Hello, everyone, and welcome to Grifols' Full Year 2022 Conference Call. Thank you very much for taking the time to join us today. This is Nuria Pascual speaking, Investor Relations and Sustainability Officer. And I'm joined by Thomas Glanzmann, our Executive Chairman; Victor Grifols Deu and Raimon Grifols, our Co-CEOs and Alfredo Arroyo, CFO of Grifols. We anticipate that this call will last for about 60 minutes. There will be a presentation of approximately 35 minutes followed by a Q&A session. [Operator Instructions] As a reminder, this call is being recorded. And the materials for the call are on the Investor Relations section of grifols.com. Before we start, I draw your attention to the forward-looking statement disclaimer on Slide 2 in the slide deck of our release. Forward-looking statements on the call are subject to substantial risks and uncertainties, speak only as of the call's original date, and we undertake no obligation to update or revise any of these statements. With that, I would like to turn the call over to Thomas.

Thank you, Nuria, and thank you, everyone for joining the call today. By now, you all are aware that we have had a change of the guard in the position of Executive Chairman. The Board with great respect accepted the resignation of Steve Mayer, who made the decision to step down for health and personal reasons. Effective February 22, I stepped into the role and I would at this point like to thank Steve for the valuable work and contribution he made over the past month and 12 years as a Grifols Board member. Needless to say, I and the Board wish him all the best as he moves on to another chapter in his life. For those that do not know me or I have not had an opportunity to meet at one of our investor meetings, let me briefly introduce myself. I've been on the Grifols Board for almost 17 years and in recent years was the company's Vice Chairman. I have been associated with the plasma and diagnostics industries since the late 1980s, and I have been a CEO of plasma, biologics, reno, and diagnostics companies during my career. In the past years, my focus has been on investing in start-up companies with innovative new medtech technologies and serving on a number of boards among them Alcon, Inc., which I know some of you also know. Throughout my career, my priority has always been to build and grow companies sustainably and profitably, which I also intend to do in partnership and close cooperation with the CEOs, the Grifols leadership team and the Board. Grifols is on the rebound. After some tough years, we are now setting up once again for a sustainable and financially sound growth oriented future with our operational performance plan and the recently announced…

Thank you, Thomas. Good morning or good afternoon to everyone and thank you for joining us today. Now we will turn to Slide number 8. To talk about the performance at high level of Grifols. I am very proud to say that Grifols performed strongly in 2022, while operating in a challenging macroeconomic environment. Grifols’, total revenues grew by 12.4% at constant currency, 23% on a reported basis, reaching record levels of sales of EUR6.1 billion and EUR5.7 billion if excluding Biotest, driven by Biopharma’s performance, robust underlying demand, favorable pricing and product mix and a notable Biotest contribution, plus an FX tailwind. Now turning to Slide number 9, to make a deep dive on Biopharma. Biopharma stood out with full year robust operational growth of 10%, 22% on a reported basis, driven by a strong fourth quarter. In Q4, it delivered a 14% increase in revenues, which was close to 30% on a reported basis. Please note that all those numbers on the slide exclude Biotest. We remain positive as we see this momentum reinforced, evident by a strong fourth quarter across all key proteins, especially IG, our flagship which grew by 18% in the fourth quarter and by 13% in the full year. This was driven by a significant increase in plasma supply with a strong growth recorded in our leading IgG brands. Demand has been robust and this is expected to continue, backed by the fact that many patients remain undiagnosed while demand for treatment for primary immunodeficiency and secondary immunodeficiency continue to grow. Also noteworthy is how new products continue to increase their contribution, driven by our plan to grow our subcutaneous immunoglobulin, Xembify, market share and revenues. This product in particular offers an improved patient experience for those wanting the convenience of home-based treatments. The…

