Earnings call: West Pharmaceutical Services outlines Q3 2024 results By Investing.com

In the quarter of 2024 West Pharmaceutical Services reported a slight decrease in organic sales but raised its annual forecasts for net sales and adjusted diluted EPS numbers.The companys net sales totaled $746.nine million with a 0.five percent drop compared to the quarter last year.Adjusted diluted EPS saw a decline of 14.four percent due to production volumes and shifts, in product mix.

Our leadership team remains optimistic about our firms position in the biologics field despite the challenges we face and anticipates improvements in the quarter particularly regarding wearable self injection devices​. Furthermore​ the company sees growth opportunities ahead, in the injectables sector despite the current challenging environment we are operating in​.

West Pharmaceutical Services is dedicated to expanding its manufacturing capabilities and improving efficiency by investing in facilities like the Phoenix site for SmartDose and continuously upgrading the Nova brand products to fuel growth prospects for the company. With expectations of a stabilized market demand and a shift back to destocking patterns West Pharmaceutical Services is ready to build momentum in growth and establish a foothold, in the pharmaceutical and biologics sectors.

West Pharmaceutical Services Inc., which is also known as (I apologize for shortening the name) has demonstrated resilience in the market recently based on some InvestingPro data I read recently. Despite facing setbacks in their sales and adjusted diluted EPS not long ago (that's unfortunate) the company maintains a market capitalization of around $24 billion. It appears investors are feeling optimistic about the companys direction, in the long term!

InvestPro data reveals that WST garnered $876 million in revenue during the Q of 2024 period—closely align, with the companys revised projection of $875 million to $905 million—an indication that managements forecasts closely mirror present performance trends.

According to a tip from InvestingPro, its highlighted that West Pharmaceuticals Services (WST) has been paying dividends without fail for 52 years – demonstrating the companys resilience and commitment to appreciating its investors trust over time.This accomplishment holds importance considering the challenges, in the market and mirrors the companys view on the future potential of the injectables market.

John Sweeney warmly welcomes everyone to Wests quarter 2024 conference call this morning as he delves into the latest financial results now up on westpharma.com for investors to check out and analyze later in the day during the call where they will discuss financial performance and business updates while providing an overview of the full year ahead in 2024. Todays call features a slide presentation that's conveniently available in the Investors section of our website, for easy reference. In the slide of our presentation deck you'll find our Safe Harbor statements which are where our management lays out forward looking statements that adhere to US Federal Securities Laws.These statements represent our beliefs and assumptions and are grounded in present expectations and forecasts.The future performance of our company is influenced by factors that are, outside of our direct influence. The results in the future could differ from what was predicted or mentioned here Please refer to todays press release as wells as other updates, from the company regarding the potential risks it is encountering including our 10 K and 10 Q reports.

Eric Green showed his appreciation to John. Greeted everyone with a friendly "good morning." He acknowledged the involvement of all attendees in the meeting and took a moment to share their thoughts and solidarity with team members and communities affected by recent hurricanes and severe weather conditions. To ensure the safety of team members of Hurricane Miltons arrival, in Florida the manufacturing site was closed as a precautionary measure before the storm struck. I want to express my thanks to the team members who were affected by the storm – they truly embody the essence of our One West culture so beautifully! While our St.Pete facility was luckily untouched by the storms wrath many of our team members endured challenges during this time. Their commitment and diligence ensured that West continued to provide service to our customers without any disruptions. Now lets turn our attention to slide 5 and delve into the performance of Q3. We experienced a quarter where both revenues and adjusted EPS exceeded our expectations landing towards the upper end of the range. Our global team is performing across different regions due to our dedication to improving the health of patients worldwide.Our success in the quarter is a result of our efficient strategies and close collaboration with our clients that allowed us to meet their needs promptly and sometimes ahead of schedule.After a Q3 performance we are increasing our earnings, per share forecast for the entire year. This experience boosts my confidence in Wests capability to successfully handle tasks as we follow a market driven strategy with exciting long term growth prospects ahead. To proceed to slide 6; West is actively involved in the field of biologics—a growing sector within injectables—not only for current medications but also for upcoming drug launches where our participation rate remains consistently strong. Our HVP components target areas such, as immunology,cancer research,rare diseases and obesity. In the three months we expect advancements in biologic products driven by the increasing use of wearable self injection devices to improve our market position and growth at West thanks to our skilled scientific and technical teams expertise guiding us in adjusting to evolving requirements in development and regulations to cater to customer demands effectively as a trusted provider of safe medication by engaging in meaningful discussions, with customers during key industry gatherings. At the CPHI Worldwide Conference presentation conducted by our specialists from the West region discussing contamination control strategies in primary packaging as outlined in the EU GMP Annex 1 guidelines emphasized the significance of using high quality materials from external suppliers in a pharmaceutical companys overall approach, to mitigating contamination risks and maintaining product safety and effectiveness.We believe strongly in our ability to leverage our HPP capabilities to effectively meet the demands of our customers pipeline. Lately we've seen some progress in our long term growth initiatives – in the areas of GLP 1 and serving our dedicated customers over time.With our market presence and unique product offerings coupled with continuous success we are actively allocating resources to enhance our capabilities and capitalize on new opportunities.We are also making strides in rampin up the production of HVP delivery devices. During the quarter there was a noticeable increase in the adoption of, on body self injection devices, driven by a combination of higher funding and improved operational efficiency resulting from implementing a new production line setup strategy. We anticipate this trend to continue in the quarter as we implement our growth plans.We have taken steps to boost profitability by optimizing our manufacturing procedures through automation and expanding to serve our customers demands. Lets now talk about reducing inventory since its still a worry for our customers. We're starting to see some changes in our business situation. From speaking with customers we've observed a shift as some are thinking about ordering more soon. This progress gives us hope that we're getting closer, to a turning point in the trend of decreasing inventory. "We expect to notice indications of a return to the state in our pharmaceutical sector as we see favorable developments in biologics due to the rise and distribution of devices and a ongoing decrease, in inventory levels; some generic clients are projected to remain until 2025 " said one individual prompting Bernard to take the call next.

