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Avantor, Inc. (AVTR) Delivers Solid Q2 Results, Reaffirms Full-Year Guidance
Published on September 24, 2024 | Ticker: AVTR

Avantor, Inc. (AVTR), a leading global provider of products and services to customers in the biopharma, healthcare, education & government, and advanced technologies & applied materials industries, has reported its second-quarter 2024 financial results, showcasing its resilience and operational excellence.

Financials

For the full year 2023, Avantor reported annual net income of $321.1 million, annual revenue of $6,967.2 million, annual operating cash flow of $870.0 million, and annual free cash flow of $723.6 million. These strong financial metrics demonstrate the company's ability to navigate the evolving market landscape and deliver consistent performance.

In the second quarter of 2024, Avantor reported revenue of $1,702.8 million, a 2.4% decline compared to the same period in 2023. This decline was driven by a 2.0% decrease in organic sales, partially offset by a 0.4% favorable impact from foreign currency. The company's Laboratory Solutions segment saw a 3.2% organic decline, while the Bioscience Production segment experienced a 0.5% organic decline.

Despite the revenue decline, Avantor's profitability remained strong. Gross margin expanded by 30 basis points to 34.1% in the second quarter, driven by improved product mix, lower inventory reserves, and manufacturing productivity, partially offset by inflationary pressures. Adjusted EBITDA margin contracted by 180 basis points to 17.9%, primarily due to increased operating expenses and lower sales volume. Adjusted Operating Income margin decreased by 200 basis points to 16.3%, reflecting similar dynamics.

Segment Performance

The company's Bioprocessing business, which represents approximately two-thirds of the Bioscience Production segment, was a bright spot, outperforming the company's expectations. Bioprocessing revenue declined in the mid-single digits on an organic basis, an improvement from the high-single digit decline anticipated. This was driven by strong order trends, which are translating into increased sales and supporting continued momentum as the company enters the second half of the year.

Avantor's Laboratory Solutions segment faced headwinds, with revenue declining 3.2% organically, primarily due to decreased demand in the biopharma and healthcare end markets. However, the company remains encouraged by the activity levels and opportunity pipelines in this segment, with the electrical board design and manufacturing business serving as a leading indicator of potential improvements.

Cost Transformation Initiative

The company's cost transformation initiative continues to deliver results, with Avantor ahead of plan in executing the program. The initiative is expected to generate approximately $75 million in cost savings for the full year 2024, putting the company well on track to achieve its long-term target of $300 million in annual gross run-rate savings by the end of 2026.

Liquidity

Avantor's balance sheet and liquidity position remain strong, with $272.6 million in cash and cash equivalents and $1,060.7 million in available credit facility capacity as of June 30, 2024. The company's adjusted net leverage ratio stood at 3.9x at the end of the quarter, and it remains committed to deleveraging, having paid down over $200 million of debt during the period.

Outlook

Looking ahead, Avantor has reaffirmed its full-year 2024 guidance. The company expects organic revenue growth to be in the range of flat to down low-single digits, with the Bioscience Production segment expected to outperform and be down in the low-single digit range, while the Laboratory Solutions segment is anticipated to be flat to down low-single digits. Adjusted EBITDA margin is expected to be in the range of 17.0% to 17.5%, and adjusted earnings per share is projected to be between $0.95 and $1.05.

Conclusion

Avantor's strong execution, focus on operational efficiency, and continued investment in innovation position the company well to navigate the current market environment and capitalize on long-term growth opportunities. The company's diversified portfolio, leading market positions, and commitment to sustainability make it an attractive investment proposition for investors seeking exposure to the life sciences and advanced materials industries.

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