Azelis stock falls despite steady earnings

Investing.com -- Shares of Azelis dropped 1% today after the company reported its full-year 2024 results, which showed a modest year-on-year (YoY) revenue growth of 1.5%.

Despite the increase in revenue to €4,214 million, the market reacted negatively to the company’s performance, which included a slight organic decline offset by contributions from mergers and acquisitions (M&A) and foreign exchange (FX) headwinds.

The fourth quarter (Q4) revenue growth of 4.3% was primarily driven by organic growth and M&A, but was slightly below the third quarter’s (Q3) organic growth rate due to seasonal factors and some order shifts in the EMEA region into the first quarter.

The strongest organic growth in Q4 came from the US at 5.6%, supported by the Life Sciences sector, while the EMEA region remained relatively flat and the APAC region saw a decline, with weaker industrial growth in China.

For the full year, the Life Sciences and Industrial Chemicals sectors reported total growth of 3.4% and -1.7%, respectively. Adjusted operating profit saw a marginal increase of approximately 1% YoY to €471 million, slightly ahead of consensus, with a steady margin of 11.2%.

Gross profit rose by 5% YoY to €1,031 million, which was also slightly above consensus. However, the conversion margin decreased by 170 basis points YoY to 45.7%.

Azelis’ leverage increased to 2.9 times compared to 2.7 times in June and 2.5 times in December 2023, partly due to deferred payments for past acquisitions. Free cash flow (FCF) conversion was lower because of higher working capital investments, driven by positive developments in the order book.

In their outlook, Azelis did not provide specific financial guidance but noted that a recovery is underway, with market sentiment gradually improving. The company also indicated a positive trend in the business, as seen in the order book since the beginning of the year. Analysts currently expect a 4.5% organic revenue growth for FY25, with an operating gross profit of €1,083 million and an operating profit of €509 million, reflecting a margin of 11.3% and a conversion margin of 47.0%.

Morgan Stanley (NYSE:MS) commented on the results, stating that the company delivered "a solid print," which suggests that while the results met some expectations, the market may have anticipated stronger signals of growth or profitability improvements.

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