Blau Farmaceutica SA

BOVESPA:BLAU3

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Matheus Fujisawa, executive]

Matheus Fujisawa, Investor Relations. Our call is being done in Portuguese with simultaneous translation into English, and it's going to be available in the company's IR website. By the end of the presentation, we'll have the Q&A session dedicated. [Operator Instructions] and other investors can send their questions to the [e-mail]. Now I'll pass the word on to Marcelo, so he can begin the presentation on Slide 3.

[Marcelo Hahn, executive]

Thank you, Matheus. Good morning, everyone. I want to start off with this presentation celebrating an all-time high in our quarterly results achieved by Blau in the second quarter of '24 from BRL 465 million, substantially and above the results in the fourth quarter of '23 of BRL 387 million. This record is reflecting the pharmaceutical market that's resilient even in a macroeconomic scenario that's so challenging. The hospital market has been proven to be pretty heated and the same sales of Blau's medication had growth where we were able to retrofit our prices. With this, the company is able to continue with its sustainable growth and deliver results with improvements, keeping up sequential evolution of operational margins, demonstrating consistency in the execution of our operation. This is only possible because of 3 initiatives were implemented by the end of last year and improved throughout 2024.

The next go to market speedup in 3 business units which really levers our core business with other avenues for growth with the Retail, Aesthetics and Plasma businesses. Secondly, we performed investments and a significant increase in our capacity portfolio, improving our investments in research, development and innovation, promoting the launch of new products and increasing the addressable market for Blau to be able to meet this market that's growing. We've been investing in our increased capacity. And I want to highlight the acquisition of Bergamo, our [Indiscernible] of our specialties plant P210 and this increase in the market has allowed the company to grow its revenue in the launches, as well as the mature portfolios and increase the efficiency of the utilization of our production lines.

And when we talk about efficiency, the third initiative was an in-depth review of our structure, contracts and processes, which is reflected in a sequential increase in the gross margin, which accelerated our improvement to 320 bps in the second quarter of '24. And as a consequence, the third consecutive evolution of EBITDA margin. And this improvement was more visible because we had success with our aged stock turnover with a consecutive reduction to 180 days, and that led to production of 15 days in our cash cycle in the company. I want to pass the floor back to Matheus.

[Matheus Fujisawa, executive]

And well, now we want to talk about the Research, Development and Innovation where we can see that Blau invested about BRL 150 million in the last 12 months, basically about 9% of our revenue in this period. And this increase is related to the Inventta expenses, which is our dedicated research, development and innovation center for the development of the biologicals and the monoclonal antibodies that have been growing our expenses due to the different development phases for production, quality control as well as the different clinical initiatives to prove the safety and efficiency of the molecules developed. When we go over to the side graph here, we can see that this revenue of about BRL 85 million is still about 5% of the revenue.

So we still have room to capture even more returns on these investments. And here, you can already get a feel about the potential growth in the revenue and cash generation when these lines meet. And eventually, they could even invert with a contribution from the revenue of these launches, maybe being a little greater than the R&D percentage upon revenue. And when we look on the right side, you can see some numbers that really demonstrate the seats. We've been planting at Blau to really set the future of the company.

We've submitted 46 drugs for approval in Brazil and in Latin America in the first half of this year only, and we had the approval of 28 drugs in the same period. We've launched 5 new drugs in Brazil in '24. And here, we're only considering the new molecules, which is different than the number of submissions and approvals, which are the registrations. And we do this to help investors get an idea of the incremental market we can achieve with the new molecule. So we added about over BRL 400 million in 6 months, which is basically double what we've had as an incremental market.

And moving on to Slide 5, we can see the growth of 28% in our net revenue in the quarter to the all-time high of BRL 465 million. Excluding the acquisition of Bergamo, which was only consolidated in the third quarter of '23, we can see an organic growth of 16%. And then on the side, you can analyze the segments, and you can see, we start off with the Hospital, which is our core business, and we have the business unit for Onco-Hemato specialty, and we had a growth of over 20%. And while we take a look at this, we can see positive performance from the mature portfolio that grew 20%, but also the launches with over 50%. And when we take a look at the Retail, Aesthetics and Plasma segments, which include the business units for Pharma, Blau Aesthetics and Hemarus respectively, we had an increase of over 60% of the revenue. These are the avenues for growth at Blau.

