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Stevanato Group S.P.A. - Q1 2022 Financial Summary

Business Context and Reporting Period

This Form 6-K filing presents the interim condensed consolidated financial statements for Stevanato Group S.P.A. for the three months ended March 31, 2022. The Company is a global provider of drug containment, drug delivery, and diagnostic solutions, operating primarily in the biopharmaceutical and engineering sectors. The report was authorized for issuance on May 6, 2022.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Consolidated revenue increased by 10.0% (19.3 million EUR) to 212.1 million EUR. On a constant currency basis, revenue grew by 8.3%.
  • Biopharmaceutical Segment: Revenue rose 7.4% to 172.4 million EUR, driven by a 36.9% increase in "high-value" solutions (e.g., EZ-Fill®). This offset a 4.1% decline in other containment solutions.
  • Engineering Segment: Revenue increased 22.8% to 39.6 million EUR, largely due to a 203% surge in inter-segment sales of production equipment to support capacity expansion.
• Profitability Decline: Net profit decreased by 24.0% to 27.8 million EUR. This decline is primarily attributed to:
  • A one-time 5.5 million EUR tax saving in Q1 2021 related to the "Patent Box regime" which did not recur in 2022.
  • Increased General and Administrative (G&A) expenses (up 32.1%) due to labor costs and listing-related expenses.
  • Higher Research and Development (R&D) expenses (up 32.8%) to support innovation.
  • Inflationary pressures on energy (natural gas) and logistics costs impacting gross margins.
• Capital Expenditure: CAPEX surged to 53.8 million EUR (up 34.7 million EUR vs. prior year) to fund new facilities in the U.S. (Fishers, Indiana) and China (Zhangjiagang), as well as expansion in Italy.
• Cash Flow: Operating cash flow was 5.2 million EUR. Free Cash Flow was negative 48.8 million EUR due to heavy investment in property, plant, and equipment.

Outlook, Risks, and Management Commentary

• Guidance: Management anticipates 2022 capital expenditures to range between 35% and 40% of sales, focusing on growth platforms in the U.S., China, and Italy.
• Backlog: Order intake for Q1 2022 was approximately 324.3 million EUR. Total backlog as of March 31, 2022, stood at 992.2 million EUR, up from 880.0 million EUR at year-end 2021.
• Key Risks:
  • Geopolitical Conflict: The war in Ukraine has caused dramatic increases in natural gas prices, affecting margins. While supply access remains stable, future sourcing at commercial terms is uncertain.
  • Supply Chain: Global shortages of electrical components and lockdowns in China have caused temporary disruptions, though inventory management has mitigated significant impact.
  • COVID-19 Transition: While demand for vaccine-related products (syringes, vials) remains elevated, management notes uncertainty regarding the transition to an endemic state and potential demand normalization over the next 12-24 months.
  • Regulatory/Compliance: The Company disclosed an inadvertent violation of Section 13(k) of the Exchange Act regarding loans to executives, which were repaid in full. A new policy prohibiting such loans has been adopted.

Investor Verification Checklist

• Margin Sustainability: Verify the Company's ability to pass on inflationary costs (energy, logistics) to customers to stabilize gross margins.
• CAPEX Execution: Monitor the progress and timeline of new facilities in the U.S. and China to ensure they come online as planned to support future revenue.
• High-Value Mix: Track the continued growth of "high-value" solutions revenue, which is critical for offsetting declines in standard containment products.
• Working Capital: Review the trend in Days Sales Outstanding (DSO), which increased to 73.4 days in Q1 2022 from 71.5 days at year-end 2021.
• Dividend Proposal: Note the Board's proposal to distribute a dividend of 13.5 million EUR, subject to shareholder approval in June 2022.