VIRBAC: Operating profit from ordinary activities up sharply for
the first half of 2020 reflecting revenue resiliency and strong
expenditure restraint during the Covid-19 crisis
The disposal of Sentinel on July 1, 2020
will have an impact on the accounts of the second half of the year,
but has enabled the group to reduce entirely its net
debt
CONSOLIDATED DATA AS OF JUNE 30thin millions of € |
|
2020 |
2019 |
2020/2019 Growth |
|
Revenue |
478.3 |
463.7 |
+3.1% |
|
Growth at constant
exchange rates |
|
|
+5.0% |
|
Growth at constant exchange rates and scope 1 |
|
|
+5.0% |
|
Current
operating profit before depreciation of assets arising from
acquisitions 2 |
85.5 |
66.9 |
+27.7% |
|
as a % of revenueas a
% of revenue at constant rates |
17.9%18.3% |
14.4%
|
|
|
Depreciation of
intangible assets from acquisitions |
6.3 |
7.5 |
|
|
Operating profit from ordinary activities |
79.1 |
59.4 |
+33.2% |
|
Non-recurring
expenses and income |
5.4 |
9.4 |
|
|
Operating profit |
73.8 |
50.0 |
+47.6% |
|
Net profit from ordinary activities
3 |
53.6 |
35.5 |
+51.0% |
|
Consolidated net profit |
49.7 |
28.4 |
+75.1% |
|
Including net profit - Group share |
47.2 |
26.4 |
|
|
Shareholders’ equity - Group Share |
548.0 |
488.9 |
+12.1% |
|
Net debt 4 |
348.2 |
455.5 |
-23.6% |
|
Operating cash flow before interest
and taxes 5 |
104.2 |
82.4 |
+26.4% |
|
1 Growth at constant exchange rates and scope is
the organic growth of sales, excluding the impact of exchange rate
changes, by calculating the indicator for the financial year in
question and that for the previous financial year on the basis of
identical exchange rates (the exchange rate used is that in effect
for the previous financial year), and excluding the impact of
changes in scope, by calculating the indicator for the financial
year in question on the basis of the scope of consolidation for the
previous financial year.2 Current operating profit before
depreciation of assets arising from acquisitions reflects profit
from ordinary activities adjusted for the impact of allowances for
depreciation of intangible assets resulting from acquisition
transactions.3 Net profit from ordinary activities corresponds to
net consolidated profit adjusted for non-recurring expenses and
income (€5.4 million), and for non-current tax (- €1.5 million).4
Net debt corresponds to current (€104.5 million) and non-current
(€328.3 million) financial liabilities as well as a lease
obligation related to the application of IFRS 16 (€33.3 million),
less cash and cash equivalents (€117.9 million) as published in the
statement of financial position.5 Operating cash flow corresponds
to operating profit (€73.8 million) adjusted for items having no
impact on cash position and impacts related to transfers. The
following items are adjusted: asset depreciation and impairments
(€30.2 million), provisions for risks and charges (- €0.6 million),
provisions related to employee benefits (€0.2 million), and the
other expenses and income without any impact on cash position (€0.4
million). and the impacts related to transfers (€0.2 million).
The accounts were audited by the statutory
auditors and examined by the supervisory board on September 15,
2020. The statutory auditor’s report is in the process of being
issued. The statements and detailed presentation of half-year
results are available on the corporate site at
corporate.virbac.com.
