Ladies and gentlemen, welcome and thank you for joining Eurofins 's nine-month 2025 trading session. We hope that this call is being recorded and will later be available for replay on the Eurofins Investor Relations website. Throughout today's presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by the pound key on your phone to register for questions. For operator assistance, please press the star key followed by zero. During this call, Eurofins management may make forward-looking statements including, but not limited to, statements with respect to outlook and the related assumptions. Management will also discuss alternative performance measures such as organic growth and EBITDA, which are defined in the footnotes of our press releases. Actual results may differ materially from objectives discussed.
Risks and uncertainties that may affect Eurofins Scientific SE's future results include, but are not limited to, those described in the risk factors section of the most recent Eurofins annual and half-year reports. Please also read the disclaimer on page two of this presentation, subject to which this call and Q&A session are made. I would now like to turn the conference over to Dr. Gilles Martin, Eurofins CEO. Please go ahead.
Hello, everybody. Thank you for joining our quarterly call. We have posted a small presentation for those who are interested. I will refer to some of those slides. We'll start on slide three. I'm happy to report on a good quarter, which is in line with our plans. We've made good progress on all our initiatives. As you know, we are in the middle of our five-year plan to build a world-class network of laboratories in our core market. We continue to build laboratories to finalize our hub-and-spoke network. This is continuing to make good progress. We will be, over the next few quarters, finalizing a number of labs, for example, in CDMO, in our large campus in Toronto, in Canada, in Leiden, in the Netherlands for our BPT. We're expanding our Lancaster campus. We see a strong outlook overall for the next few years.
Of course, some parts of BioPharma have been a bit soft following the COVID peak, but we are bullish about their future expansion. We are getting ready for that. The other big areas where we are investing are our digitalization programs, where we aim at standardizing all the digital solutions for. We are also making good progress on that. We plan to complete this by 2027, which would make us much more efficient, leaner, faster, and differentiate further the level of service we can offer to our clients compared to what our competition is doing. This is also making good progress. When it will be finalized, we will have also a reduction of cost in addition to the benefits we will get operationally from those systems. Throughout the course of this year, things are developing as planned. We have a solid margin progress as planned.
Overall, we are looking forward to delivering on our objectives for this year when we report in the beginning of 2026. Overall, things are in line. We can give a bit more color during questions if you want. The different segments are growing in line with the previous quarters. We have a very significant base effect that is going to flip in Q4 of this year, as we announced, because we had a number of activities that we have in our ancillary BioPharma activities, especially the clinical areas, our central lab, our bioanalysis, where very significant studies ended in Q3 of last year. We have that in the base until this quarter. Next quarter, this should fade away. We also have a similar effect in pricing reduction in the French routine clinical business that will also fade in Q4. We are looking forward to a strong Q4.
The rest of our business is developing well. We continue to acquire businesses. In actuality, we are a bit above our objectives for this year. We will continue over the next few years to add about EUR 250 million revenues each year from acquisition. We continue our startup programs. We have opened a number of startups and blood collection points. Blood collection points is because we find the cost of that is more attractive than buying existing businesses. We are, of course, reviewing constantly our portfolio of businesses and may make some decisions on some limited divestments of non-core assets. This is something we are working on and evaluating. On page seven, we have a summary of how we see the outlook. We simply confirm the objectives we set at the beginning of this year.
Of course, we've had a little bit of dilution for the SYNLAB, but there also, the restructuring is going as planned. We will remove significant costs in the last quarter of this year and the beginning of next year. We, of course, incur some costs for that, and it creates some dilution. This dilution will fade in 2026 and 2027. We believe we will create a lot of value with this acquisition and to the company we already had in Spain in clinical diagnostics. I'm happy to report that this is developing as planned. We have a small FX effect. Of course, nobody can predict the FX, and it could go the other way at some point. Nobody really knows.
Since it seems that the US dollar-to-euro exchange rate is stabilizing somehow at the current level, we gave an indication of what the impact on the full-year result of Eurofins would be. As you can see, it is not much. The type of margin improvement we can do in our operational business is many times this impact. We are confident that this will not affect our objectives for 2027 and our objectives for this year. Overall, things are progressing as planned. It's a lot of work. We are making our business even more competitive, even more effective. We are very bullish for what we will achieve over the next two years and beyond as we enter a phase where we are much more cash flow generative. We own our buildings. We will have also less cash to spend for those buildings because we know them.
