SCHOTT Pharma AG & Co. KGaA (SHTPY) Q3 2026 Earnings Call Transcript

Good morning to everyone on the call. Welcome to our nine-month, third-quarter conference call for the financial year 2026. My name is Tobias Erfurt, Head of Investor Relations and Communications, and I will be guiding you through today's session. With me are our CEO, Christian Mears, and our CFO, Reinhard Meyer. Christian will begin with a business update, followed by Reinhard, who will walk you through our financial performance in more detail. After that, we will open the call for your questions. Before we kick off, please take a moment to review our disclaimer on slide number two. It covers our standard safe harbor language for forward-looking statements. And as a reminder, our financial year 2026 runs from October 2025 to September 2026. the nine months results we are presenting today cover the period from october to june 2026. with this i would like to hand over to christian please go ahead

yeah thank you tobias good morning everyone let me open with a headline q3 was a strong quarter and it demonstrates that our growth trajectory is intact.

Group revenue in Q3 reached 282 million euro, representing growth of 8.3 percent at constant currencies. EBITDA for the quarter came in at 75 million euro, which corresponds to a solid margin of 26.8 percent. Our high value solutions revenue share amounted to 59% in Q3 and was thus in line with our midterm targets of reaching a 60% revenue share. Both segments contributed to the Q3 momentum. What I would like to stress here is that the higher demand was broad-based across our portfolio. So, we are not talking about single customers applications or products but healthy portfolio-wide dynamics let me now turn to slide five for a closer look at the strategy execution our high value solutions business is the engine of short pharma hvs represents 57 of our revenues this reflects consistent execution across our three strategic pillars, innovation, capacity expansion, and trusted partnerships with the world's leading pharmaceutical companies as well as solution and development partners. The commercial logic is straightforward. High-value solutions address structural and growing customer needs. Complex biologics, GLP-1 therapies, the shift to home care and self-administration, and the industry-wide adoption of ready-to-use formats as part of the manufacturing transformation. These dynamics translate into stronger pricing, better margins, and more resilient customer relationships. As said, our mid-term target is a 60% HVS revenue share, and we are on track. Slide 6 covers three developments that illustrate how we are strengthening our position as a trusted long-term partner. First, as already communicated in our ad hoc release in early July, we have reached a mutually beneficial agreement with a key glass syringe customer. It includes both compensation as well as revenue-related components, which will have an impact on future periods. This agreement is a very good example of the strength and resilience of our customer relationships, and it reflects our shared commitment of creating long-term value as trusted partners. Second, also in July, we announced the result of an expanded collaboration with Nimera, a specialist in drug delivery devices. Together, we have verified the compatibility of Nimera's pen injector platform with our 3ML ready-to-use cartridge system. Pharmaceutical companies benefit from a ready-made solution that speeds up time to market and helps avoid technical problems that are common in such combination products. Patients, on the other hand, benefit from a safe system of self-injection. So the offering plays directly into the shift toward a head-at-home treatment, which is a trend we are seeing accelerate. Third, we have created the new role of Chief Commercial Officer. Fabian Stöcker takes on this position while keeping his responsibilities as head of the DCS segment. Fabian has been with SHOT for 14 years, 10 of which are spent at SHOT Pharma, with a strong track record in developing our DCS business. With the implementation of this new role, we are strengthening our customer centricity through greater collaboration across departments and product groups, making sure that customers get exactly what serves them best with respect to products and services. These three examples share a common logic. Proximity to customers is a competitive advantage, from how we negotiate as partners, how we innovate, to how we approach the market. Before I hand over to Reinhardt, let me briefly summarize the status of our expansion projects. In the United States, we have brought significant additional capacity for core and specialty vials into operation, also in sterile quality. The expansion contributes to our long-term local-for-local strategy, strengthening our presence in the important U.S. market. With the tripling of local capacities for high-value solutions, we are addressing key trends in the pharmaceutical industry, such as the manufacturing shift and the rise of biologics. At the same time, we contribute to a resilient healthcare infrastructure, also in the case of medical emergencies, such as pandemics. In Hungary and Switzerland, the ramp-up for sterile cartridges is progressing. Both investments strengthen our HVS platform and increase our readiness to meet future demand, particularly for home care solutions. With that, I hand over to Reinhardt for a financial update.

Thank you, Christian, and a warm welcome also from my side. Let me take you through the nine months numbers and, more importantly, what is driving them. On slide nine, I will start with revenues. Q3 first, then the nine months picture. A quick note on the chart. Gray bars represent our drug containment solution segment, DCS, and the blue bars represent drug delivery systems.