Thanks to the Virbac teams’ constant
dedication to animal health and the resilience of the sector, we
posted annual revenue of €478.3 million, an increase of
+3.1% (+2.4% excluding Sentinel) over 2019 at actual exchange rates
and +5.0% (+4.5% excluding Sentinel) at constant rates. All regions
were experiencing growth at the end of June, reflecting the
resilience of the sector and also the different stages of the
epidemic depending on the geographical location. Europe and Latin
America led the growth for the half-year at +5.7% (+5.5% at
constant exchange rates) and +1.3% (+9.3% at constant exchange
rates) respectively, although some countries were more affected by
the health crisis (United Kingdom and Italy). The Asia-Pacific
region grew by +0.1% (+2.4% at constant exchange rates), impacted
by a significant decline in India over the period. Finally, the
United States achieved growth of +5.8% (+3.1% at constant exchange
rates and -2.8% excluding Sentinel) thanks in particular to sales
of Sentinel and the dermatology, hygiene and nutraceutical lines.
In terms of species, the companion animals business grew overall by
+5.0% at actual rates (+5.3% at constant rates and +4.6% excluding
Sentinel), essentially driven by growth in the internal and
external parasiticide lines and pet food (anticipation of purchases
preceding price increases and Covid-19-related lockdowns), which
compensated for the withdrawal of the antibiotic and vaccine lines.
The food producing animals segment also achieved growth of +1.4%
(+5.3% at constant exchange rates), buoyed by the ruminants sector
and aquaculture.
The current operating profit before depreciation of
assets arising from acquisitions amounts to €85.5 million,
significant growth compared to the first half of 2019 (€66.9
million). This growth in performance of 3.5 points (3.9 points at
constant exchange rates) as a ratio to revenue is attributable to
three main factors: a marked reduction in expenses related to the
Covid-19 situation, excluding recognition of exceptional items over
the first half of 2019 of €4.3 million, (postponement of seminars,
conferences and events, suspension of travel in many countries,
postponement of projects and reduction in marketing expenses,
etc.), a marked reduction in our R&D expenditures related to
delays and program postponements, and lastly to our good sales
performance and improvement in our gross margin with a favorable
mix of our products, in particular a very strong contribution by
Sentinel, whose prices increased significantly as at February 1.
These various first-half items will not recur in the future and may
even trend in the opposite direction, with a decline in sales
anticipated in the second half (disposal of Sentinel, vaccine
shortages), and an increase in expenditures (renewed marketing
activity and R&D programs).
Net profit from ordinary activities (net
consolidated profit adjusted for non-recurring expenses and income
and for non-current taxes) totaled €53.6 million, up 51.0%
over the first half of 2019. This improvement in net profit from
ordinary activities is attributable to the items listed above,
particularly the growth in activity and excellent cost control,
which compensate for the recognition of the additional impairment
of assets associated with the leishmaniosis vaccine due to the
definitive discontinuation of marketing of this product, for a net
amount of €3.3 million. It should be noted that the financial
result remains stable compared to the same period last year, with
the €3.0 million decrease in the cost of net financial debt offset
by unfavorable exchange rates, mainly for the Chilean peso, which
declined sharply compared to the euro and the US dollar.
Net Profit - Group Share
reached €47.2 million, a strong increase compared to the first half
of the previous year (€26.4 million), buoyed by operational
performance and the elements shared above.
From a financial
standpoint, our net debt is at €348.2 million, down
by €20.2 million compared to December 31, 2019 at actual rates, and
€16.7 million at constant rates and scope. The lack of a dividend
payment by Virbac S.A. on 2019 profits, and a strict control of
working capital requirements and investments contributed to debt
relief. Thus, the Group is in compliance with the financial ratio
(Net debt/Ebitda), which was 1.90 versus 4.25, which was the
maximum limit set at the end of June, 2020 as part of the financial
covenant.
OutlookThe animal health sector
has shown relative resilience in recent months, which helped to
limit the impact on our business at the end of June, despite the
anticipated downturn in the second quarter of 2020. However, there
are still many unknowns regarding the outlook for demand in the
countries in which we operate (particularly in major countries such
as the United States, India, and Chile), and also regarding the
inventory position at all stages of the distribution chain in the
different channels. In addition, we are also facing uncertainties
related to the current health situation in certain countries that
entered into confinement later (Brazil, Mexico, Chile, India,
etc.), and possible resurgences or second waves of Covid-19 in the
coming months, which could lead to a sustained and prolonged
reduction in demand.