These are different markets. They differ from the core business, but this is why we create the business unit divisions that we highlighted in the beginning of the presentation, which of course, brings the obvious benefit of focus and greater control over each business unit.

Moving on to Slide 6, we can see the growth in '24, and we will put it into perspective. So the second semester last year, we saw the revenue growing 3% and compared to the same period in '22. And now when we move on to the first semester of '24, you can see an acceleration to over 30% growth in the first semester compared to the first semester of '23, and when you merge these 2 performances in the last 12 months, the LTM, we have a growth of 17% to almost BRL 1.6 billion. So to give you a reference, the benchmark of BRL 1.6 billion is basically the consensus for the full year of '24, and we're already achieving this in our LTM.

So now we'll pass the floor on to Douglas, our CFO, to move on.

[Douglas Rodrigues, executive]

Thank you, Matheus. Good morning, everyone. And as we advance and talk about the operational performance and our financial results in the second quarter. We'll start off with the gross profits and our gross margins. I think the main highlight here is really considering the third quarter consecutively and the evolution of our margins, which is an extremely positive highlight versus the previous quarter. We've been advantaging 320 bps, and we achieved a margin of 36.5% versus last year, and we've grown over 12%. So this demonstrates the consistency of our execution in the company. And this is a really considerable evolution because it's recurring and it's sustainable.

If you take a look at the revenue side, we'll have an increase in prices, growth in volumes. And in the cost dynamics, you have better use of the productive capacity, including an optimization of the productive capacity at Bergamo, where we start off this operation in the second semester of '23. And then, of course, you have the acquisition value of the -- where you can see the acquisition price, which is a lot lower, and we've been generating our -- we've been having a stock turnover in a really good rate with the active pharmaceutical ingredients, APIs. So I think it's important to show the evolution from the starting part when we started incorporating Bergamo into our results, you can see we have an evolution of over 53% with the trend to keep this recurrence and continue to search for this evolution in the gross margins in the next quarters because it's not based on a single opportunity. But on a set of initiatives the company has been working on.

Moving on to the next slide, you can see the expenses, and I'll stop for a minute to explain that we had a strong impact on the NPL. We had about BRL 15 million. This is a projection. It's a provision, actually, sorry. And we had 5 customers that had gone through Chapter 11 procedures in the quarter, and then we performed a recognition of 100% of the accounting provision. We can escape from the macro environment. There's a very unique dynamic in the market overall with the payers in Hospitals, and this reflects all of the distributor chain and also demonstrates the strategy in the company to always have a more distributed basis or fragmented basis. But now the company continues to have all the initiatives involved, and we've been closely monitoring and negotiating plans to understand how this plan takes place and then, of course, consider the recovery of this credit with the reversal of this provision.

But now we've already provisioned about 100% of this in the quarter, and this has been very conservative actually in the company's results. Now moving on to SG&A. Of course, we had an increase in expenses in our quarter, but this is really related to sales expenses due to the revenue. But when it comes to the net revenue, it's pretty much the same level. So dilution of the DNA and 2 percentage points demonstrates the growth of the revenue. The PDI is always like 1.3, but I want to highlight the dynamic. It's mainly due to the earnings plus the balance, and that's about 10%. So it's really in line with the schedule for each development phase and of course a whole level after the monoclonal antibodies. And as they advance, we increment the levels of investments in these products.

So moving on to the next one as we look into the EBITDA, you can see the EBITDA demonstrates an important highlight and a sequence once again, another evolution in our margins. We gain another 160 bps compared to the previous quarter. When you take a look at this perspective after the acquisition and integration of Bergamo and you have an evolution of over 80% just in the last quarter versus the previous quarter, over 40%, which means that operationally, the company has been demonstrating consistency in its execution and an import in advance, it could have been even better. We could have gone over the 20% barrier, but we had the effect of the NPL in the quarter.

