Schott Pharma kicked off the year with impressive Q1 2025 results, unveiled on February 13th, hinting at a stronger performance than initially anticipated. This promising start was unequivocally confirmed last week when their H1 2025 results were published.

Now, I'm pleased to offer a comprehensive review of their performance.

DISCLAIMER: This article is not a recommendation to buy or sell any financial instrument, the content is educational and my personal opinion. Each person has to make his own analysis. Any action or decision you take as a result of viewing this article is your sole responsibility.

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Executive Summary

• Better than Expected Revenue Growth: Revenue grew 3.4% to €482 million, from €466 million previously in H1 2024 (+7% growth in constant currency), and accelerated in Q2 with sales of €252 million (+8% vs Q1 2024, +10% at CC).

• Strong Revenue Growth in America, especially in North America where the items supplied were manufactured in Schott Pharma AG factories from other geographies.

• CapEx reduction as Serbia & Hungary factories are now built and ramping-up production.

• Unchanged 2025 Outlook, despite better than expected start of the year, due to current market volatility.

Income Statement

Revenue growth

Revenue grew by 3.4% to €482 million, up from €466 million. Excluding currency impacts, growth in constant currency (CC) reached +7%. This positive trend accelerated in the second quarter (Q2), with sales reaching €252 million, an +8% increase compared to Q1 2024 and a +10% CC.

Regarding gross margin development, in the first half of 2025, gross profit declined by €2.5 million (-1.54% YoY) to €160.3 million, this was primarily due to a 6.0% increase in cost of sales, which outpaced revenue growth. As a result, the gross profit margin decreased to 33.2% (from 34.9% in H1 2024). This margin contraction was expected and largely attributable to:

• An unfavorable product mix.

• Ramp-up costs associated with capacity expansions and relocations across segments.

• Lower capacity utilization in polymer syringes within the DDS segment.

Revenue Breakdown by Product Segment

Looking at each segment’s performance:

• DCS Segment 

  The DCS segment demonstrated positive revenue growth in H1 2025. Revenue was up +3.4% year-on-year on a reported basis. In CC, the growth was considerably stronger at +10.5%.

  This performance was primarily driven by robust demand for pharmaceutical vials and cartridges, including a significant positive contribution from special pharmaceutical vials, which feature enhanced properties such as improved inner surfaces and tighter geometries. The segment's performance also benefited from easier comps. due to the inventory destocking experienced by customers regarding pharmaceutical vials in the previous year.

• DDS Segment

  The DDS segment also contributed positively to overall revenue performance, with revenue increasing by +3.3% on a reported basis compared to H1 2024. In constant currencies, growth stood at +2.2%. This growth was mainly fueled by strong customer demand for prefillable glass syringes. However, the positive impact from glass syringes was partially offset by a reduced order volume of polymer syringes during the current financial year.

Geographical Revenue Distribution

Revenue growth was outstanding in North America (+31.6% YoY), with consistent performance in South America (+8.1% YoY) while sales in Asia (+1.0% YoY) were flat and EMEA showed revenue contraction (-5.8% YoY).

Diving deeper into North America revenue it can be observed that despite customer’s being located in North America, Schott Pharma manufactured those items on its factories from other regions as “Revenue by location of the Company” outpaced “Revenue by location of the Customer” in every region apart from North America, where the “Revenue by location of the Company” stayed flat. See figure 4.

This supports that supply chain considerations come second, after product specifications, highlighting the paradox of a critical component representing a minor fraction of the final product's overall cost.

Schott Pharma kept improving its customer diversification in the first half of fiscal year 2025. Unlike the same period in the previous year, when one major customer accounted for 11.3% (€52.9 million) of external revenue within the DCS and DDS segments, no single customer generated more than 10% of total revenue. This reduced reliance on a single client is particularly positive as it suggests a broader market for glass packaging, beyond GLP-1 dependent applications and offering wider expansion opportunities due to those treatments.

Operating Income Metrics

In the first half of 2025, operating expenses rose faster than revenue:

• Selling expenses increased by €1.6 million (+3.89%).

• General administrative expenses rose by €1.2 million (+5.53%).

• Research and development costs grew by €1.1 million (+8.40%).

These increases reflect continued investment in organizational growth, innovation, and market development but also underscore the pressure on operating leverage in the short term.