We are very bullish with the cash we will generate. We continue to take opportunity of basically undervaluation, what we believe is undervaluation of our shares, to buy back within the range of our leverage commitment, which we intend to keep between 1.5 and 2.5 since we generate a lot of cash and we think we'll generate a lot more cash. We have quite a bit of headroom for that in addition to potential asset divestments if we see opportunities for things that are not necessarily 100% fit for what we do. This is an overview of the progress of the business. Laurent and I will be happy to answer questions if you have some.
Thank you. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. Thank you. Our first question today is coming from Suhasini Varanasi with Goldman Sachs. Your line is live.
Hi. Good afternoon. Thank you for taking my questions. Two from me, please. Can you maybe share a little more color on the declines that you saw in discovery genomics and ancillary revenues in Q3? In the first half, it was running at - 4% and - 10%, respectively. I just wanted to understand whether the declines have been similar in the third quarter to date, or has it improved? Do you have any idea when this will stabilize? I suppose that's the first part of the question. The second question is on the BioPharma business. I think you mentioned that some large studies were in the base in Q3, which will flip and go away from the base in Q4. Is it possible to give some color on the magnitude of the benefit in the comparatives? Is it like a half a percent, 1% benefit in the comps?
Thank you.
Thank you very much for your question. The genomics, unfortunately, is continuing on the same trend. Also, agroscience . Discovery is more stabilizing. We don't see an explosion, but more a stabilization. I think we will also hit bottom in genomics and agroscience . We don't foresee a continued decline of that order of magnitude in Q4 and especially going in next year. More importantly, we can adjust the cost base to that new level of revenues. Also, the product mix in agro science, for example, there is still stronger demand in some areas like biologics or replacement of chemicals with bioorganic compounds. We refocus some of our teams on the markets that are more growing in this area. We're optimistic that this will stabilize, probably not looking at significant growth for next year, but probably a stabilization.
That will also be a positive because it won't be dilutive on our growth. On discovery, there are some positive outlooks, but like others, we don't see it very much. We're more looking to a stabilization in discovery, so the very early phase, than a restart of significant growth in the next quarter. On BioPharma, our BPT is doing well. It's growing mid-single digit. Where we were hit is we had very large studies in the central lab and the clinical phases that we do in bioanalysis. Those programs ended in Q3 of 2024. They have not restarted yet, but basically, we won't have the base effect next quarter. As to the impact, it is tens of millions of euros. I don't know if it's EUR 10 million, EUR 20 million, EUR 30 million. This is something we, and also if it's per year or per quarter, but it is significant.
We will see it. I don't know if Laurent has a number. No, we don't have it here, but we will. It's a good point. We'll try to publish that with Q4 or give some indication with Q4 on that. It is significant.
Of course, there is the other side. We have signed contracts, and we think there will be a restart of those contracts. As usual, for clinical research, it's difficult to know exactly when our clients will restart, when they will start recruiting at a significant level. We do hope in the course of next year to also see a rebound of growth. We have capacity. We have an efficient central lab or an efficient bioanalytical lab that can support our central lab. We have clients that have selected us and would like to start studies with us. When exactly those studies will start is a question, but they really plan to do it, and they are preparing for it.
Thank you very much.
Thank you. Our next question is coming from James Rowland Clark with Barclays. Your line is live.
Thank you. Just following up on the easing comps in the fourth quarter, beyond the BioPharma Product Testing business, I think you also have easing comps in clinical diagnostics and also in consumer and technologies services. I wondered if you could help quantify what those two could look like as well. On FX, I just wanted to check, would there be any margin dilution from 1.5% headwind on revenue, i.e., is the EBITDA impact larger than that 1.5%, or is it similar? My final question is on Life, which has accelerated in the last two quarters, really good performance in food in particular. Is that now running at what you think is a sustainable rate of growth, or is the environment business being flattered by easier comps and so it actually moderates down a tiny bit in the future? Thank you.