And then we have the net income. Of course, the net income has all of the effects we've already highlighted before. But you can see once again that in this perspective, we doubled the level of net income in the company ever since the starting point. And we continue to advance. So basically, beyond the issues we already presented with the operational performance, and NPL, we had an impact of the currency variation. So the quarter started off with about 5 -- pretty low, then we had the closure of our balance sheet, n -- it dropped and went up.

You saw what happened in the market on Monday and so in the stock exchange. So basically we need to understand where the [Indiscernible] is going to stop and -- but it's worth highlighting that the commercial policy in the company is always considering transferring the currency variations to pricing. So the Brazilian market imports a lot and we import finished products, but also the inputs, and this is a normal dynamic to transfer the currency variation increases. So another positive point that's worth highlighting is that in this quarter, we already use the tax losses for Bergamo. So this is also an interesting dynamic. It's going to improve our tax efficiency in the company, leading to a band -- the losses we have accumulated at Bergamo.

Then moving on, I want to show you that we've been following this acceleration, recovery and operational efficiency process, improving all the margins and indicators in the company. But once again, we should highlight that everyone needs to keep us in mind that our operation is consolidated. And within it, we still have operations that are not contributing to results. And so they actually push our margins downwards because they consume about 1.5%, 2% of our revenue because these are operations that are under development, basically, the affiliates are plasma operation in the U.S. and so on. So it demonstrates the potential in the mid to long term to accelerate even more this performance and returns on everything Blau has invested in the last few years. So it's a really important point, and it's always worth highlighting.

Moving on to our balance sheet. Here, you can see one more highlight, which is our working capital and once again, an advance and improvement in our cash cycle [and the company in the] quarter was 15 days. Once again, it's a sequence that is really levered by our inventory in stock. The company always had this target, and it's a really healthy level when you think about a supply chain that's normalized, 180 days is a pretty healthy level.

And of course, within our S&OP cycle, we're going to be searching for ways to keep and search for opportunities. So of course, any improvement you're going to be releasing cash to the company. And when we look into the working capital in total in regards to the net revenue, you can see that we're pretty much keeping up with this level. And diluting this in the growth of the revenue. So receipt days is pretty much the dynamic in the market. We can also see that the sector also when you consider the demand, you have to really make the drugs reach the actual market. And then the industry actually needs to sometimes take a lead on this issue with credit to fund this, and it's a trend that should be recovered in the next quarters.

And then in this quarter, you have, of course, growth -- you grow your revenue, and that's where you also grow. So this is an accounting metric. It's important to highlight. This is just an accounting perspective. And so from a payment days perspective, it's related to the reduction of the inventory, purchases and then you have the accounting base. But it's important to highlight that when you look at the working capital, the company has been advancing. So it's a very sustainable performance. CapEx, well, we've been talking about fixed asset CapEx. So this is the dynamic the company is now working on maintenance CapEx and improvements, efficiency gains, improvements in productivity in the plants -- in the production plants. We're going to generate CapEx of BRL 100 million per year. That's pretty much the basis. And intangible CapEx, along with -- this is about 10% of our revenue, which is where we continue to follow this trend.

And moving on to the next slide. We also wanted to highlight this cash position in the company, which I think makes Blau one of the only companies in this segment with such a robust cash position. So we still have pretty low debt, 0.4%. And in the quarter, we were able to amortize part of the debentures by BRL 50 million. The interest on equity. And then you also have a leverage of 0.4% and a debt position where you have amortization is pretty comfortable. And then, of course, this is a cash position, it's very robust, and it sustains the growth of the business units and even the new operations in the company. And it also makes the company really comfortable to analyze any strategic opportunities. So I think this is an important highlight also in this performance.

Now I'll pass it on to Marcelo as he talks about this merger between Blau and Prothya.

