Avantor (AVTR) Q1 FY26 earnings call: guidance and Q&A

Asked about specific actions to offset inflationary pressures, particularly transportation costs, and other watch areas.

Emmanuel Ligner explained that a task force has been established, led by the new Chief Procurement Officer, to evaluate the impact of inflation from the Middle East conflict. They are focusing on inbound/outbound freight and critical materials. He noted that the company has experience with surcharges from post-COVID inflation and aims to reproduce that success.

“We have a task force in place already evaluating the impact. I think, Steve, in the opening remarks, talked about the $10 million to $20 million headwind that we are seeing that we are contemplating in the reforming of our guide. And I think it's really an action for us in terms of monitoring and in terms of things what we can pass to our customers.”

asked by Dan Leonard · answered by Emmanuel Ligner

Inquired about the significance of the BMP book-to-bill of over 1.1x and the lead time for it to translate into revenue growth.

Emmanuel Ligner highlighted that process chemical order intake was double-digit in Q1, showing sequential acceleration from Q4. He stated that many products have lead times of 30 to 90 days, which, combined with operational improvements, gives confidence for a return to growth in the second half of the year.

“A lot of those products are between between 30 to 60 days, 90 days lead times. It also depends on the customer that gave us some blanket order with a lot of visibility... So we are super encouraged with what happened in both operation and commercial due to revival. And so 60 days, 90 days. That's why we are positive and confident about the fact that we'll go back to growth in the second half of the year.”

asked by Dan Leonard · answered by Emmanuel Ligner

Asked for more specifics on Q2 overall organic growth and the margin cadence for both segments.

Brent Jones indicated that the firm-level organic growth for Q2 would be a decline of about 5%. He explained that VWR would see sequential improvement, while BMP would go backwards by 500 basis points or more due to idiosyncratic comps. Modest margin increases are expected due to better fixed cost absorption and Revival initiatives.

“We're -- you're probably talking about a decline of 500 basis points there for the quarter on top line... you'll see a sequential improvement in VWR and then going backwards by 500 basis points or more in BMP.”

asked by Patrick Donnelly · answered by R. Jones

Questioned the confidence in VWR bottoming in Q1 given Q2's expected overall organic decline, and sought clarification on the bridge to positive H2 growth.

Emmanuel Ligner attributed VWR's Q1 bottoming to stabilization after prior market share losses, strong order trends, contract wins, and successful e-commerce execution. Brent Jones clarified that the Q2 firm-level decline is due to BMP's specific comp headwinds, while VWR is still expected to improve sequentially. The H2 recovery is expected from VWR stabilization, BMP order book, and the overall impact of the Revival program.

“I think we had a strong reset of VWR last year. We shared with you that we've lost market share. Q1 was really the tail of those market share loss. We have really stabilized the situation with VWR. And we also looked at the order trend, okay? We look at the contract conversion, the new contract we win, we measure the engagement of our commercial team. Everything that we are doing on VWR, in particular, around the e-commerce channel has been executed phenomenally well.”

asked by Vijay Kumar · answered by Emmanuel Ligner

Asked about Q1 FCF of $25 million, its alignment with expectations, and how the company plans to achieve the full-year guidance of $500 million to $550 million, implying a significant step-up.

Brent Jones confirmed Q1 FCF was within expectations, noting that excluding restructuring costs, it was around $40 million. He highlighted that significant customer prebates were a meaningful, anticipated headwind in Q1. He stated that Q1 is seasonally lower for FCF, and strong sequential improvement is expected throughout the year, consistent with prior years.

“So we noted that it was consistent with our expectations. Our guide is before restructuring expenses. So then it was around $40 million when you exclude restructuring expenses, we cited the significant prebate... it's not unusual for Q1 to be lower on a seasonal basis, and then you'll see strong continued sequential improvement, which you've seen from us.”

asked by Casey Woodring · answered by R. Jones

Inquired if the bioprocess portfolio, particularly BMP, can return to market growth rates (high single digits) in the long term, given current operational improvements.

Emmanuel Ligner expressed confidence, stating that the BMP negative growth in Q2 is primarily due to idiosyncratic purchasing patterns in serum and new sales from last year. He emphasized that process chemicals saw double-digit growth in Q1 and a positive book-to-bill. He believes the market is 6-7% and the team is pushing to grow at or above market, with Revival efforts driving confidence for H2 growth.

“No doubt. Look, the BMP negative growth into Q2 that we are anticipated... is mostly due to what we talk about the seasonality and the speed static purchasing that we've seen, in particular into serum and new sale last year... We think that the market is 6%, 7%, like our peers looked at it, and we are really pushing the team to make sure that we are growing at market or even above market for the rest of the year.”

asked by Matthew Larew · answered by Emmanuel Ligner

Asked if current operational improvements give confidence that EBITDA margins will be up in 2027.

Emmanuel Ligner stated it's too early to provide detailed 2027 guidance but expressed optimism. He highlighted Q1 performance, expected positive H2 growth, and the increasing impact of the Revival program. He anticipates exiting 2026 with more capital deployment flexibility and higher confidence, leading him to be optimistic that 2027 will be a growth year.

“It's a bit premature to talk about '27... I am optimistic that 2027 will be a growth year.”

asked by Daniel Arias · answered by Emmanuel Ligner