(Bloomberg) -- Grifols SA, the Spanish pharmaceutical company hit by a short seller attack this year, said it overstated the value of its stake in a Chinese firm and reported an accounting adjustment of €457 million ($494 million).
The Barcelona-based maker of blood plasma treatments on Tuesday reported the adjustment linked to its stake of 6.5% in China’s Shanghai RAAS. The markets regulator suspended trading following a Bloomberg News report on the adjustment.
Shares rose 0.53% at 5:11 p.m. when trading was restarted, after having fallen as much as 5.5% earlier. During the suspension, the company published its second quarter earnings, originally expected after markets closed.
Grifols has faced intense scrutiny of its accounts since January, when short seller Gotham City Research accused it of manipulating its debt and earnings through transactions with the company’s largest shareholder — a financial firm to the Grifols family. The company denied any wrongdoing.
In the aftermath of Gotham’s attack, Grifols removed all family members from executive roles, named new managers, including a new chief executive officer, and committed to improving its financial reporting. The new CEO, Nacho Abia, made a good impression on the company’s first quarter earnings call in May, according to several analysts.
The short seller report heightened investor scrutiny of Grifols’ debt levels. Concerns were compounded when the firm saw its credit rating downgraded by three agencies since March, with Moody’s ultimately dropping coverage earlier this month.
The firm in July received $1.7 billion in proceeds from the sale of a 20% stake in Shanghai RAAS, which combined with private credit placements was used to clear debt maturities for 2025.
On July 8, the company said that the Grifols family and asset manager Brookfield were looking to take it private.
Grifols said figures in its condensed consolidated interim financial statements for the first half of 2024 were restated “due to an incorrect accounting treatment.” The discrepancy, which won’t have an impact on the income statement, was discovered by Grifols’ new auditor, Deloitte, which was appointed this year, Bloomberg reported.
The company also said it had restated figures relating to its joint venture with ImmunoTek GH, which resulted in reductions of net income for 2022, 2023 and the first half of 2024.
In its earnings statement, the company said positive cash flow rose to €57 million and reiterated its free cash flow forecast for the year at €5 million. Free cash flow has been under the spotlight since management issued a shockingly low guidance at an earnings presentation in February, triggering a 35% drop in the stock.
Key 2q earnings data:
- Ebitda adjust €441m
- Ebitda margin adjusted 24.2%
- Leverage ratio 5.5x
- Net profit €15m
(Updates with earnings graph in last paragraph)
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