[Marcelo Hahn, executive]

Well, thank you, Douglas. I want to talk about an investment of EUR 50 million to about 20% stake at Prothya that we performed last year. Prothya is one of the 10 biggest plasma fractionating companies in the world working in the full chain from the collection all the way to the commercialization of the end products, so immunoglobulins and other coagulation drugs. So there is a growth last year of 30% in its revenue with an all-time high revenue of BRL 317 million, which comes from the sale of drugs and also fractioning of plasmas for their company. There's also 2 production plants that lead to 22,000 square meters of total area, one in Amsterdam and the other in Brussels. And now there's access to about 1.3 million liters of plasma per year with about 1 million in contracts to third parties, including [Indiscernible], which is also a company shareholder and 300,000 liters per year of 5 collection centers in Hungary. With the plasma collection in the U.S. that Blau through Hemarus, we have the possibility to expand this and enter the plasma subproduct markets in the U.S.

We want to highlight that it's only allowed for this kind of market. The global plasma market is really interesting. We grew about 7% a year, and we're expecting to keep this pace until 2026 to reach over $40 billion in revenue. The demand for this market should be growing higher than the capacity in the industry due to the aging of the population and the increase in demand for plasma therapies. So in this context, Prothya is very well positioned to capture the market growth. And due to its current capacity, about 3 million liters per year for a fraction, and 1 million in purification for end products.

So without any additional CapEx, we already have a chance to look at production and double it with the current capacity and increase of the efficient [Indiscernible] and the extraction processes. And then second -- in a second moment with the available land in the properties, we could expand even more in the capacity for fractioning and purification. It's worth mentioning that our investments at Prothya are still convertible loan, so it doesn't really contribute to the results in the second quarter of '24 or the equity equivalents method.

We're going to be working on the conversion at the right moment, and we're really excited about this partnership. And finally, on Slide 14, we're going to quickly connect our strategic plans together. And we want to show you that we have some linear steps to make things easier to understand, but things kind of happen all simultaneously and in an integrated manner. And timing in the sector is really long. Even if we do things at the same time. So it's an important barrier for new entry. And that's why we've been investing in research, development and innovation with our own centers and also through partnerships, such as the one we have with Similis Bio to accelerate the development of monoclonal antibodies. And it's worth mentioning that Prothya also has an R&D area that should be contributing to new products in the future. And then as we move on to the second phase, the products that are developed must be submitted to the regulators for approval. And after green lights, we can start the launch of these products as soon as possible.

So with the launches, the addressable market is going to grow. And then there's a next step, which is the increasing capacity to support the growing demand. And here, the main initiative is the centralization of our production at Blau in Pernambuco [Indiscernible]. And for the more strategic products, you need to have more control of the productive chain. Then you have the fourth place, which is the verticalization. So for Blau biological products are focused, right? The derivatives of plasma and even the combo of Hemarus plus Prothya, and even the other categories. So this is valid for some mature products as well, where you've things we've already developed, and we're working in some clinical trials for submission and registration purposes.

Then as we access new markets with our first-in-class products and productive capacity to meet these new markets without giving up on growing in Brazil. So now we're going to start off with a Q&A session.

[Operator]

Thanks, Marcelo. [Operator Instructions] The other investors can also submit their questions by e-mail, ir.blau.com. And we have the first question from Rafael from XP, Rafael?

[Rafael Junqueira de Barros, analyst]

The first one is related to the growth in our Retail, Aesthetics and Plasma segment. We've seen significant growth year-over-year. And I wanted to understand a bit more, if you could give us more details on the growth profile organically for the spreader cost, even if you consider a basis with -- excluding Hemarus to understand the performance. And the second one is about the NPL that you guys explored very well. You had some occasional increases from 5 customers. But I wanted to understand how this behavior has been taking place in the beginning of the third quarter and what we should expect in the next period?

[Marcelo Hahn, executive]

Thank you for your question. I'm going to share this answer with Douglas and then we'll go back and forth and help each other with the answers. But anyways, first of all, the improvement in the results comes from greater focus in the retail market. We have a specialized team, and we've been promoting more products in the retail portfolio. And so we have some hospital products that we've already focused on packaging for the pharma market, and that's been contributing to this increase. Besides this, we also have the ramp-up of Hemarus that's been growing, and we have a portfolio that we're able to add to with the Bergamo products that also used to be used.