Thanks, Victor. Hello to everyone. We're in Slide 15. In Q3 earnings call, we provided guidance on revenues, EBITDA and leverage for the year 2022. And now we can confirm that we met and even exceeded the targets, EUR6.1 billion revenues, 20.6% margin and 7 times leverage. Slide 16 shows the 2022 P&L with an accelerated growth and improved profitability. Revenues on -- Q4 revenues were up by 20.9% at constant currency versus prior year, reaching EUR1.7 billion. On a reported basis, this growth represented a 34.7% increase. Top line for the full year increased by EUR1 billion, reaching EUR6 billion, representing close to 23% increase versus prior year of 20 -- 12.4% growth at constant currency on the back of a strong organic growth of Biopharma, positive Biotest contribution and a positive FX. On the gross margin, this -- the gross margin was impacted by high plasma costs collected in 2021 and the first half of 2022 due to the 10-month lag inventory accounting, higher plasma costs mainly coming from higher donor fee and labor cost inflation. Also the termination of COVID-19 and Zika testing business impacted total gross margin by 200 basis points in 2022 versus prior year. Reported EBITDA grew up to EUR1.2 billion, 16.5% growth at constant currency with a 20.6% adjusted margin, improvement based on operational leverage, including SG&A cost savings and R&D prioritization that partially offset higher cost of plasma and lower diagnostic margin. Net profit increased by 10.4%, up to EUR208 million hit by higher financial expenses linked with Biotest acquisition. Now moving to Slide 17. The 2022 EBITDA reported increased by EUR237 million to EUR1.2 billion with a 21% margin. Positive contribution to EBITDA from all business units except diagnostic, coupled with OpEx savings. Slide 18, leverage -- deleveraging remains a top…

Thank you, Alfredo. In closing, I want to first thank our entire Grifols team for making it all happen. Without everyone's efforts, focus and dedication, we would not be able to make the progress we're able to report today. We are delivering a step change in performance. And as we enter 2023, we are very well positioned and confident that we will keep building on this positive momentum. Looking at 2023 (ph), we believe the company has a solid foundation to build Grifols' future with an organization that is more accountable, efficient, agile, and effective. I want to make it clear that both Grifols' long-term strategy and the measures in place have not changed at all and we are executing in our plans and commitments with the full support and at the direction of the board. Our focus for 2023 (ph) is also crystal clear. We will execute on our operational plan and deliver the EUR400 million in cash and cost savings. We will deliver on our guidance and you should see a significant margin improvement in the second half of 2023. And finally, 2023 is the year where we will deleverage the company. You should know that there is no back for us as they say, the train has left the station and is accelerating. Management and the Board are fully invested and laser focused on creating value and making our commitments a reality. In closing, Griffols is on the rebound and we are excited about taking the company forward and writing another successful chapter in the company's long growth history. With that also goes our commitment to keep you informed of our progress with these calls, which I hope you find our value. So finally, let me thank you for your attention. And I'll now turn it back to Nuria, who will open it up for questions.

Thank you, Thomas, and thank you all for your time. Let's just start the Q&A session. [Operator Instructions] Okay. So let's start. We have the first question coming from Peter Verdult from Citi. Please, Peter.

Thank you. Can you hear me? Thanks. Thanks for doing the call. Much needed. Just on the midterm targets, historically, they've been for EBITDA margins exceeding 30%. So, Thomas and team, if you execute to your plan when do you see this target being reached at the earliest? Is it something that is 25 and beyond or could it come sooner? And then, Thomas, your last line about looking at accelerating deleverage. I know there's been discussions around a Juul share structure collapse. Arrestake sale or maybe even options with diagnostics. I think they've been put off the table at least near term. But given your comments about the train leaving the building and really being committed to accelerating deleverage, could either of these options still be undertaken in 2023? Thank you.

Peter, you don't mind I take your first question regarding the midterm guidance. As I said, the EUR1.7 billion, which will account for the annualized EUR400 million, that's 27%, 28%. So if we think about operational improvement in 2024, we can get to 28%, 29%. To come back to the 30s, this will come from 2025 onwards, while at the time that we will launch the two new products from Biotest.