Thank you very much. The clinical business is about, I think, EUR 300 million, and the hit was 8% on an annual basis. You can more or less calculate per quarter, it's EUR 75 million and EUR 5 or EUR 6 or EUR 7 million impact on the French clinical business. What was the second one you mentioned? Excuse me.
Consumer.
Consumer. Oh, consumer. This is a mix of many different things. We had a lot of orders in our microscopy and material science business because of pre-stocking prior to memories and other things and instruments going to China because we also test instruments in the semi-industry. That was a big boost to 2024, and that is easing a little bit. We do hope to see better numbers on that in Q4 and the resumption of growth next year. That was the second one. We lump it in consumer, but that's mostly on this activity. The rest of consumer is going well, actually, surprisingly, considering the economic situation. We don't see that changing very much. Of course, we also have a heavier weight in Asia in that area, and Asia is doing well. The economies in Asia are doing much better than in Europe. That is good.
Life, yes, you know Life is essentially a mid to high single-digit growth business. We've seen that for a long time. What you have to realize also is in the environment, we have seasonal impact. Depending on weather effects, you can have one quarter in Q1, especially, which is a lower quarter. If it snows a lot, if everything's frozen, or if there is a hurricane, or if something happens, that can affect one quarter in the environment more than the other areas, like food. Food is more affected by scandals or contamination events and things like that. Although we are so big now that anything happening in one continent wouldn't so materially affect the whole. The growth in the environment can vary from quarter to quarter without being partly meaningful on an annual basis.
Thank you. Sorry, just on FX, is it safe to assume a 1.5% headwind on EBITDA as well as revenue?
Yeah. We have a slightly higher margin in the U.S. That's why we come on. You know if you can do the math yourself, if you take 2024 and you take the split of margin in the U.S. in North America versus Europe, there is a small dilutive margin effect from if the dollar is lower versus the euro. We've quantified it on a full-year impact. That's probably the same order of magnitude on the quarterly impact that we will see on the margin. This is more than offset by the things we do operationally to, of course, continue to optimize our margins. This program is going well.
Great, thank you very much.
For a strong change in dollar value, the impact of margin, as we calculated, was 0.2% on a full-year basis. We're not talking of huge impact of margins. It's mostly translational. Over time, our margins in Europe should catch up in North America as we finalize all our IT standardization program and also the hub-and-spoke model where we cut duplication across countries in Europe. It shouldn't be that forever we have significantly lower margins in Europe than America. Over time, we've had times where Europe had high margins in North America. We will see how that evolves over the next two or three years.
Great. Thank you.
Thank you. Our next question is coming from Virginia Montorsi with Bank of America. Your line is live.
Hi. Good morning. Thank you very much for taking my questions. I just had two quick ones. One is, could you elaborate a little bit more on how you're thinking about buybacks into the end of the year and next year? Just on the FX impact, at total level, if I think about the 1.6% headwind that you're talking about due to the dollar, would it be fair to assume just a little bit more at group level when I consider all of the currency impacts, or should we think about that differently? Thank you.
Thank you. Yeah. Buybacks, we, you know, it is the best investments we can do at the moment when I compare to M&A, the quality of M&A on the market, what we pay for M&A, companies we don't always know, and more importantly, what others pay for M&A, which usually we pass on because we think it's quite high. In our sector, transactions go for 15x and more, 12 x, depending on the sector. When we can buy Eurofins at 8x or 9x, or depending on what year you look at, we think it's a bargain. Of course, we have a leverage range we want to respect. We will respect that. That still leaves a lot of headroom as our EBITDA is growing, and it's growing every year. On top of that, we generate a lot of cash.
Our investment in buildings, this will also at some point ease out because at some point, we will have the hub-and-spoke network where we're very far along. That will generate more cash. Additionally, you know if things stay completely abnormal as they are now, we could sell a significant asset and use that cash to buy back even more share or to reduce leverage. We have a number of options, which means we can continue to do buyback opportunistically and maybe going forward more massively if things continue, maybe not short term, for the rest of this year anyway. As to FX, it's the same thing. It's all mostly translational. We have a slightly higher, so on your 1.6% was for the dollar. As we pointed out on the top line, on the top line, the dollar represents about 70% of the FX effect.
