Grifols' shares tumble as restructuring costs hit annual profit

BARCELONA (Reuters) -Shares of Grifols dropped almost 10% on Thursday after the drugmaker reported a 72% plunge in 2023 profit due to restructuring costs and rising expenses, though it said it cut its debt ratio and was on track to reduce it further.

Grifols, which produces drugs made with blood plasma, posted profit of 59 million euros ($64 million), down from 208 million euros the prior year. Analysts polled by LSEG had expected profit of 162 million euros.

The results are the first since a report by hedge fund Gotham City Research published on Jan. 9 that questioned the drugmaker's accounting and debt ratio wiped $3.8 billion off its market value.

Grifols dismissed the report, insisting its data was correct and initiated legal proceedings against Gotham City.

The company said on Thursday its leverage ratio fell to 6.3 times EBITDA (earnings before interest, taxes, depreciation and amortisation) at the end of 2023 from 6.7 times in the third quarter.

This would fall to 5.4 times EBITDA using funds from the $1.8 billion sale of its stake in Shanghai RAAS Blood Products which is expected to close in the first half of 2024, it said, adding it was on track to meet a target of four times EBITDA.

Its shares were down 9.9% in late morning trading in Madrid. JPMorgan analysts said the fall may have been triggered by Grifols revealing the results were not yet audited although it expects an opinion from KPMG by March 8.

"We believe Grifols accounts are normally signed off ahead of publication," it wrote.

Broker XTB also said that Grifols' free cash flow was negative for a second consecutive year, adding it would struggle to cut debt if it did not generate more cash.

Since the publication of the Gotham City report on Jan. 9, Grifols' shares have fallen 18%.

The hedge fund's report capped four tumultuous years for the Barcelona-based company as the COVID-19 pandemic severely hit its capacity to collect plasma, prompting the market to focus on Grifols' debt. The company has since then overhauled its management team and sought to reduce debt and costs.

Grifols acknowledged in its results statement the impact of the report.

"Although the company's fundamentals remain sound and unchanged and all financial information was duly reported in the audited financial statements, this action had a significant impact on Grifols' share price and corporate reputation," it said, adding it was working to restore confidence.

The company expects 7% revenue growth this year and adjusted EBITDA to reach 1.8 billion euros ($1.95 billion), when excluding currency swings, from 1.5 billion euros last year.

($1 = 0.9219 euros)

(Reporting by Joan Faus; additional reporting by Jesús Aguado and Tiago Brandao; Editing by Inti Landauro and Emelia Sithole-Matarise)

By Joan Faus