Peter, thank you for the question on the deleveraging. And let me just say, first of all, all options are on the table, and we are looking at them as we go forward here. And the collapse of the shares is also something that we committed to and will do. But the trading value has got to be right, and it's got to be valuable for all shareholders that are involved in such a transaction. But we are very much looking at everything at the moment working very hard to make it happen here and we will make it happen in 2023.

Thank you, Thomas. We have now a question from Rosie Turner from Jefferies. Hi, Rosie.

Hi. Thank you very much for taking questions. Maybe we could go back to leverage target. I think you said there 4 times, by the end of 2024. What does that mean in terms of the past this year? And I suppose that 4 times, does that rely on a transaction coming through? And then just to clarify on your comments to heat. So does that mean you said that there will be a collapse to share costs. So can I just confirm is that this year or that's just at some point in the future? Thank you.

So Rosie, thank you for the question. I will just address the piece on the collapse and then, I'll pass it on to Alfredo just to pick up your other point. So on the collapse, it all depends on the trading value of the shares. And right now, where we are, that is obviously not of interest. So we are continuing to monitor how the shares progress, and we will then make the decision at the right time when it makes sense for everybody.

Regarding the deleverage target that for 2024, the 4 times remains intact. And this will be achieved as it will be the combination of both the EBITDA increase plus deleverage transaction.

Thank you very clear.

Now we have Elizabeth Walton from Credit Suisse. Hi, Elizabeth.

Hi. Thank you so much for taking my questions. Just one clarification on the transaction this year. Can I check if you are also considering just a straight equity raise? I know that's been also discussed by many investors. You talked about the dual share collapse and potential divestments of business units that you have, but can we just triple check on a straight equity raise? And then maybe you can help us understand a little bit more as to what's driving that EUR250 million of cash savings you're expecting this year. We see your peers reporting weak cash flow as they're rebuilding inventory. Perhaps you can remind us where you are in terms of level of inventory that you hold and if you expect to return to pre-COVID levels? Thank you.

Elizabeth, thank you. I will just address briefly the first part of your questions and then pass it on to Alfredo. As I said before, everything is on the table, and it all depends on the value that we can create and what makes the most sense for the company.

Regarding the cash savings this year, the EUR250 million around 80% will come around, 200 will come from plasma cost reduction that, as I said, it takes time to go through P&L. However, we take it as a lower inventory upfront in 2023. And the rest, up to EUR250 million will come from the G&A, I would say, savings and other savings across the board. I already mentioned so that accounts for EUR250 million. Regarding your inventory, yeah, as you saw in our cash flow in 2022, we built up a significant inventory just to recover the levels of the pre-COVID time. So for the 2023 cash flow year, the inventory growth will be very limited because we're already in line with the inventory that we need to commit our sales, okay? So that's on inventory side. We'll see, I would say, positive trend versus the previous year.

Okay. And we have next question coming from Tom Jones at Berenberg. Hi, Tom.

Hello. Thank you for taking my questions. I had two. Firstly, I was just wondering if you come back to one aspect of the guidance for 2023. You talked about 10% to 12% constant currency growth in your plasma business. But I wonder how you reconcile that with the growth in collections that you've said, you've been running at probably 20%, 25% up on collections yet. You're only pointing to 10% to 12% growth on the plasma revenue side, given the pricing environment, demand environment, that seems fairly conservative given the amount of plasma you've got. So I was just wondering if you could sort of reconcile those two figures for me. And then the second question, maybe one for Alfredo. I guess it pertains to the leverage, but I was just wondering if you could clarify exactly how you calculate the EBITDA number that you've used to calculate your year-end leverage ratio. I think it caught us by surprise and probably caught you by surprise, given you were guiding to 7.9 times midyear and you came in at 7.1 times. So the debt hasn't changed much, but obviously, something has gone on with EBITDA. So if you could just clarify exactly how you calculate the EBITDA that you use in your leverage ratio, that would be helpful for us all, I think.