The FX effects on other currencies, since the margin is similar to our average group margin in the rest of the world or in the areas covered by the other currencies, that wouldn't necessarily impact the margin. That's the indication we can give on that level.
Okay, thank you very much. Very clear.
Thank you. Our next question is coming from Arthur Truslove with Citi. Your line is live.
Thank you very much for taking my questions, please. A couple if I may. The first one, just on the organic growth guidance, obviously, mid-single digit you're talking to. My guess would be that that means at least +4%. Can you confirm whether that relates to organic growth adjusted for working days or not adjusted? I guess at nine months, that's whether it's 3.3% or 4% that would be the reference point. Second question, I don't think it was in the release, but are you able to say how much revenue you've acquired so far this year in terms of deals that you've done and also how much you've paid for it? I guess just on capital allocation as well, you mentioned in response to a prior question that you could potentially sell a major asset. In what circumstances do you think you would actually do that? Thank you.
Thank you. Yeah. The organic growth guidance is adjusted for working days, but it doesn't mean we can't exceed it. We will see, as I mentioned, the comps should help us in Q4 significantly. Our business is doing well. We see some acceleration in some areas. We will see what Q4 brings. More importantly, whether our growth is 7%, 6%, 5%, 4%, we will improve margins, and we will improve profits overproportionately. More and more as we advance through our digitalization and network expansion program. We've shown that with less growth than our secular growth targets, we can improve margins significantly. We showed that last year. We showed that in the first half of this year. We will show it again in the second half of this year, we believe. That's on that.
Also, on organic growth, if you look at one quarter, I've heard people saying, "Oh, yes, but the BioPharma organic growth in Q3 is slightly lower." We're talking a very small number. BioPharma is EUR 500 million. In Q3 of last year, in 2024, there was one building of our CDMO in Canada that started working that added EUR 4 million to our revenues. That is 0.8% of the BioPharma. Of course, that is now included in the comps because it started in Q3 of last year, of 2024. One should not draw things over, conclude on things that are very small. There are very small numbers we're talking about. We don't see any change of trend. Maybe there was this single event that can confuse some people.
Overall, we see the evolution in BioPharma as we described with the BioPharma Product Testing doing very well, the CDMO doing very well, and the ancillary activities staying soft and having a base effect for the clinical with studies that ended in Q3 of last year. Overall, we are very confident with our objectives for the rest of the year and on the organic growth level and even more on the margin level. Acquired revenues, I don't think we have published that. We will look for it. It's nothing extraordinary in Q3. We published a number of small acquisitions or we did a number of small acquisitions.
In each one, it was EUR 210 million on a full-year basis. It's going to be EUR 10 million, EUR 20 million more for Q3.
For the revenues.
Yeah, for the revenues on a full-year basis.
We didn't do any large deal in Q3. We do mostly small bolt-ons because we focus on finalizing our hub-and-spoke network. The capital allocation, you know, this will be, if we ever sell assets, it will be mostly opportunistic. If we see an asset that potentially is not 100% fit with our plans and where maybe we will not become number one in the world in that area, we might consider exiting that asset if we get a really good price for it. I think that would be it. We arbitrage with the buying of our shares. I don't know how long this undervaluation, in our opinion, will continue. We think it is quite massive. Of course, the market is always right. We will opportunistically arbitrate if we need to. Of course, those things are done confidentially. There will be no warning. If we do a deal, we'll announce it when it's signed.
Thank you very much.
Thank you. As a reminder, ladies and gentlemen, if you do have any questions today, you may press star followed by one on your telephone keypad. Our next question is coming from Allen Wells with Jefferies. Your line is live.
Hey. Good afternoon, Gilles. A couple for me, just a clarification question off Suhasini 's question from the start. I just really want to understand the sequential change in pharma growth. It looks obviously like sequentially pharma overall growth was weaker in Q3 versus Q2 by at least 110 basis points. It also looks like the comp was easier as well. As you say, there's some trialing that starts to drop out in Q3. In your commentary at the start, you talked about genomics and agro science was weak but kind of at the bottom. Ancillary was kind of stable, maybe getting a little bit better. Discovery was stable. I'm just trying to understand what's actually got worse in Q3 versus Q2 to drive that sequential weakness. That's my first question.