DDS.

In Q3, group revenues amounted to 281.8 million euro. That represents a growth of 8.3 at constant currencies and 10 percent on a reported basis. Both segments contributed to this acceleration. In Q3, DDS continued its strong growth trajectory as revenues grew to 158.9 million euro. This was up 10.8% at constant currencies or 11.3% on the reported basis compared to the prior year quarter. Growth was driven by continued high demand for sterile cartridges, specialty vials, and ready-to-use formats. We also saw good momentum in our core Wiles' business, reflecting continued healthy demand beyond the HVS portfolio. DDS in Q3 showed an encouraging recovery. Revenues increased to €123.2 million, notably up from €113.5 million in the prior year. This represents a meaningful recovery versus the first half of the year. Two dynamics drove this. Sustained strong demand for pre-fillable glass syringes, especially for GLP-1 medications, and an increasing momentum in polymer syringes outside of mRNA applications, turning to the nine-month period. Group revenues amounted to 769.8 million euros, resulting in a year-on-year growth of 4.4% at constant currencies and 4.1% as reported. DCS revenues for the first nine months reached 445.3 million euros, an increase of 9.2% at constant currencies and 7.6% as reported. Growth was driven by the same factors as Q3. Sterile cartridges and vials, specialty vials, as well as an improved demand for our core vials business. In DDS, reported nine-month revenues were €325.1 million, essentially flat compared to €325.7 million in the prior year, and slightly down 1.7% at constant currencies. This reflects the weaker H1, which was primarily driven by lower polymer syringe volumes for mRNA applications. Now let's dive into our profitability. In Q3, group EBDA amounted to €75 million, corresponding to a margin of 26.8%. This compares to a particularly strong margin of 32.3% in Q3 2025, which benefited from high margins in both segments, supported by a favorable mix and strong utilization. In contrast, the current quarter profitability was impacted by continued lower utilization in the DDS segment, as well as costs related to infrastructure and process optimization measures in production. For the nine-month period, Group EBITDA reached 205.3 million euros compared to 213.3 million euros in the prior year, a decrease of 3.8%. The EBITDA margin was 26.7% compared to 28.9 in the nine months of the financial year 2025. Let me explain what drove this margin development. The nine-month margin development reflects the Q3 factors just mentioned. In addition, the inventory impairment on customer-specific glass syringes reported in the first half also weighed on profitability. Our EBDA after nine months was impacted by extraordinary specific items. They are not reflective of underlying structural margin pressure. Looking at the segments, DCS EBITDA grew faster than sales, rising 10.1% to €109.7 million for the nine months. The margin improved to 24.6% from 24.1% in the prior year. Volume growth and a positive product mix with increasing HVS penetrations drove this outperformance. The HVS share in DCS reached 25%, up from 23% in the prior year. DDS EBDA for the nine months was €95.7 million, down 16.3% from €114.4 million. euro. The margin was 29.4% compared to 35.1% in the prior year. As mentioned, this reflects three factors. Lower utilization, the Q3 infrastructure and process optimization costs, and the glass syringe impairment from the first half. The underlying DDS business remains well positioned. Now a few lines further down the P&L. Depreciation and amortization increased by 14.2% to 65.5 million euro. This reflects our ongoing growth investments and was entirely expected. As a result, the EBIT decline was somewhat larger than the EBITDA movement, bringing EBIT to 139.7 million euro. The financial results improved significantly by 35.6% to minus 6.2 million euro. This reflects lower interest expenses following the optimization of our financing structure, a meaningful step forward. Income taxes were 30.2 million euro, corresponding to an effective tax rate of 22.6%. This is in line with our communicated expectations. Overall, net income for the nine months amounted to €103.4 million, down 9% year-on-year. Earnings per share were €68, compared to €75 in the prior year. Now let me turn to the cash flow. Cash flow from operating activities for the nine months came in at €140.7 million. Free cash flow improved by 49% year-on-year to €58.9 million, up from €39.6 million in the same period last year. This improvement was benefiting from working capital changes, lower tax payments, and the optimization of our financing structure. Capital expenditure for the nine months was €82.5 million, slightly below the prior year level of €89.3 million. We have continued our investment program in both segments, with particular focus on HVS capacity at our sites in Switzerland and Hungary, while improving cash conversion. That combination demonstrates the financial discipline underpinning our growth. Based on our nine-month performance and our continued positive order book development, we confirm our updated guidance for the full financial year 2026. As communicated on July 8th, we raised our revenue growth guidance to 5% to 6% at constant currencies up from the prior range of 2 to 5 percent. We expect an EBDA margin of 27 to 28 percent up from the previously guided around 27 percent. This upgrade was supported by Q3 momentum and today's result confirmed that the positive dynamics continue. For additional context we continue to expect capital expenditure in the range of 140 to 160 million euro. We expect our HVS revenue share to remain at the prior year level of 57% for the full year. With our guidance confirmed and Q4 already well underway, let me briefly touch on the fourth quarter. As our guidance implies we expect revenue growth to slightly accelerate in Q4 compared to nine months of 2026. And as you know from the previous years, Q4 is seasonally weaker for the DCS segment. This will again be the case in Q4 so that DCS revenues likely come in below the strong level seen in Q3 2026. Good growth momentum in DDS should contribute meaningfully to the group's growth and coming clearly above the Q3 2026 level. This concludes the financial update and with that I will hand it back to Tobias.