Thank you, Tom. This is Victor. I will be answering your first question about the linking the 25% volume growth in plasma for 2022 compared to the 10% to 12% sales growth in biopharma for 2023. The 25% volume growth that we have seen and realized during 2022, basically, as Alfredo was saying in the previous question, has been devoted to rebuild our inventories that were affected very highly by the pandemic. So basically, this is going to build -- has been financing the inventory buildup. So part of that 20% growth, growth related to that. And then as I have said, some centers are going to be consolidated. Therefore, we don't need that much amount of plasma for 2023 to meet our sales. So there is really, we are now tackling sales really directed to the volume needed.

Hi, Tom. Good to talk to you again. Regarding the leverage calculation, the 7.1 times for the year-end 2022, I mean we are consistently calculating the leverage ratio based on the current credit agreement that clearly states that in addition to, I would say, the standard adjustments related to IFRS 16 and others, they specifically disclose the non-recurring items on one hand, basically restructuring charges and transaction costs and all these things. And in addition to that, they allow you to include as part of the EBITDA covenant, the amount of cost savings associated to operational improvement plans like this one on a run rate basis for the upcoming 12 months with a cap of 10% of the EBITDA. So that's the way that it is being calculated, but happy to provide you with a detailed reconciliation in case that you needed.

Perfect. And then, so just to follow-up question on the leverage. You obviously gave us a target at the CMD for leverage this year, and you've given us a target for leverage at the end of next year. Would you be fair to give us any kind of steer for what you expect leverage to look like at the end of this year? And I guess it probably includes whether you do a large transaction or not, but maybe some qualitative commentary you can give us around the sort of stepping stones between the 7.1 and the 4.0.

I mean, obviously, I mean, there is, you can do a quick math with the EBITDA that I provided to you with the adjustment that mainly to be included. But as you said, clearly said that it will depend on the size of the transaction, and it is going to be one or two. So finally, those will be the one that will move the needle in 2023, but we'll reiterate the 4 times leverage target for 2024.

Okay. Let's move now to James Gordon with JPMorgan. Hi, James.

Hello. James Gordon from JPMorgan. Thanks for taking the question. I think some of the key ones have been asked. So I'll just do three quick clarifications. One was on the biopharma revenue guide, so the 10% to 12% growth, even though you could grow quicker than that in that you have enough plasma to do so. Is that because that's where demand is, that demand is actually the limiting factor, and there isn't even of easy comps or is it more demand than that? Or is it more about the fractional economics that you could grow more quickly than that, but you wouldn't be able to maintain the sort of EBITDA margins do you want to now get to? And that was the first one. The second one, I think you said 28% to 29% EBITDA margin next year. Is that with or without Biotest, please? And could that be a bit conservative if you've also got operational leverage and underlying improvement and the EUR400 million of savings? And then the final clarification was just divestments. I think you said that everything is on the table. But is it now less likely that you look to divest some of older Shanghai RAAS given you want to retain exposure to China for strategic reasons or is that still as likely is doing a share collapse?

Thank you, James. This is Victor. I may take the first question. I may take the first question about the 10%, 12% biopharma revenue growth for next year. This is a combination of many factors. We have, as you know, our hemophilia franchise, for instance, has been in the recent years impacted, and this continues to do so. Meaning by that, that IG, which is the lion's share of our sales and Alpha-1, both are growing nicely in a way above this 10% to 12%. So this kind of gives an indication that really there is solid demand there. We have the plasma that we need to fulfill those sales. And basically, this is the answer to your question, the third one.

To your question regarding the margin, the 28%, 29% for next year, which would be 1.7%, 1.8% with organic growth biotest contribution up to the time that we will launch the new products will be the minimum. So it's all about stand-alone and combined is pretty much the same. The operational leverage, yes, obviously, this EUR400 million is basically as you said, this is the result of a bunch of initiatives, sort of initiatives to achieve operational leverage, especially on the plasma cost and across the whole organization.

And let me just come back on the question of Shanghai RAAS and any of the other transactions that we are looking at or contemplating or that you might consider. We will obviously do nothing if it doesn't create value, and that also goes for the capital raise because obviously, we're looking at this very carefully to make sure that we create the most value for the company. So I just want to make sure that we're very much aligned on the fact that we -- it is one of the options, but it is not necessarily the preferred option.