Secondly, just maybe which could also answer some of it as well, is regionally, I just wanted to understand what was going on in North America. Again, sequentially, it's been a good region for you, but sequentially looks weaker by a kind of 40 basis points in Q3 versus Q2 against an easier comp. It's 100 basis points of decline in North America. Are there particular moving parts in particular pharma, or is it food that's driving that North America slowdown as well? Just pharma in North America for me, please. Thank you.
Your first question was cut off. I'm not sure I understand what you said. I don't see a 110 basis point going down anywhere. I don't really understand your numbers. Do you mind rephrasing?
Yeah, sorry. If I just look at the Q2 growth, at least in my headline numbers, working day job reported was 1.5% ish, 1.4%, 1.5% in Q2. Pharma looks like 0.4 % in Q3. That looks like 100, 110 basis points of decline. Sequentially, maybe that number's wrong, but it looks like pharma got sequentially weaker in Q2 versus Q3. Yet the commentary around genomics, agro science, discovery all feels like it's weak but stable. Something must have got worse in Q3 versus Q2, unless I'm misunderstanding the numbers here.
Yeah. No, I was commenting on that earlier. You know we have, for example, in Q3 of 2024, we had one unit of our new CDMO building in Canada that started. That added 0.8% to the pharma in Q4 of 2024. Of course, that's a base effect for this quarter because this unit is growing, but it's not growing at the same order of magnitude, so doubling in size or whatever. Those are the kind of effects you can have from one quarter to the next, which don't mean anything. That's basically this question. On the other aspects, I'm not sure. I think I answered already about the different components that we think, the agro science and part of the agro science, actually. Agro science and genomics are still down and still down meaningfully, but we think they will bottom up in the relatively near future.
We are adjusting the cost to the level where they are, while discovery is soft, but we see the outlook more positive and looking for a stabilization. It's not significantly down. I think that's the comments I gave. As to the clinical part of BioPharma, we had very large studies that ended at the end of Q3 of 2024. Therefore, we had still a significant amount of revenues in Q3 of 2024, which are not there in Q3 of 2025. When we go in Q4 of 2025, the comps will, of course, not include those revenues because those studies ended in Q3 of 2024. I think that's what I said earlier.
Thank you. Just on North America, the change sequentially, what's driving the slightly slower North America growth?
I don't think there is any meaningful explanation other than the one I gave, or BioPharma is bigger in North America. The CDMO is a North America effect that happened in Q3. That was a big plus in Q3 2024. I don't think there is anything meaningful in North America going one way or another that I could extrapolate anyway, any particular way. Frankly, I think, of course, there is not a lot of data in a quarterly release. Maybe it gets overanalyzed and over-extrapolated over 2,000 quarters, a trend of one quarter. That is, of course, possible. Our view from inside is everything is evolving as planned. We think we will achieve or exceed our objectives for this year. We're bullish about the evolution for next year and the achievement of our 2027 objectives.
Okay, thank you.
Thank you. This is all the time we have for today's question-and-answer session. We would like to turn the call back over to Dr. Gilles Martin for any closing remarks.
Right. Thank you, everybody, for your questions. Of course, we are available offline for more questions. Laurent or myself at investors' conferences will be holding one investors' meeting in Hamburg later this week on Friday. We will also be holding an investors' meeting in Lancaster. That will give you the opportunity to meet our leaders who lead our different business lines and ask more questions. They are definitely more competent to give you views about how they see the future in details in their business lines. Overall, we have done a lot internally to improve our business, improve our efficiency. We are continuing to do that. That makes us very bullish about how well we will do in a sector that's very resilient, that's not too affected by the economic cycles. We build very, for our market, what are extraordinary efficiencies.
That should help us in the end stages of the consolidation of this market. We think our competitive advantage in the market can only improve, will improve, and will be more and more appreciated by clients, which will lead to market share gains that are also an important part of the growth that we see going forward. That concludes this call. Looking forward to meeting some of you in person on Friday and in November in America. Thank you very much.
Thank you. Ladies and gentlemen, the call is now concluded. You may disconnect your telephone. Thank you for joining and have a pleasant day.