Eurofins Responds to Muddy Waters Report
25 Junho 2024 - 2:15AM
Business Wire
Regulatory News:
Eurofins (Paris:ERF):
The management of Eurofins is aware of a short seller report
made by Muddy Waters, LLC, (MW) a firm that potentially stands to
gain in the event of a decline in Eurofins’ share price. To the
best of Eurofins’ knowledge, Muddy Waters has never participated in
Eurofins investor events, nor has it ever directly engaged with
Eurofins to gauge the correctness or relevance of their
assumptions, hypotheses and inferences, which would have enabled
the avoidance of spreading inaccurate, irrelevant or misleading
information and the twisting or spinning of facts to maliciously
disparage the Company and its management.
Upon a first review of their claims, it is Eurofins’ view that
the entirety of the allegations and insinuations contained therein
is either inaccurate, irrelevant, biased and/or misleading.
Some of the most blatantly wrong and/or misleading allegations
include:
- Making an unsuitable comparison between Eurofins’ purchase of
BioSanté in Martinique to investments in travel and tourism, when
actually the multiples for this acquisition were in line with the
lower range in the sector and it has proven to deliver accretive
margins since then.
- Citing some specific local GAAP requirements in how to report
cash and equivalents in condensed local statutory accounts filings
to build a story about potential double-counting of cash at Group
level, when all these intercompany transactions are eliminated in
the Consolidated financials, and cash amounts are systematically
audited at both local and consolidated levels based on bank
confirmations and other controls with all required communication
between accounting teams and auditors.
- Using the post transaction address of the buyer (Eurofins)
instead of the registered address of the seller and using wrong
values to falsely paint the purchase of Permitted Development
Investments No. 9 by Eurofins from unrelated real estate developers
as a deliberate act to facilitate a markup of the property via a
straw buyer.
- Alleging that spreadsheets are extensively used for reporting
and with “unacceptably loose internal controls” when the Company
has actually utilised for many years recognised technologies such
as Microsoft Dynamics, Microsoft Great Plains, IBM Cognos and
Coupa.
- Highlighting that the ratios of revenues per employee and cost
per employee are higher than some companies active in the TIC
sector, and therefore claiming that they would be too good to be
true, while there are obvious geographical and type of service and
sector served mix effects (i.e., Rest of the World accounts for
less than 20% of Eurofins consolidated revenues, compared to
between 40% and 50% for peers cited in the report due to their much
higher China exposures), as well as fundamental differences between
Eurofins and TIC activities such as:
- Eurofins is mostly focused on testing and not on inspection and
certification (I&C) activities which require much higher labour
intensity (i.e., lower revenues per employee).
- Compared to I&C, Testing requires highly skilled staff and
generates higher revenues per employee.
- Eurofins activities are much more focused (over 30%) on more
scientifically advanced testing services for the biopharmaceutical
sector.
Most wrong and misleading allegations by MW have already been
addressed at length by Eurofins in multiple disclosures following
previous disparaging short sellers reports but, as always Eurofins
will provide detailed refutations and facts in due course about the
long list of insidious allegations in the report. Some of the MW
comments refer to facts that occurred 10 to 20 years ago when
Eurofins had much less access to capital and higher indebtedness
relative to its profitability. It has been already widely disclosed
that Eurofins would not have been able to acquire all the
laboratories buildings performed by the holding of its main
shareholder at that time without exceeding acceptable financial
leverage ratios. Instead, it favored investing organically and
inorganically in the growth of the Group at much higher returns
than if these amounts had been invested in buildings. The growth of
Eurofins revenues, profits and enterprise value since 2005 should
provide sufficient confirmation of this but Eurofins will provide
more analysis of these matters too. As previously disclosed, all
real estate transactions with related parties were done at arm’s
length terms and of course all buildings were paid for by their
owner.
The Company is completely confident in the integrity of its
accounts, operational performance, internal controls and risk
management. It firmly stands behind the processes and reporting
quality of its financial performance and corporate governance. Its
structure with focussed operational companies under an empowered
leader has proven well suited to success in our fields of activity
where service and customer focus are important and contrary to
assertions by MW, Eurofins is of the opinion that this structure
provides better controls, risk management and accountability.
Examples of the Company’s financial resilience and strong corporate
governance include:
- A solid cash position and balance sheet that enabled the
Company to do an early redemption of a €448 Eurobond on 19 June
2024, one month ahead of its maturity date on 25 July 2024.
