sample outside because it's too cold, everything is frozen, we don't test. People don't go to the doctor to get tested. They don't go to the hospital to get their procedure. This has all an impact. And every winter, of course, we have an impact. It's a matter of magnitude, and normally we catch up during the year. It just happens that this year was X year. I've had questions of how do we quantify that. Well, Q1, that's 62.5 days. If you have to shut down three days, not even a full week, you're losing 5% of your revenues for the month if people can't come to work or you don't get samples. So that's relatively easy to see that the impact can be significant. And, of course, we get the question, can we catch up? Normally we catch up. It just happens that this year the catch-up might take probably longer than just one quarter because we had a very – However, also March had one more day, but even with that effect, March was back to our mid-single-digit target. However, it was not enough to compensate for what happened in the earlier part of the quarter. We do think that much of that will come back at some point during the year, maybe not fully. But overall, we are sticking with our objective of mid-single-digit organic growth for the full year. Overall, our business is doing well. We have a slideshow, if you want. I'm on page three, but I will not read everything from the slideshow. You're welcome to go back and read it yourself or ask further questions in the call later. Overall, our business is doing well. Our biopharma product testing is doing well. We continue to build our hub and spoke network, the completion of which is making further progress. We will be done by the end of 2027, as we believe, and we start to see the impact of that because Even with fairly soft growth in Q1, losing some volume due to weather, for example, we still continue to improve significantly our profitability, so we are very confident on our objectives to achieve the profitability and cash flow growth that we have set for this year and next year. The biopharma, the core biopharma product testing, as I said, is doing well. It's mid-single-digit. We still have a softness in the ancillary biopharma. Discovery is also still a little bit soft, the very early phase of biopharma. Genomics, forensics, agro-science unfortunately are dragging the growth. We will get bottom on those activities. We've done lots of rationalization. We also continue to rationalize the contracts that we acquired from CINNAB in Spain. They had a lot of loss-making contracts that we are exiting. We're exiting some of the distributorship we had in clinical diagnostics in Italy, which also has an impact on the growth. How long will that go? SYNLAB, we should be done this year with the cleanup, and probably also Italy. We've exited completely one activity in the Netherlands in clinical diagnostics because we didn't see potential upside. So we are really making the company very efficient, highly digital, and we're quite positive for the outlook. On page four, we give a breakdown. Of course, we have an FX impact. It's very difficult to predict what the further effects impact will be going forward. Some of you know, please tell me, how the currencies will evolve. On page five, we give a bit more color on the various components of the growth in the different activities, life, biopharma, and diagnostic. Biopharma includes ancillary activities. like agro-science, genomics, forensics, which are really diluting the growth of our core business. Our CDMO is also quite lumpy. We actually got an award as one of the best or the best mid-scale CDMO recently, yesterday or the day before. We have a good product, but it's fairly lumpy. When you're small, you get the big contract, and that has an impact. But overall, we like that activity, the profitability of which, especially on our large campus in Toronto, is doing very well. On page six, we talk about acquisitions. Will we continue our acquisition plan? We do think we can achieve the 250 million additional revenue in 2026. A smaller bolt-on acquisition at acceptable multiples. On page seven, maybe I can give a bit more color on the divestment of our electrical and electronic testing business. We have talked about the possibility of such things happening. We like consumer product testing. This is definitely not an exit of consumer product testing. We believe consumer product testing has a strong impact on health. If you take cosmetics, those are things that we put on our skin and definitely impact our health. They fit very well in testing for life. If you get things from, if you wear shoes and they leak chemicals, this has also an impact. You might have seen recently the Texas state suing Lululemon for PFAS containing clothing. And indeed, clothing may contain chemicals, so the level of health impact is there potentially. So we do like consumer products. We think they fit very well. But electrical and electronic was a little bit different. It's more like type certification. of products, it's not checking every single batch or every single product. We thought the fits with our testing for life objectives was not perfect. Also, we were relatively small in that area. We are in many, many countries. And it was pretty obvious that it is a better fit with the buyer UL, which already has a global network in this activity. We would have had to develop all the digital backbone specific to that activity. We all know it's essential for long-term efficiency and leadership, and that was a bit too small to do the spend that we thought was required to make that platform the best in its activity in digital. As you can see, the terms of that, I think it's a good highlight of what we have in the portfolio of Eurofins. It wasn't by far our strongest business. It was a business where actually we hadn't started the digital journey. I think they acquire as a right digital tool, and so they can deploy that. So for them, it's very good. For us, it would have cost a lot of capital to put the digital backbone in place, the hub and spoke and so on. We didn't have the scale to build proper hub and spoke. We had good accreditation. It is a nice global platform in that area. But It's definitely, if I compare it to the rest of Eurofins, not a crown jewel by far, and it shows in terms of valuation what is contained in Eurofins businesses. I think the remaining businesses have definitely, for us, from our perspective, more potential. On the page 8, we are just repeating our objectives, so although the Q1 was a bit soft, we think we We will achieve our goals for this year. We have already achieved significant continued profitability growth. On the M&A, we are on track. And our digitalization programs and building the hub and spoke network, we are on track. So that's it for my short introduction. But we can go to Q&A and I can answer some specific questions.

Thank you. 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 yourself from the question queue, you may press star followed by two. If you're 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. One moment, please. Thank you. Our first question today will be coming from Remy Renu with Morgan Stanley. Your line is live.