Virbac SA · EURONEXT:VIRP

Virbac SA — FY2016 Earnings Presentation

49 slides from Virbac SA's earnings presentation, March 2017

  1. Slide 1: 2016 results & perspectives

    2016 results & perspectives March 2017

  2. Slide 2: Agenda

    AGENDA 2016 results • Successes • Difficulties • Financial results Perspectives Appendix : 2017 agenda 2

  3. Slide 3: Market share gains

    MARKET SHARE GAINS ⅔ of affiliates Growth ahead of the market 3

  4. Slide 4: 2016 Successes in key segments

    2016 Successes in key segments + 14% Dermatology (11% outside US) + 37% Dental + 34% Internal parasiticide (21% outside US) (12% outside US) + 10% + 33% Bovine injectables + 10% Bovine vaccins Petfood physio + 12% Suprelorin 4

  5. Slide 5: St. Louis: lifting of the warning letter

    ST. LOUIS : LIFTING OF THE WARNING LETTER Dec. 2014 Dec. 2015 Aug. 2016 Dec. 2016 Inspection Warning letter Inspection Lifting of Warning letter 5

  6. Slide 6: Agenda

    AGENDA 2016 results • Successes • Difficulties • Financial results 2017 perspectives Appendix : 2017 agenda 6

  7. Slide 7: Chile: difficulties with the salmon business

    CHILE : DIFFICULTIES WITH THE SALMON BUSINESS -15 to -20 % of salmon biomass in Chile due to Algae Bloom in 2016 New Zoetis/Pharmaq SRS vaccine competition Media pressure on antibiotic usage • « Pincoy project » -19% net sales on Aquaculture and decrease of profitability 7

  8. Slide 8: US legacy business: a slower return than expected

    US LEGACY BUSINESS : A SLOWER RETURN THAN EXPECTED 100 ~90 M$ Key products not-yet returned +26 M$ 80 M$ 90 -10 M$ Soloxine 80 Easotic Ketochlor Clintabs 70 54 M$ 60 50 Key products returned later than expected 40 30 Iverhart Plus 20 Iverhart Max Virbantel 10 WormX Plus 0 2015 2016 Actuals 2016 Expe

  9. Slide 9: US market shares: internal parasiticides for dogs

    US MARKET SHARES : INTERNAL PARASITICIDES FOR DOGS (DISPENSED $) Dispensed $ MAT Dec. 15 vs Dec. 16 7,1% Brand n°5 7,8% 7,1% Brand n°4 (new) 1,8% 25,6% Brand n°3 29,0% 13,5% Sentinel (Flavor Tabs 14,4% + Spectrum) 33,9% Brand n°1 33,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 9 Source: Gfk

  10. Slide 10: Agenda

    AGENDA 2016 results • Successes • Difficulties • Financial Results Virbac strategic perspectives Appendix : 2017 agenda 10

  11. Slide 11: 2016 Financials – Summary (1/3)

    2016 FINANCIALS – SUMMARY (1/3) • Solid organic growth of 4.4% • +4.3% in Europe • + 2.2% in ROW (6.9% excl. Aquaculture) • +11.5% in US • Gradual recovery in the US • Double digit sales increase however impacted by a stocking effect in 2016 • Significant improvement of the US Margin in 2016 • Impro

  12. Slide 12: 2016 Financials – Summary (2/3)

    2016 FINANCIALS – SUMMARY (2/3) • Positive Net profit: 37.9 M€ vs 12.7 M€ in 2015 : • Non-recurring expenses : 3.8 M€ in 2015 and -2.6 M€ (profit) in 2016 (IFRS principles related to purchase price allocations in acquisitions) • Taxes : 1.9 M€ in 2015 and 15.0 M€ in 2016 • Decrease of total debt by

  13. Slide 13: 2016 Financials – Summary (3/3)

    2016 FINANCIALS – SUMMARY (3/3) 2016 Last perspectives vs Actuals : Perspectives 2016 Actuals 2016 • Organic growth ~4.5% 4.4% √ • EBIT Adj.1 ratio @ constant rate > 10% 10.4% √ • Covenant2 @ constant rate ~4.5 4.4 √ • Net Debt reduction ~50 M€ 58 M€ √ 1. 2. EBIT Adjusted : Current Operating profit

  14. Slide 14: Consolidated sales

    CONSOLIDATED SALES Million euros 2016 2015 Var.% Consolidated sales 871.8 852.6 +2.3% - Exchange rate impact vs. 2015 19.1 Consolidated sales at constant rates 890.9 852.6 +4.5% - change in perimeter* -0.7 Consolidated sales, pro-forma at 890.2 852.6 +4.4% constant exchange rates st *Acquisition of