At that time, they weren't really focused on the retail market, but they were using third parties to perform sales, and that's when we started in direct sales that were done through Blau as growth hormones and other nasal sprays, and we started to produce these direct sales. And that's when we had the growth in our Retail product and Aesthetics as well. So with the business unit for Aesthetics, we had a greater focus. And as we move more towards the market, we were able to visit new opportunities, and we've been able to grow that. Well, it's a set of things really to demonstrate the opportunities that exist. And the segmentation was super important because -- you can see this combination of the portfolio for Bergamo, which expanded the competitive advantages, which are important avenues for growth.

Then Rafael, getting back into the NPL plan, yes, we have this provision, an accounting provision 5 customers, and we saw this really occasional movement with certain days, which maybe levered by a big customer in the market that asked for Chapter 11 procedure, which kind of triggered things because that becomes a mechanism for protection so that after they can negotiate debts with banks and suppliers because it was all very concentrated in a very short period of time. So we haven't seen this trend anymore, and we know that, of course, when it comes to granting credit, we have this process that's super robust as we look at and analyze things closely. The commercial team also has this vision really being close to customers, and we also have the strategy to dilute the basis.

We haven't seen big trends in the second semester. Nothing that would lead to the need for greater care. But we, of course, cannot just consider disregard, an interest rate that's not going to go down. And that also, of course, pressures business that have high levels of leverage. So especially now when we see there's a risk of also increasing interest. So up ahead, we're not really sure. But what we can confirm is that we're already in halfway in the quarter. And there is no NPL expected for this quarter. So to make things clear, it's something that was really just like a one-off. And we already had a provision. And for the third quarter, we don't have anything expected -- any provisions expected.

[Operator]

Our next question [Indiscernible].

[Unknown Analyst]

Two questions really quickly. Then about the private market what you can talk about?

And also the second question is about the you can see that the stock is pretty much at an adequate level. But I wanted to understand what the dynamic was for the other lines. Supplies and receivables and Douglas also talked about greater timing for industry, but also from the suppliers, from what moment should we see this line get better, when you start buying more, having better stock turnover ratio and understand a bit more about these other capital lines. So that's it guys.

[Marcelo Hahn, executive]

Well, I also have a double answer here anyways, about the recent bid on immunoglobulin. I wanted to make it clear that this was a very big lawsuit for Blau. We had this judicial fight really. We were kind of on our own in this reversal process. So it was a big battle for Blau legally, and it was actually a victory for the whole sector industry, but we're really concerned with the regulated market and the regulatory framework, and we were able to reverse this issue with drugs that do not have records in the country. And so once we get the final Supreme Court decision, this is going to be very important as we eliminate the risks that we're kind of scaring everyone in the pharmaceutical industry in Brazil.

Now moving on to immunoglobulin and the bid, we've already seen a slight improvement, but it's still very recent. So we had some small bids and others -- in other units. And prices were already better before. But what I wanted to make very clear was that in the business plan for Blau in '24, there is no sale of immunoglobulin in the market directed to the [Indiscernible] health market. So our growth is not relying on this. Our results don't rely on this and what's more, Blau in the private market has been selling this drug a great volumes, and they've been growing the volume of sales of these products. So we're a lot more focused on the private market.

But of course, the public market is good. It's going to contribute, but occasionally, it will bring maybe better margins and -- but we've been searching for ways to bring more safety to the company and even have an occasional revenue in single -- concentrating revenue in a single product, reduced exposure to the public market. And so this is the process that we've been working on, and it brings in sustainable solid results, and so we don't suffer with these changes in the public market. So Blau went back to having the option, right? Of choosing to sell in the public or private channels. And we're selling whatever is more convenient.