Thank you very much Christian and Reinhardt for your presentation. We will now open the Q&A session.

Parisa, our operator, will assist with the registration please go ahead thank you ladies and gentlemen if you would like to ask a question please press star 9 and pound key on your key telephone keypad if you would like to revoke your question press star 3 and pound key you can also use the dial in function in the webcast and raise your hand if you would like to ask a question by phone thank you very much I think we have the first people in line.

We will start with Odysseus Manisiotis from BNP Paribas. Please go ahead. Thank you.

Hi, everyone. Thanks for taking my questions. Firstly, could you share a bit more color on where the polymer strength is coming from and help us potentially with quantifying how significant that was, perhaps in terms of sequential step-up from Q2 along with what you expect for that business in Q4. Secondly, your full-year margin guide implies quite a big step-up in Q4 margin if we assume we're landing at the midpoint, around 300 basis points in my numbers. Where should we think that comes from? Is it fair to think that this will be driven by the strength you're seeing in polymer given that's where underutilization has dragged you back a bit? Or should we assume that the lower end of the 27 to 28 range is more likely here? And thirdly, one of the GOP-1 market leaders recently booked notable termination fees because of the downsizing of large supplier contracts given lower volume expectations. Should we read this across as a risk to your midterm or for your guide?

Odysseus, thanks for the questions. Obviously, I mean, about polymer strength in the Q3, we have described that in the earlier quarters that we have basically seen a slowing decline of the mRNA volumes. And at the same time, we have seen an expanding increase of other applications, which are now in a position that we, so to say, compensate for the declining volumes on the mRNA polymer. And this will continue. We will not specifically describe how much more growth this will deliver, but obviously the polymer strength continues and is broad based on the five other applications we have within that segment. And then to the second part, yes, where comes the margin increase? And obviously, it will be a meaningful step up in margin for the fourth quarter. And you mentioned, let's say, range is most probably not wrong. And I would also see that to be in that range, mainly driven by, as we said, a stronger portion of DDS growth, and that both supported by better utilization in our factories and also, let's say, a stronger polymer side in the segment. And that will help to drive the margin increase in Q4 over the first three quarters.

And I must ask you on the third questions i didn't quite get it maybe you can repeat this again uh yes of course um thanks for the answer so far so we um one of the glp1 market leaders recently booked notable termination fees um because they downsized a few large supplier contracts given lower volume expectations uh i was i wanted to ask whether that's a risk um to your full year or midterm targets I understand.

Well, obviously, we have highlighted that we have concluded with at least one of our large clients a new contract, which, so to say, rebalances the contract to new terms. In that way, we will have similar structures like take or pay clauses in the contract. And in that consideration, we need to see, let's say, most of the large contracts. So far, we have, let's say, with that, been able to deliver the growth and the margins as expected. And we foresee that to support our, let's say, midterm guidance, which we laid out beginning of the year and which is still intact and confirmed.

That's helpful. Thank you. Thank you very much. Next question comes from Zhang Nguyen from Citi.

Please go ahead, Zhang.

Thanks, Tobias. And good morning, everyone. Thanks for taking my questions. I have one follow up on Odysseus' questions and then two of my own. And I think what he says was asking whether the lower end of the 27 to 28 margin range is more likely here. I just wanted to double check that that was your yes was your answer to that question. And then two questions for me. The first one is, can you provide more color on the agreements with the specific glass syringe customers and whether there was any revenue or compensation that was recognized in Q3? or is there anything that you're expecting to recognize in Q4 that could help explain part of the step up? And then the second question is, can you quantify the cost associated with production infrastructure that you incurred in Q3 and specifically were those related to?