- Eurofins commissions statutory audits covering nearly 100% of
its external sales, EBITDA and total assets, even when this is not
required by local regulation. These are performed mostly by Tier 1
and Tier 2 audit firms.
- A Board-level Sustainability and Corporate Governance Committee
made up exclusively of independent and non-executive directors
systematically assesses the materiality of planned related party
transactions and ensures they are at arm’s length terms.
- Clear disclosures on all related party transactions are
published in Annual Reports, including benchmarks with third party
leases.
- As a Luxembourg-based and registered company, Eurofins fulfils
all reporting obligations of that jurisdiction and in addition
complies with relevant French AMF regulations as it has been
historically listed in Paris.
Eurofins has obviously shared this publication with its current
lead auditors (Deloitte Audit), as some statements or insinuations
in this publication may unjustly cast doubts on their work. The
company will work together with its auditors in preparing further
analyses as required.
Comments from the CEO, Dr Gilles Martin:
“Since its inception nearly 37 years ago, Eurofins has taken
pride that integrity, impartiality and independence form an
integral and unalienable part of our Group culture. This extends
across all aspects of our business and organisation, from
operations and finance to corporate governance. We have been and
always will be committed to fair and clear disclosures. Thus, it
appears deeply slanderous to me, and undoubtably also to our
employees, bondholders, shareholders and other stakeholders, to see
these baseless accusations levelled against us. We will spare no
effort to ensure the truth is made clear to all. The MW report
contains such blatantly false or misleading statements that at
first glance it would seem to come from someone with absolutely no
experience about Eurofins, its sector or its history and who has
been very negligent in its research. It is troubling though to read
that MW took the pain to analyse every line of 30 irrelevant local
statutory accounts of small Spanish subsidiaries of Eurofins but
failed to note that, just to cite some examples, the revenues per
employee of Charles River laboratories (CRL) in 2023 were 50%
higher than those of Eurofins, while CRL’s capital expenditures to
revenues ratio was also very close to that of Eurofins. As can
easily be seen in a few minutes of research in Eurofins and other
publicly available reports, CRL and some other contract research
organisations are closer peers to Eurofins than the 3 companies
cited by MW. Other similar examples to easily disprove MW’s grossly
false allegations of overstated revenues abound. Whether the
assertions of MW are down to inexperience in our business,
carelessness or wilful intent to mislead investors and other
Eurofins stakeholders by knowingly spreading false assertions and
insinuations remains to be analysed too.”
About Eurofins – the global leader in bio-analysis
Eurofins is Testing for Life. The Eurofins Scientific S.E.
network of independent companies believes that it is a global
leader in food, environment, pharmaceutical and cosmetic product
testing and in discovery pharmacology, forensics, advanced material
sciences and agroscience contract research services. It is also one
of the market leaders in certain testing and laboratory services
for genomics, and in the support of clinical studies, as well as in
biopharma contract development and manufacturing. It also has a
rapidly developing presence in highly specialised and molecular
clinical diagnostic testing and in-vitro diagnostic products.
With ca. 62,000 staff across a decentralised and entrepreneurial
network of more than 900 laboratories in over 1,000 companies in 62
countries, Eurofins offers a portfolio of over 200,000 analytical
methods to evaluate the safety, identity, composition,
authenticity, origin, traceability and purity of a wide range of
products, as well as providing innovative clinical diagnostic
testing services and in-vitro diagnostic products.
Eurofins companies’ broad range of services are important for
the health and safety of people and our planet. The ongoing
investment to become fully digital and maintain the best network of
state-of-the-art laboratories and equipment supports our objective
to provide our customers with high-quality services, innovative
solutions and accurate results in the best possible turnaround time
(TAT). Eurofins companies are well positioned to support clients’
increasingly stringent quality and safety standards and the
increasing demands of regulatory authorities as well as the
evolving requirements of healthcare practitioners around the
world.
The Eurofins network has grown very strongly since its inception
and its strategy is to continue expanding its technology portfolio
and its geographic reach. Through R&D and acquisitions, its
companies draw on the latest developments in the field of
biotechnology and analytical chemistry to offer their clients
unique analytical solutions.
Shares in Eurofins Scientific S.E. are listed on the Euronext
Paris Stock Exchange (ISIN FR0014000MR3, Reuters EUFI.PA, Bloomberg
ERF FP).
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version on businesswire.com: https://www.businesswire.com/news/home/20240624809206/en/
Notes to Editors:
For more information, please visit
www.eurofins.com or contact:
Investor Relations Eurofins Scientific SE Phone: +32 2 766 1620
E-mail: ir@sc.eurofinseu.com
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