BarcelonaOn Thursday, November 10, in the evening. The American statistical office publishes the inflation data for the month of October, which stands at 7.7%. It is two tenths below what investors expected and five tenths below September’s 8.2%. The drop is fueling optimism and even suggests it may serve to soften or end Fed rate hikes. The news sent stock markets around the world soaring. In Barcelona it is particularly well received by one of the big Catalan companies. This 7.7% seems to put an end to the crisis of credibility in the markets that Grifols has suffered for months.
The hemoderivatives giant, which before the outbreak of the pandemic had had its shares at 34 euros, had them this October at 8.13 euros. During this decline, the company admits to having made mistakes and points out in particular a “much improveable” management of the plasma inventory with which they make their products, a key aspect because from collection to product the company needs eleven months and during the pandemic it became very difficult and made the process more expensive.
Shares had reached 34 euros in 2019, have fallen to 8 and are now approaching 10
Despite everything, the company has not stopped making money and closed the third quarter with a profit before taxes, interest, depreciation and other (ebitda) of 927 million euros, which puts it in line to be able to close the year with a gross profit of 1.2 billion. This business reality has contrasted with the stock market punishment. The explanation must be found in the fact that Grifols has a debt of 9,000 million due to the aggressive purchasing policy it has followed in recent years and which led it to also buy Biotest for 1,400 million in the midst of a pandemic.
The debt it has is considered high and that’s why when the drums of interest rate hikes, which make debt more expensive, began to sound, the stock market penalized it. Grifols’ decision to freeze the dividend payment intensified the fall in the share price. And the algorithms that govern the investment world are clear: if rates rise and a company is heavily indebted, it must be sold. This logic ignored data such as the fact that Grifols does not have the first maturity until 2025 and that the majority of the debt, 65%, is at a fixed rate. It is this reality that Grifols has been facing for months and that is why the recent improvement in inflation has changed the trend.
During this stock exchange viacrucis, at the beginning of October the family company made the historic decision to place Steven F. Meyer as executive chairman of the company, above the two co-CEOs of the family: Raimon Grífols Roura and Víctor Grífols Deu. This rally did not mark a turning point in the share price, but of late there has been an improvement. This Friday, Grifols shares were at 9.73 euros and the upward trend was evident. A market source smiles at this sudden improvement: “The company has not changed; the environment has changed”.
Plans a curt termini
The analysts consulted by the ARA predict that the company’s short-term future will see two important milestones. On the one hand, according to the forecasts of the sector, the pharmaceutical industry will carry out a workforce reduction in line with what has happened in recent years. It should be remembered that in 2019 Grifols had more than 24,000 workers, but at the end of 2021 it had fewer than 23,000. It should be remembered that Grifols has always retained all of its staff in the purchases it has made, which is unusual in the corporate world. This adjustment, which is taken for granted, would affect the group worldwide.
It is taken for granted that Grifols will cut staff in the coming weeks
The other big element that has hovered over the Grífols company is the eventual sale of a subsidiary to ease its financial position. But everything suggests that it will not be the path chosen by a company that has resigned in recent months to see how its businesses separately have a higher value than what the stock market gives it. Thus, the analysts consulted by this newspaper predict that Grifols will allow the entry of a partner in one of its businesses in the world, without this entailing losing control or detaching from it. It should be remembered that Grifols has a very important part of its market in the United States and that one of the jewels of its business is in China, where it works with a local partner.