However, a notable positive offset came from the balance of other operating income and expenses, which improved significantly by €10.7 million year-on-year. This shift—from a loss of €5.8 million in H1 2024 to a gain of €4.9 million in H1 2025—was driven by:

• €10.5 million reduction in exchange rate losses. This improvement helped partially cushion the decline in gross profit and the rise in operational costs.

• Government grants received by SCHOTT Pharma fell sharply to €926k in H1 2025, compared to €5.86 million in H1 2024. This reduction was primarily driven by the DCS operating segment, which saw grants decline from €5.69 million to €731k over the same period.

Accounting for both factors, operating income would have shown no change.

Net Income

Compared to the previous year, the financial result declined by €2.0 million (-2.9% YoY) to €67.6 million. This decrease was primarily driven by higher interest expenses related to cash pool financing and lease obligations. The increase in cash pool financing costs stemmed from greater funding requirements to support capacity expansion projects at individual SCHOTT Pharma entities.

Income tax expenses increased by €5.9 million (+48.0% YoY) to €18.3 million. With profit before tax rising by €3.8 million, the effective tax rate climbed from 15.0% to 21.3%. The previous year’s unusually low tax rate was influenced by non-recurring tax income in the low single-digit million range, resulting from a change in accounting estimates related to deferred tax measurement.

Balance Sheet

N/A

Cash Flow Statement

Capital Allocation

• Capital Expenditures (CapEx)

  Almost €51 million were used to purchase property, plant and equipment,

• Working Capital

  SCHOTT has made a significant investment in working capital during H1 2025. This is evident as the increase in inventories nearly doubled to €16.1 million (from €8.5 million in H1 2024), indicating a strategic build-up, likely in anticipation of rising demand. Concurrently, contract assets have also substantially increased to €18.4 million (from €7.4 million), reflecting a greater volume of work performed or services delivered for which the right to payment is still conditional.

  While the increase in contract liabilities (from customer prepayments) decreased from €19.5 million to €16.6 million, the overall rise in both inventory and contract assets points to increased operational activity.

  I believe this considerable investment in working capital, particularly the inventory build-up and increased conditional revenue, is a positive sign and consistent with an expectation of returning or growing demand

• Dividends & buybacks

  No share buybacks were executed during the first half of 2025. The ordinary dividend was distributed on February 7, 2025, with a total payout of €24.01 million, equivalent to €0.16 per share and representing a 16.2% payout ratio.

FCF Generation

€21,47 million of FCF were generated during H1 2025, a 38,27% decrease vs H1 2024 despite the lower investment in CapEx. This was caused by:

• Lower operating income than previous year.

• Higher depreciation, consequence of the ongoing expansion.

• Larger investment in working capital, € -26.5 million in H1 2025 vs €-2.4 million in H1 2024.

Management Call & Guidance

Stepping into the recent Schott Pharma management call, I found myself drawn to how management is navigating today's volatile market.

Management Call

CEO Andreas Reisse emphasized during the presentation tha Schott’s products are still critical for customer’s solutions, being demand strong despite recent volatility, confirming they don’t expect any impact from tariffs this year during the Q&A session

Furthermore, he stressed the immediate benefits derived from the RTU strategic alliance with Gerresheimer AG and Stevanato Group, noting its success in attracting new customers – presumably from competitors like Becton Dickinson.

2025 Outlook

The stated guidance for the year remains unchanged due to existing uncertainty despite the better than expected H1 2025.

Interestingly, this comes despite their announcement of a pause in planned US investments, directly counteracting the goals of the Trump administration's tariffs.

This approach raised the question if Schott could effectively supply its customers in case they relocated capacity to the USA. According to the CFO, Dr. Almuth Steinkühler, Schott Pharma would have no problem to follow them if that were the case:

Conclusion

Schott Pharma AG is flawlessly executing its strategic roadmap, boosting capacity through new facilities currently ramping up and enhancing profitability by expanding high-value solution (HVS) product sales. These initiatives are perfectly timed to capitalize on the anticipated return of demand following a 1.5-year destocking cycle. With recent price target upgrades and clear evidence of its high-quality business model, Schott Pharma is poised to deliver significant shareholder value in the mid to long term, if not sooner.

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