On the supply side, we managed to limit the
impact on the first half of the year. However, we cannot rule out
possible pressures across the world on the supply of certain
components and even certain products in the second half of the
year. Our Indian subsidiary (the Group's third largest subsidiary),
which obtains its supplies locally, experienced supply disruptions
during the quarter due to the country's complex health and economic
situation, and even if the situation is improving, we do not
anticipate a return to normal for some months.
In terms of production, we continue to operate
at our main sites with additional constraints (health measures).
Even so, we have returned to near-normal activity levels at these
sites, with the exception of Chile, which is still operating at
approximately 80%, due to Covid-19 prevention measures that have
imposed a slow-down in production. With regard to our inventories,
production activity levels were slowed and under constraints during
the second quarter, preventing us from maintaining safety stocks
for all of our products, and will cause shortages in the second
half of the year. Finally, the stoppage of our worldwide production
of dog and cat vaccines, which lasted just over two months, is
creating third-quarter shortages that will impact us throughout the
entire second half of the year.
In view of these items and the resilience of our
business, at this stage we anticipate revenue that could be on the
high end of the previously shared range of -3% to 0% for 2020 at
actual scope (post-Sentinel disposal) and at constant rates.
Furthermore, on the basis of mid-July exchange rates, we anticipate
an unfavorable exchange rate impact of approximately €25 to €30
million related to the sharp depreciation of currencies in the
Latin America and Asia-Pacific regions. The ratio of “current
operating profit before depreciation of assets arising from
acquisitions” to “revenue” should be within a range of 12% and 13%
in 2020 at actual scope and constant rates.
Finally, the early July disposal of Sentinel
brands, for which we will continue to manufacture the Sentinel
Spectrum formulation at our US site in Bridgeton, is expected to
result in a decrease in revenue of approximately US $55 million and
approximately 3 points of the Ebita2 to revenue ratio on a pro
forma full-year basis. For 2020, the impact on the Ebita to revenue
ratio is expected to be limited to approximately 1 point, given the
good level of sales of Sentinel, which accounted for revenue of US
$39 million in the first half.
From a financial standpoint, the divestiture of
Sentinel for a total of US $410 million resulted in negative net
debt. Lines of credit drawn in US dollars were repaid, and the
major portion of our financing, maturing in 2022 for the most part,
was retained for covering potential working capital requirements,
external growth operations or other projects.
2 Ebita: Current operating profit before
depreciation of assets arising from acquisitions
ANALYSTS' PRESENTATION -
VIRBAC
We will hold an
analysts’ meeting on Thursday, September 17, 2020 at 3:00 pm (Paris
time – CET) in the Vivaldi Auditorium of Club Laffitte, 54 rue
Laffitte- 75009 Paris (France).
Participants may
arrive 15 minutes before the start of the meeting.
You may also attend
the meeting using the webcast (audio+slides) available via the link
below.
Information for
participants:
Webcast access link:
https://bit.ly/31AKCjv
This access link is
available on the corporate.virbac.com site, under the heading
''financial press releases''. This link allows participants to
access the live and/or archived version of the webcast.
You can ask questions
via chat (text) directly during the webcast or after watching the
replay at the following email address: finances@virbac.com.
A lifelong commitment to animal
healthVirbac offers veterinarians, farmers and pet owners
in more than 100 countries a practical range of products and
services for diagnosing, preventing and treating the majority of
diseases while improving quality of life for animals. With these
innovative solutions covering more than 50 species, Virbac
contributes day after day to shaping the future of animal
health.
Virbac: NYSE Euronext - compartment A – ISIN
code: FR0000031577/SYMBOL: VIRPFinancial Affairs Department: tel.
04 92 08 71 32 - email: finances@virbac.com - Website:
corporate.virbac.com
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