Yeah, maybe I take the first one and Christian, you take then the second and the third one. Good. Obviously, Chiang, I mean, I didn't say it's going to be lower. And the range is fully intact. And with that, I leave it really down to you. But we actually see a clear opportunity in the fourth quarter to substantially increase the EBDA margin so far reached. Hence, we feel very well positioned to be in that range. So no lower end perspective and not a higher end perspective. The range is intact.

Yeah. And, Zhang, coming to your to your second question regarding the agreement with our glass syringe customer. Well, what basically Reinhard said before, we we found an agreement that mainly is based on on future revenue revenues. revenues and basically you can say it's a it's a take or pay agreement for the upcoming years we will see first impacts in in q4 2026 and then in the years to come and that basically underlines that we have found a strong agreement that both partners are going to benefit from Regarding the third question, when it comes to our production impact, well, you know, we are constantly optimizing both our infrastructure as well as our production processes. And sometimes such optimizations do have an impact on the production process itself, which then is being seen as temporary production inefficiency. And this is actually what we have seen in the last quarter. It is driven by our ramp-up activities on the one hand and the optimization activities on the other. But what is also very important, the results that we have shown now are very well in line with our plan. And that means at the end, we are not talking about a structural issue. We are rather talking about isolated cases and while we cannot fully guarantee with certainty that similar effects won't occur again, we believe we are on top of the specific issue.

Thank you.

Next question comes from Jonathan Anwin from Barclays. Please go ahead.

Good morning. Thank you for taking my questions. I've got three, please. My first question is on the updated guidance for FY26. You obviously upgraded that based on the renegotiation of contracts with your class pre-filter in the customer. But I'm just wondering what level of expectation from that customer you had in your midterm growth target from this customer. And if you were low-balling expectations in the midterm, and therefore do you think it's now conservative based on the renegotiated contract plus the DCS strength that you're my second question is actually on your Indian business where I believe you're the number one glass player in the region I'm just wondering if you've seen a notable tick up in demand in that region since semaglutide went generic in the country and is that mainly in vials and then my third question is on vials actually it seems that vials are outperforming expectations after a couple of years of over capacity and inventory in the market so can you just talk a little bit

about where the utilization for the valve business sits today and are you getting closer to the sort of over 90 percent that you target on your other line thank you jonathan thank you i will uh take your first question uh and obviously i mean um we had um always said that this is an important client of ours, one of the larger ones, and that 2026 represents a transition year where the impact is the most important one. And also, so to say, that I was a continuation of that customer relationship expected, hence a part of the midterm guidance included volume with this client. And And that is more or less now confirmed. So no material change to what is embedded in the midterm guidance, hence no rise out of, let's say, the new agreement towards the midterm guidance. But yes, there is an impact on 2026, which has led to the increase as well, beside the strong momentum underneath all segments.

Jonathan, regarding your second question and our Indian business, I would like to keep it short. I think we can confirm that the growth in the Indian business is well on track and according to our expectations or maybe a little bit above. Now, when it comes to your third question on the vial business, we do see a strong utilization of our vial capacities. As said earlier, we have now concluded the expansion of our facility in the US, especially with a focus on RTU vials. That means we are well positioned to serve the market with the increasing demand we are expecting.

This question comes from Falko Friedrichs from Deutsche Bank. Please go ahead.

Thank you. I would have a follow-up first and then also two questions. My follow-up is, could you potentially quantify how much of the 8% organic sales growth in Q3 was coming from this new agreement with the Glass customer? The next question is, taking a very early look at next fiscal year, is there any reason why growth should not be broadly in line with your medium-term guidance? And more specifically, are there any tailwinds or headwinds that we should keep in mind as we think about your growth progression into the next fiscal year? And then my last question is, could you comment on the potential for further upside in your high value solution product portfolio next year following this strong increase to 59 percent in q3 um are there any additional opportunities to drive this share even higher and and what do you see as the key drivers for that thank you

thank you falco for your questions and maybe i take the first two and christian the third one okay um in q3 falco there was no impact uh on growth out of the new agreement.

We signed this agreement during July and as said, then made the announcement and then thereafter was the first point. To the second point, which is a growth in 2027, I just want to remind you and the audience here when we laid out the midterm guidance, 2% to 5% for 2026 and then 6% to 8% on top-line growth, 27% to 29%. Obviously, it was based on that, let's say, arrangement. With the agreement we have now with this large client, there will be obviously one compensation effect supporting the uptake in the fourth quarter. And that's, let's say, a specific one-timer which will not repeat itself in 2027. But we will describe that effect when we report Q4. So overall, so 2027, all growth drivers are basically intact and structurally there. But we are not going to give the guidance now. Here you need to wait until we have reported fourth quarter and give guidance for the next year.