Thank you, Thomas. We have Guilherme Macedo from CaixaBank. Hi, Guilherme.

Yes. Good morning. Thank you for taking my question. So the first one on your plasma collection capacity versus pre-pandemic in 2023 following the restructuring that you plan to undertake. If you can compare it with your targets in terms of plasma collections that you mentioned that you don't need that much plasma for 2023 to fulfill met? And the second question is about the EUR400 million savings. Should we think about them on gross terms or in net terms, including perhaps potential needs to reinvest in the business that you might have? Thank you.

Hi. I will take the first question. Again, now with Grifols, we are in a stage regarding plasma collection that we have the availability to collect the plasma volume that we need to meet our sales growth for the year. So on that side, we are basically now focusing on improving the productivity per center, meaning that we get the same plasma volume that we need, but if possible, at a better efficiency and productivity levels to help us the margin expansion.

Regarding your question, the EUR400 million, there are net and no additional investments would be required was all basically streamlining all our operational cost.

Thank you. And from Banco Santander, we have Jaime Escribano on the line. Hi, Jaime.

Hi. Good morning. So a couple of questions from my side. Regarding the target of EUR1.7 billion, which at first sight could look low. But obviously, you are not including Biotest EBITDA or any incremental EBITDA coming from sales growth in 2024. Would it be fair to say that when you add up these levers also product mix and others, the EBITDA could be more closer to EUR1.9 billion, EUR2 billion EBITDA or at least close to the consensus in 2024, which is right now EUR1,850 million. The second question would be regarding the donor fee. How much downside from current levels do you see? So is there room for further improvement or capping the donor fee more? And final question regarding free cash flow generation in 2023. How should we think about that figure? If you can provide any kind of magnitude range or at least qualitatively, how do you see the free cash flow improving this year? Thank you very much.

Two questions. So first question the EBITDA levels, on an annualized basis, as I said, this is EUR1.7 billion for 2023. For 2024, you need to add the organic growth. So clearly, it will exceed by far this EUR1.7 billion. So maybe we'll be close to your expectations. The donor fee, yes, we see that donor fee can be further optimized by discrimination of donor centers depending on the area, depending on there are competitors across the street or not. So this is like any other business with pricing management. So there is a room for improvement on the donor fee. On the cash flow generation, this year is going to improve significantly versus 2022. First of all, because on the back of higher EBITDA, point number one. Point number two, lower working capital consumption because the inventory growth will be very limited. Lower CapEx, the EUR100 million lower CapEx than the previous year. So basically, due to those, I would say, key three levers. The cash flow generation will be significant. But at this point of time, we'll not provide with the specific details.

Thank you. We are close to the final time of this call, but we have four questions, so four persons still willing to as we'll try our best to answer your questions for this four at least. So now it's Thibault Boutherin from Morgan Stanley. Hi, Thibault.

Yes. Thank you for taking my questions. So just one on the plasma collection for 2023. So I understand that you are managing the level of plasma you're going to collect going forward with the closure of some centers and the improvement in productivity in the remaining centers. And I guess, if you think about the growth rate of collection in '23, probably on the first half of the year is going to be relatively high because your base is lower. But from the normalized base that you achieved in the fourth quarter of 2022, what is your ambition to grow collection further when we think about beyond 2023. So basically, should we see again an ambition to grow the volume and for example, expanding to new centers? Or are we going to remain in a mode where you're trying to manage your productivity by center rather than trying to expand [indiscernible] centers. Thank you.

Thank you for the question. You nailed it at the end of your question. It's about we will manage volume, of course, by existing centers, but especially through productivity. We are not back to pre-pandemic levels productivity-wise. So there is plenty of room for improvement to use the level of productivity per center to get the volume that we need and to align the volume needs with the sales needs. So it has been in the past, and now we expect this to be the case. And the [indiscernible] has been the pandemia.

