Grifols S A : Full year 2022 – Conference call transcript

Grifols

Full Year 2022 Results Webcast

28th February 2023

Speakers

Nuria Pascual, VP, Corporate Treasury & IR & Sustainability Thomas Glanzmann, Executive Chairman

Victor Grifols Deu, Co-CEO

Alfredo Arroyo, CFO

Raimon Grifols, Co-CEO

Questions From

Peter Verdult, Citi

Rosie Turner, Jefferies

Elizabeth Walton, Credit Suisse

Tom Jones, Berenberg

James Gordon, JP Morgan

Guilherme Sampaio, CaixaBank Equities

Jaime Escribano, Banco Santander

Thibault Boutherin, Morgan Stanley

Charles Pitman, Barclays

Álvaro Lenze, Alantra Equities Juan Ros, ODDO BHF

Nuria Pascual, VP, Corporate Treasury & IR & Sustainability

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. If you want to book a question press star followed by 5 when the session begins. We will kindly ask you to limit your questions to a maximum of two.

As a reminder, this call is being recorded. 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 statements disclaimer on slide two 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 the statements.

With that, I would like to turn the call over to Thomas.

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Thomas Glanzmann, Executive Chairman

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 contributions he made over the past months and 12 years as 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 have 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 diagnostic industries since the late 1980s and I have been a CEO of plasma, biologics, renal and diagnostics companies during my career. In the past years my

focus has been on investing in startup 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 restructuring.

I want to recognize and thank Steve, the CEOs and Alfredo for making the plans and addressing our challenges head on with tough but needed measures and clear priorities to ensure that we again find ourselves on a winning path.

In our presentation we will update you on the progress and outlook which I personally think is very encouraging although we as a Leadership team recognize that we clearly still have work to do and be assured it will happen and it will get done.

I am committed with the CEOs and Alfredo to stay the course on all the plans, priorities, and measures that we have announced and that currently are being implemented. There is no way back and as you will see in our presentation we are visibly committing to targets and numbers associated with the announced measures.

I would also like to spell it out once again and this is very important, that we are laser focused on deleveraging the company with both improved operating measures and evaluating broader corporate initiatives, which we expect to complete in 2023. Together with the CEOs and Alfredo we will be monitoring our progress on a weekly basis and if necessary, undertake immediate course corrections to ensure we deliver on our objectives.

I am also committed to keep the open communication with you and we, as a team, will, as promised, be updating you regularly on our announced quarterly calls of the business on financial status and progress.

Finally, I want to reiterate, and again this is very important that the Board, which initiated and has guided the creation of the operational improvement plan, continues to be in full support of executing the plans and measures that we have announced recently.

I know that Alfredo, Nuria, Dani and the investor team will continue to address questions you have in between our calls, and I will personally meet a number of you as I on occasion will travel with our Investor team.

As you can hear. we are committed to a seamless transition and optimistic about the future. I am excited to work with Victor, Raimon, Alfredo and the entire Grifols team to make sure that we deliver on our commitments to all our constituents.

Let us now turn to our presentation that I will share with Victor and Alfredo and then we will be happy to take your questions.

So let me start with an overview of our focus areas and Grifols full year 2022 annual results, which we show you on slide four.

2022 was a pivotal year for Grifols and I want to give a lot of credit to the entire Grifols team. We set clear action priorities and took important steps to improve the company's performance. Today we are executing on these priorities.

Over the last months, we have been focused on building an organization with a performance culture that is more efficient, effective, agile, and decisive.

With that in mind we have taken measures to become leaner and more cost-effective which, combined with strengthened financial discipline and cost control, will drive margin expansion.

On February 15th this year, the company also announced an operational improvement plan that will generate €400m in annualized cash cost savings. This initiative, which already is underway and in the implementation phase, will reinforce Grifols competitiveness, reduce the global cost base, and enhance organizational accountability, efficiency, and effectiveness.

Once we have fully executed this Plan which was initiated, endorsed, and now closely tracked by the Board, we will have a solid foundation for profitable future growth.

This Plan is supported by a commitment to invest in our talent through the implementation of new and improved short- and long-term incentive plans, which we are about to roll out.

At the same time, a key priority is the implementation of aggressive measures to increase operating cash flow and reduce our debt. As previously stated, the company continues to evaluate potential transactional opportunities and is committed to reduce our leverage in 2023.

As we focus on our commercial and innovation priorities, we continue to see significant opportunities for our high margin AlphaOne product, Prolastin, and our subcutaneous IG product, Xembify.

In addition, a significant effort is going in to accelerating the approval, and preparation for a successful launch and commercialization of the new Biotest proteins. These proteins, once launched, are expected to have a substantial positive impact on Grifols' financial profile in the coming years. Bringing these products to market with the Biotest team is a key part of our ongoing integration of Biotest.

Let me now turn to slide five on our 2022 performance.