Grifols Estimates The Impact Of Covid19 At €200 M ; Launches €100 M Cost Containment Plan

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The Spanish blood products multinational estimates an impact of 200M euros on its annual accounts due to the pandemic. More specifically, the impact will be reflected in the gross margin line in the firm’s H1’20 results statement. That said, it will not alter the income. This impact is related to the higher costs of access to plasma, its raw material. This is due to the lower amount of donations that the group received during the confinement period. For their part, fixed costs have remained unchanged. However, the group is observing a recovery in plasma volumes and expects to be at similar levels to those prior to the coronavirus “shortly.”

Taking into account the forecasts of Renta4’s experts:

“Net sales growth in 2020 would be 8%, and the impact on gross margin is approximately -3.5 pp (up to a margin of 42.4%). This is compared with our previous estimate of a flat gross margin of 46% (in line with Factset consensus).”

In any event, and with the aim of mitigating the impact of the pandemic, Grifols has implemented a 100 million euros plan to contain non-structural operating costs.

Given the low net impact of the provision, this news should not have an impact on the share price. According to Bankinter analysts:

“The cost savings plan is equivalent to 6.2% of our estimate for EBITDA 2020, 3.9% of stocks at 31 March and 0.6% of market capitalisation. Furthermore, the share price has dropped 6.8% in the last 30 days due to the intensification of trade negotiations between China and the US. So we do not believe this is a strong point in favour of selling the stock in the short term.”

Final details of the impacts on Grifols’ financial statements will be provided when the group’s results are released.

With regard to the fight against the coronavirus, Grifols has flagged that it has a comprehensive plan in place which includes the development of a diagnostic system and two treatments in the experimental phase.

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