And so we've been growing in this channel, and we're really happy with the results. The company today does not have this immuno reliance and the company has about 80% of its revenue coming from over 20 different products. And I think that the company demonstrated that -- there was a big shift in the last 4 or 5 years, immuno dependency and reliance on public sales and to the Ministry of Health. And when we look at the sales in the company in 2019, it was almost half-half private and public. But when you look at the LTM, the last 12 months, it's over 80% private and less than 15% from public.

So we see almost a really high percentage of the revenue. Yes, it's a whole another company, and that's what we're trying to demonstrate to you guys. And that's why we've been investing a lot, developing other initiatives, and there was a big opportunity at that time to be able to grow and have the necessary strength to reach other markets, and that's what we've been working on. And of course, it's the optionality, right? If it's better, the company is always going to be looking for the best channel to sell these products.

And then the other answer is, well, [Indiscernible], about the working capital dynamic, yes, we understand 180 days is not a healthy level for stocks, but of course, within the S&OP cycles, we have a robust process established, and we're always searching for new opportunities. When it comes to customers, considering the new revenue levels, we have this occasional trend with the closure of the quarter, but you also have this macro issue dynamic. And you also have the trend to get back to what should be a healthier platform, and it should be about 75 to 90 days, and it's a target we should be pursuing. And also the accounts payable -- and so this is an accounting metric with the reduction of the volume of purchases. We understand that it should be a target about 60, 95 days in negotiated deadline, especially for the big suppliers.

We've had a deadline that's even a little greater. And so as you generate more new -- as you generate new accounts.

[Operator]

Our next questions comes from Vinicius Figueiredo from Itaú BBA.

[Vinicius Figueiredo, analyst]

I wanted to understand a point here that was actually covered in other questions. But when we look at the kind of growth the company demonstrated during this quarter, where you guys -- if you guys could split, was the importance of the private channel and the public channel, which would be really good to give us a better feel on this. And then you guys also talked about how in the Hospital channel, you guys had growth in volume and tickets. So in this context, I wanted to get an understanding about the importance of the biologicals in this growth, especially when you consider the tickets, if we consider a level of greater normality when it comes to pricing.

A second point that's worth mentioning is that Douglas actually mentioned some points about how there are some levers for margin improvement. So if you guys could list, which would be the main levers that rely on normalization in the price structure or if it's something that you need to maybe have to be able to increase the utilization of the Bergamo capacity. Could you guys discuss this a bit? That would be super important.

[Marcelo Hahn, executive]

So now we have all 3 just talking about the public, private. Well, I think you guys are talking about quarter versus quarter, right? So when we look at the performance, it's a lot stronger in the second quarter than in the first quarter, it's really because of the private market. So public sector revenue is really stable and all of this growth came from a more significant performance in the private market. And then Marcelo can talk about this a little more with the biologicals. And we've seen really good performance in the biological, but also specialty. So this has been like an overall improvement in the portfolio.

So the improvement is really in the overall portfolio, new products as well and better presence in the company alongside the institutions and the go-to-market strategy, which is a lot better. So we had a big change in the commercial area, and this shift in the go-to-market strategy, which has really brought the results we're looking at. And we see and have already kind of felt that the situation continues, and the company has been able to have really good penetration of its products in the market. And actually, in the antibiotics and injectables, we're already a leader in Brazil, according to [IQV].

[Douglas Rodrigues, executive]

Great. So then Vinicius just understand where the performance improves in the margins. It's mainly because of this. So if you look at the gains, if we were to simplify this, we could say it's like 1/3, 1/3, 1/3 and then you have a price evolution, and we can see a demand with greater rationality and which is towards having more stabilization in the pricing, especially for Hospital products. And then, of course, you also must remember that we have this improvement process to improve our productive capacity and utilization rates. And of course, this increases our revenue, and we've been able to dilute more of our fixed costs. And of course, you have the stock turnover rates, which contributed to about like 1/3 of the margin gain. So these are movements that we've been able to scale up quarter-over-quarter. We talked about this a lot back then, and we saw a drop because of this, and now you have a gradual recovery plan to look at all of these variables.

[Operator]

So the next question is from Samuel Alves, BTG Pactual.

