Business context and reporting period
Grifols, S.A. filed this Form 20-F for the fiscal year ended December 31, 2021; it is an annual report, not a standalone fourth-quarter filing. The Spanish healthcare group makes plasma-derived medicines and operates diagnostic, hospital and biological-supplies businesses. Financial statements are prepared under IFRS as issued by the IASB. Amounts below are euros unless otherwise stated.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Net revenue | €4,933.1 million | €5,340.0 million |
| Gross margin | €1,962.6 million; 39.8% | €2,255.2 million; 42.2% |
| Operating result | €595.1 million | €996.1 million |
| Profit for the year | €265.3 million | €709.0 million |
| Profit attributable to Grifols shareholders | €188.7 million | €618.5 million |
| Basic and diluted EPS | €0.28 | €0.90 |
| Net cash from operating activities | €597.0 million | €1,110.3 million |
| Net cash used in investing activities | €854.1 million | €858.1 million |
| Net cash from/(used in) financing activities | €2,297.7 million | (€354.4 million) |
Revenue fell 7.6% as reported, or 3.7% in constant currency. Cost of sales was 60.2% of revenue, versus 57.8% in 2020. Research and development expense was €354.9 million, up 20.6%, and selling, general and administrative expense was €1,061.5 million, up 7.7%.
At year-end, cash and cash equivalents on the balance sheet were €655.5 million. The cash-flow statement reports €2,675.6 million, including €2,020.1 million of restricted cash held in escrow for the planned Biotest acquisition. Current and non-current financial liabilities totaled €10,207.2 million (€2,438.3 million current and €7,769.0 million non-current). Grifols reported €622.0 million of available capacity under debt agreements, including €534.4 million under its revolving facility. The filing does not provide a single net-debt figure in the supplied text.
Material changes versus the prior comparable period
- Revenue declined primarily because COVID-19-related plasma collection constraints reduced Bioscience and IVIG sales. Bioscience revenue fell 10.1% reported; Diagnostic revenue was broadly stable, while Hospital revenue rose 19.0%.
- Operating result fell 40.3% and profit attributable to Grifols shareholders fell from €618.5 million to €188.7 million. Higher plasma costs and lower fixed-cost absorption pressured margins; finance costs also increased.
- Operating cash flow decreased to €597.0 million from €1,110.3 million, while inventory increased by €157.5 million. Inventory turnover rose to 278 days from 237 days.
- Grifols sold minority interests in its U.S. Biomat plasma-collection group to GIC for $990 million. Proceeds were used in part to repay revolving and term loans and repurchase notes.
- Grifols issued €1.4 billion of euro notes and $705 million of dollar notes in October 2021 to fund the planned Biotest transaction. The proceeds remained restricted in escrow at year-end; the acquisition closed in April 2022.
Outlook, risks and unusual items
- Management said plasma collections began recovering as vaccination expanded and restrictions eased, but the timing and pace of further recovery remained uncertain. Plasma collection was down 4% in 2021 versus 2020, despite improvement late in the year.
- The company cited a €1.4 billion capital-investment plan for 2018–2022 and a target of 520 approved plasma collection centers and approximately 28 million liters of fractionation capacity by 2026. The filing provides no specific 2022 revenue or earnings guidance.
- COVID-19 increased donor compensation and plasma costs and reduced manufacturing capacity utilization. COVID-19 diagnostic-test sales contributed €68 million to 2021 results, according to management.
- In April 2022, the GIC investment was reclassified from equity to financial liability in the restated 2021 accounts because of its contractual terms. Grifols and GIC were considering amendments to support equity classification. The filing says the reclassification did not affect debt-covenant compliance.
- Management concluded disclosure controls and internal control over financial reporting were ineffective due to a material weakness in controls over classification of complex financial instruments. The auditor issued an adverse opinion on internal control, while giving an unqualified opinion on the consolidated financial statements. Management reported a remediation plan involving external accounting advice for complex transactions.
- Grifols discontinued its blood-collection-bag business. The filing reports 2021 impairment charges of €11.5 million for related property and equipment and €5 million for inventory, as well as €6.9 million of personnel expense associated with the decision.
- Key risks include substantial indebtedness and refinancing needs, variable interest rates and foreign-exchange exposure, plasma supply and manufacturing risks, competition and pricing pressure, regulation and product safety, and ongoing COVID-19 effects. The Abbott royalty dispute remains in court after a $4 million arbitration award to GDS/Ortho; a separate Siemens dispute had a stated best-estimate potential payment of up to $12 million.
Important facts for investors to verify
- Review the restated 2021 financial statements and the final terms, dividend rights, redemption provisions and accounting treatment of the GIC investment.
- Reconcile balance-sheet cash of €655.5 million with cash-flow-statement cash of €2,675.6 million, particularly the €2,020.1 million restricted escrow balance, and confirm post-acquisition funding and debt levels.
- Assess the material weakness, the auditor’s adverse internal-control opinion, and progress and testing of management’s remediation plan.
- Track plasma collection volumes, cost per liter, inventory levels and turnover, and the effect of those factors on production, IVIG availability and margins.
- Check the status and potential exposure of the Abbott, Siemens, Cerus and other legal matters, as well as the financial and operational effects of exiting the blood-bag business.