Bernard Birkett begins by thanking Eric and wishing him a morning before diving into a thorough review of the numbers for Q4 2024 revenues and profits discussion points include a minor decline in organic sales in the single digits as well as decreased operating profits and diluted EPS compared to the same quarter in 2022 In addition he will discuss the factors impacting sales and margins for the quarter as well as key highlights, from the balance sheet Finally he will provide an update on the 2024 guidance Lets kick off with the Q4 updates! Our financial results can be found in slide 7 while the specifics of non US GAAP metrics are outlined in slides 16 to 20.The total net sales stood at $746 million with a decrease of 0.Five percent in sales.If we look at slide number 8 there was a dip of percent in organic net sales, for our products this quarter. In the quarter most of our top quality items sold in house saw a drop of about 75% mainly because there was less stock of FluroTec and other popular brands such as Nova and Westar available at that time. On the side sales of our medical devices went up during this timeframe. After looking into how each market segment performed it's clear that the pharmaceutical sector had a boost in sales thanks to a surge in demand, for Nova products and management systems. The biologics market experienced a drop in sales numbers due to lower inventory levels of FluroTec and NovaPure products as well as the reduced demand for our drug delivery devices which was somewhat balanced by increased sales volumes of our other products like Nova brand items in the generics market sector.The revenue, from our contract manufacturing division remained steady compared to the period last year when accounting for currency fluctuations. During this quarter our profit margin decreased by 270 basis points to 21%. The diluted earnings per share also saw a 14% drop in adjusted figures. Excluding the tax benefits related to stock based compensation the EPS showed a decline of 10%. Now lets examine the factors that impacted both our revenue and profit performance as illustrated on slide number nine highlighting the contributors to the decrease in sales, for this quarter. In the quarter the sales revenue went up by $34 million thanks to price hikes and a positive impact from exchange rates of about $3 million.The increase in sales also involved a $19 million incentive for customers who reached their volume goals.On the side there was a decrease in sales volume due to customer inventory tactics and a shift towards preferring drug delivery devices, over HVP components based on customer preferences. According to the analysis on slide 10 regarding profit margins in the quarter of 2024 compared to the same period in 2023 shows a combined profit margin of 35.4% as opposed to 38.6% previously recorded for that years third quarter period. The gross profit margin for products in the third quarter was at 39.2%, which is a decrease of four hundred and twenty basis points, from the margin reported in the prior years third quarter. The decline in profits from our products is due to a decrease in the production volumes of our profitable HVP components and a shift towards lower margin drug delivery devices, a pattern we expect to see progress as automation processes become increasingly efficient, over time. Even though these margin reductions were somewhat counterbalanced by selling prices that involved customer incentives as noted above. During the quarter of handling contract manufacturing operations we observed a profit margin of 19% showing a 1 point increase from the previous year in 2023 due to the implementation of improved production efficiencies. Now lets verify our statement and evaluate our success in generating funds, for the companys operations by referring to slide 11 which presents cash flow indicators for our review. Our cash flow for the nine months ending in September 2024 was $463 million showing a decrease of $74 million compared to the period last year—a decline of 13%. This drop was mainly due to our performance not being as favorable as expected. During this quarter far we have invested $272 million in capital projects which is $18 million higher than last year, at this time! This investment is geared towards increasing the production of products and expanding our contract manufacturing capability. Our available funds amounted to 34 billion dollars as of September 30th this year showing a decrease of 230 million dollars from the years end on December 31st. This decline was primarily due to a reduction in our cash reserves. As of September 30th this year we held 490 million dollars in cash reserves. A decrease of 363 million dollars from what we had at the close of December, in 2023. The reduction in funds primarily occurred as a result of our $506 million share buyback initiative with our asset expenditures offset by the revenue generated from our business operations. Regarding the forecast presented on slide 12 it offers a glimpse into what lies for us. We have adjusted our projected sales figures for the year of 2024 to range between $2875 million and $2905 million up from the initial estimate of $2870 million to $2900 million reflecting fluctuations, in currency exchange rates. It is anticipated that there will be a $1 million foreign exchange challenge, in 2024 considering the prevailing currency rates. We expect a decrease in sales of approximately 1.5% to 2% in the upcoming period. The adjusted diluted EPS projections for 2024 have been revised to fall within the range of $6.55 to $6.75 compared to the earlier estimate range of $6.35 to $6.65. Our guidance for capital expenditures (CapEx) remains consistent at $375 million with no changes, from guidelines. There are some points I want you to focus on while following our guidelines​ In our projection for the entire year 2024 adjusted diluted EPS range we've taken into account an FX headwind of $0 02 compared to last years figures, slightly lower, than our initial projection of $0 03 headwind​ The updated forecast also includes an EPS of $26 linked to tax advantages from stock based compensation in the nine months of 2024​Please be aware that our advice does not cover any tax advantages related to stock based compensation schemes. Now I'll pass the call over to Eric.