Thank you.

Thank you, Victor. We go now to Charles Pitman from Barclays. Hi, Charles.

Hi. Thank you very much for taking my questions. Two quick ones from me. Firstly, just on the deleveraging options. Can you just talk about the potential considerations you'll have to think about when thinking about exiting either part or all of the Shanghai RAAS stake? Are there any limitations there? Would you have to find a local player to sell the stake to? Just any more information around how that could actually be taken forward would be great. And then just secondly, on the potential impact of new competitors, say, you've got CIDP as competitive threat this year. I'm just wondering to what extent you've reflected that in your kind of near and midterm guidance? Thanks.

Your first question, there are no limitation on the potential Shanghai RAAS divestment.

And regarding the competitive landscape in the immunomodulation market, FcRn blocker [indiscernible] to be more precise, due to the mechanism of the disease itself, it's a very complex disease. Many factors are implied in the disease modality. And we really don't expect that this may have a huge impact in our CIDP franchise. Therefore, we are not modeling as well that impacting our midterm projections. We expect this to be limited for CIDP.

Okay. And now from Alantra Equities, we have Alvaro Lenze. Hi, Alvaro.

Hi. Thanks. Real quick. Just if you could give us some indication of the EUR300 million expected cost savings on the plasma side. How much of this could come from lower donor fees and the overall operating leverage of recovering volumes? And how much from the actual layoffs and the more inorganic measures, so to speak, in the restructuring. So how much organic, how much the actual restructuring? Thanks.

Okay. It will be 50% coming from optimized donor fee and 50% from the rest basically, as I said already gave you some details about [indiscernible] initiative, 50-50.

Okay. Thank you. And Juan Ros from ODDO BHF.

Hello. Thank you for taking my questions. I have three very quick ones. First one is regarding plasma collection centers. You've been adding new centers in the last few years, and you've said in the past that some of those centers had kind of legacy contracts with higher costs. And I'm wondering what's the impact of the renewal of those contracts once [indiscernible] and they are renegotiated with better terms, are the impact of those already embedded in your cost saving guidance? Second, regarding the surprise collapse, sorry, to be bothersome with this, do you have any kind of share price level at which you start considering the collapse? Is it 15 per share? Is it 20 per share? And finally, another bothersome question, just to clarify, could you please tell us if you are involved in any kind of talks, even if they are very preliminary to dispose any business of the Grifols Group? Thank you.

I'll take the first one. Thanks for the question. Yes, the operating performance improvement plan on plasma contemplates is a blended of this kind of new centers that we have acquired in the pandemic plus some third-party contracts to get plasma from it. So yes, everything is contemplated. And as I said in previous questions, as an answer, regarding the footprint, whatever center that makes sense to consolidate or to close, we have yes done or we will continue to be doing during this year 2023 to really fine-tune precisely this balance between volume and productivity.

Okay. So I'll take the others. Regarding the AMB (ph) unification, obviously, we need to look for the right spot, the right time and the right spot will be with the right gap and the right stock price for the time being, we have not decided yet on these two factors. And then of course, we will not disclose any talks for the potential deleverage transaction.

And I'll take the last one, and that is your specific question on where we are on any transaction. Obviously, that's very confidential, and I cannot go there. However, I want to again reiterate one point just to be very, very clear and is that we are not considering a capital raise at all, and that's not a favorite option at the current valuations that we have. So unless something dramatically changes in the valuations or our trading prices going forward, that is not really on the table. So it's not something that, we're putting that really as a very last option.

Okay. And very quickly, we have one follow-up from Peter from Citi. Please, Peter, but be really fast.

Well, I think it will be very fast because I was looking for a clarification because I got worried about the comments last year at the CMD being no capital raise to all options being on the table. But I think Thomas has clarified that in terms of his previous comments, so I won't waste any more time. Thanks for the call.

Thank you anyway. And with that, we'll end the our call today. You know that any other questions, the IR team, it's always available and any other conversations we can follow up in the next few days. Thank you very much for taking part. Bye.