[Samuel Alves, analyst]

We have 2 questions on our side. The first one is about what you guys discussed in the initial presentation. If you guys could talk about the updated percentage of the cash cost in the company. And if there's currently hedge percentage and the expected consumption for the next months. And if this would become a challenge for the margin growth as you guys were mentioning in your previous answer -- this is the first question. And the second is about the CapEx in the year. Douglas even talked about this in the presentation, was an amount of about BRL 100 million for the year.

And I think he was maybe just talking about the fixed assets. So I wanted to understand if you could talk about what's the total amount of CapEx expected for the budget if you were to consider intangibles as well. Thank you so much.

[Marcelo Hahn, executive]

Well, Samuel, so BRL 100 million because after P210, we have some occasional trends in the factory to gain efficiency and sometimes you shift in equipment, you change the flow. So it's basically like maintenance CapEx and then you have some increments in capacity. So it's not like a new building with the exception of Pernambuco, then you have like a specific schedule for the second semester, right? So when you talk about FX -- so of course, this is a variable we monitor, and of course, we have a lot of volatility in the market.

We've been monitoring this issue. And we have this reduction in foreign currency, but part of that gain in the cost margins could be offset. You can also remember this dynamic. So the currency variation is already an issue with the price transfer in the commercial policy. And the market depends on bringing products from out of Brazil. So in regards to the hedge, we have this operation and the trend is that we'll start working on some trends, some movements to have less volatility to perform some reserves, and our strategy was always to use the international accounts.

Well, we have like this natural hedge as well exactly for each of our operations. I think that's important to mention. So despite this dollar effect, really getting in the way, we've been very confident about the other avenues for growth in the company. So while we've been discussing ever since the end this year, the company is expecting a quick recovery in revenue growth and a gradual improvement in our margins besides the stock we had already decided to then these things kind of keep up. And with the impact in the dollar, we should continue to see positive results.

[Operator]

Our next question is from Ms. Estela Strano from JPMorgan.

[Estela Strano, analyst]

I wanted you guys to talk about the Bergamo a bit more. So about like a bit more than a year in the integration. So my question is if there's something that should be done when it comes to G&A efficiency or any other potential gains in this sense, and if there's -- well, as you mentioned, the focus is the normalization and making -- have greater capacity. So after the normalization, does the company have any plans for expansion as we think about the different lines for Bergamo in this sense.

[Marcelo Hahn, executive]

Well, first of all, thanks for the question, Estela. And we still haven't captured all of our full potential for Bergamo. We're still ramping up there, and so waiting for some regulatory approvals as well. And we can't really use the entire Bergamo plant to produce all of the products Blau would like to produce there before the regulatory front getting approved [Indiscernible]. So we have part of these already approved, but now we're going through this process to make the products -- that are solutions there as well.

So we still have a lot of capacity to grow there at Bergamo. Regardless of this, as Douglas mentioned, we still have some CapEx to improve these current lines in our factories. And these are not like new buildings, but we have new lines with more modern solutions and more outputs in these. So we're working on these changes in these increments, and not only to meet the current demand, but the demand that will come from the new registrations for drugs. So we're having this really -- we have really good synchronicity. And we have a team that is really integrated in S&OP, Industrial. Everyone is really integrated, and we've been able to achieve what Matheus mentioned, which is launching products, growing this new portfolio with our old portfolio.

So we're already discussing the budget for 2026 actually, if you were to consider this in our business. So we're improving our efficiency in the operation day after day and with information that's even more precise, which has been contributing to have the necessary resources to meet the demand and bring in the expected results.

[Operator]

Well, now we have no other questions from our sell-side analysts. So we're going to pass the floor back to Marcelo for closing remarks.

[Marcelo Hahn, executive]

Well, despite a challenging year, I'm really happy with the results we were able to achieve and the path we followed for sustainable growth for revenue and margins. We have so many projects underway and so many up ahead. And so I feel we're just starting, as many opportunities ahead. Now I want to thank you all for your presence, and I hope that our Investor Relations area can be available also to clarify any other questions. As you mentioned, Blau is only starting and join us, and have a great day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]