And Falco, then coming to your last question regarding the further upside of HBS business. Well, in the upcoming year, we do expect continuous growth of our glass syringe business, also not only, but also driven by GLP-1. And we expect, as mentioned earlier, further growth in polymer that should overcompensate slightly the reduction in mRNA, driven by different new applications, like, for example, aesthetics, IV, long-acting injectables. And if you take this all together, we feel we are on a good track to further increase our HBS share.

Okay, thank you.

Next question comes from Charles Weston, Royal Bank of Canada, RBC. Please go ahead.

Thanks for taking the question. So it's tradition to ask a follow-up first. So can I just follow on from Falco's question, please? You mentioned the Q4 kind of one-off that we will see. So can I just check that one-off is already included in your 5% to 6% guide for 2026, but that it creates a headwind for 2027 for the full year? Just trying to understand, because obviously we had lower revenues earlier in the year from the Glass customer, which I thought might actually provide easier comps. So perhaps if you could just help clarify that. And my second question relates to the new Hungary and Switzerland facilities. Just if you can give us a comment in terms of the progress of the ramp utilisation and perhaps a sense of how much of those facilities are contracted already. And my last question, please, on DCS margin, step down sequentially? I know margins vary a bit from quarter to quarter, but you obviously saw continued growth. So can you just comment on what drove that sequential decline?

Sure, thank you. I'll take the first one. And yes, there will be a one-off, which is actually a headwind. And actually in that frame, I think it's okay to mention this. So we expect the one-off to be around 15 million euro, being, so to say, a contributor to growth in the upgraded guidance of this year, whilst this will be the headwind going forward versus the 2026 base. And then maybe, Christian, you take two and three, if you're okay.

Yeah, Charles, regarding Hungary and Switzerland, Our ramp-up is actually in progress and according to plan. And I think I can, regarding utilization, only say that we will need the additional capacity in order to satisfy customer demands that we see coming or reaching us in the future. So we are well on track with our expansion projects. And the last question, I have to admit, can you repeat that? Because it was difficult to understand here.

Sorry, it was just on the sequential decline in DCS margin from Q2 to Q3.

Okay, I take that. There is basically, when you look at DCS Q3 and compare that Q3 DCS margin 2025 to all the other quarters, you will realize it's a spike of a margin increase there, especially in the cross-profit margin driven. And that is due to a very, very strong quarter in, let's say, sterile solutions at that quarter with exceptionally high pricing. It was more specific projects we could realize then, has not repeated since then. So this is an anomaly which was driving the strong margin Q3 2025.

Sorry, the question was from Q2 2026 to Q3 2026.

Yeah, Charles, I think this is mainly a topic of product mix that we see in the different quarters. So in Q3, the portion of high-value solutions was a little weaker than in Q2. But that's simply product mix in quarter-over-quarter comparison.

Okay, thank you.

Welcome. Next question comes from Chiara Tomisani from UBS. Please go ahead.

Hi, I'd like to ask two questions. The first one is around GLP-1 demand. And I wanted to ask if you're seeing any changes in customer order behavior by geography or format. And the second question I'd like to ask, it's around investment opportunities. And while I recognize it's maybe like a bit too early to speak about CAPEX for next year, I wanted to ask, where do you currently see the higher return investment opportunities in the portfolio? Thank you.

Maybe I take actually the first and the second question. GLP-1 demand basically is strong in the relevant growth regions and specifically strong on the glass syringe side. that I can say is that. So it's one of the drivers and we are well positioned, though, in all formats, I must say, and all formats contribute well to the growth which we show. And the second topic is, obviously, it's a little bit too early to speak about CapEx. In prior calls, we do said that's 2027. We expect the CapEx level to be above 2026. levels and then we expect capex levels to actually taper off then thereafter and this we still confirm we have a number of ongoing projects which we are going to conclude we have also started let's say projects for the glass syringe business for specialty vials expansion and our let's say The existing expansions on ready-to-use cartridges and syringes are fully intact and unplanned. So you should see, as I said, a tapering off beyond 27 and 27 slightly above the levels of 2026.

Thank you.

Thank you very much.

Well, thanks to all of you. I think we are at the end of our conference call as there's no one more on the line. Thanks a lot to all the participants for being part of our nine-month Q3 results today. We look forward to seeing many of you in the upcoming investor conferences and roadshows in September. We'll be in New York, Toronto, Frankfurt, London, and Munich, and we hope to see you there. Our full-year results, Q4, will be published in December 10th. That's it for the moment. Thanks for having us. Thanks for being with us. Enjoy the rest of the summer, and goodbye.