  15. Slide 15: 2016 quarterly growth of sales

    2016 QUARTERLY GROWTH OF SALES* +10.0% 230.0 +9.0% Annual growth : +2.3% 225.6 ( 206.6) 225.0 at constant rates : +4.5% +8.0% +7.0% 220.0 +6.0% 215.0 +5.0% 218.5 211.4 ( 220.9) 210.0 +4.0% ( 211.4) +3.0% 216.3 205.0 ( 213.7) +2.0% 200.0 +1.0% +0.0% 195.0 1st quarter 2nd q uarter 3rd q uarter 4th qua

  16. Slide 16: Sales evolution

    SALES EVOLUTION M€ 8.5 2.2% -­‐19.1 15.6 11.5% 14.2 4.3% 871.8 852.6 +38.3 M€ (4.5%) at constant rates +19.2 M€ (2.3%) at actual rates A 2015 Europe US ROW Exchange rates A 2016 16

  17. Slide 17: Breakdown of top 15 countries (85% of sales)

    BREAKDOWN OF TOP 15 COUNTRIES (85% OF SALES) 3 countries decreasing : Chile, Germany, and Australia 5 countries with more than 10% growth : Greater China, New Zealand, Brazil, UK, and USA 21% 29% 6% 2 countries with a growth below 5% : 29% Spain and RSA 5 countries with 5% to 10% growth : Mexico, Be

  18. Slide 18: Sales growth by region

    SALES GROWTH BY REGION at constant rates North America : 151.8 M€ Europe : 336.4 M€ +11.5% +4.3% Asia : 131.3 M€ Africa/Middle East : +10.3% 29.2 M€ Latin America : +3.2% Pacific : 137.1 M€ 85.9 M€ -4,7% +2.5% 18

  19. Slide 19: Sales growth by segment - companion animals

    SALES GROWTH BY SEGMENT - COMPANION ANIMALS at constant rates A 2015 477.8 Parasiticides 102.8 (17.4%) 15.5 Endectocides 83.8 (-­‐5.2%) -­‐4.5 Biologicals 75.7 (1.3%) 1.0 Antibiotics/Dermatology 69.5 (12.3%) 7.7 Specialties 53.1 (7.7%) 3.8 Petfood 30.6 (9.5%) 2.7 Horses 25.9 (4.6%) 1.2 Other 66.8 (1

  20. Slide 20: Sales growth by segment - food producing animals

    SALES GROWTH BY SEGMENT FOOD PRODUCING ANIMALS at constant rates A 2015 364,6 Bovine antibiotics 69 (18,4%) 11,1 Bovine parasiticides 46,9 (0,4%) 0,2 Other bovine p roducts 117,9 (2,7%) 3,2 Antibiotics swine/poultry 42,2 (-­‐6,5%) -­‐3.1 Other swine/poultry 24,6 (14,2%) 3,2 Aquaculture 54,1 (-­‐19,1

  21. Slide 21: Sales breakdown by region and business

    SALES BREAKDOWN BY REGION AND BUSINESS Other developped Europe North America countries* Emerging countries 39.4% 17.4% 12.2% 31.0% (39.1%) (15.8%) (11.9%) (33.1%) Companion Animals 58.3% 28.6 % 17.3 % 5.4 % 6.9 % (28.1 %) (15.7 %) (5.1 %) (7.1 %) (56.0%) Food Producing Animals 40.7% 10.4 % 6,5 % 23.

  22. Slide 22: 2016 profit & loss statement

    2016 PROFIT & LOSS STATEMENT 31/12/2016 % 31/12/2015 % Variation in M€ Net sales 871.8 100.0 852.6 100.0 2.3% Gross margin on material cost 571.7 65.6 554.8 65.1 3.0% External expenses 181.9 20.9 208.1 24.4 -12.6% Personnel expenses 269.7 30.9 252.2 29.6 7.0% Other expenses 10.2 1.2 9.9 1.2 3.0% Dep

  23. Slide 23: Breakdown of EBIT adjusted evolution

    BREAKDOWN OF EBIT ADJUSTED1 EVOLUTION 3.5 -­‐10.5 13.7 M€ -­‐0.1 -­‐9.7 28.5 82.9 57.5 +25.4 M€ (44.2%) at actual rates +35.1 M€ (61.1%) at constant rates 23 1. Current Operating profit before depreciations of assets arising from acquisitions

  24. Slide 24: Contribution of the US operations to the EBIT adjusted

    CONTRIBUTION OF THE US OPERATIONS TO THE EBIT ADJUSTED1 (EXCL. R&D) M$ +13.4 -­‐2.6 13.2 +19.3 -­‐16.9 A 2015 Margin -­‐ activity Margin -­‐ Other** A 2016 increase* inventory depreciation variance & * On Legacy business Consultants* ** Other : Include Sen0nel (Margin and Expenses) & Legacy Expenses

  25. Slide 25: Evolution of cash-flow

    EVOLUTION OF CASH-FLOW 2016 M€ 110.7 +28% 86.4 71.8 +27% 56.4 Operating cash-flow Net cash-flow 31.12.2015 31.12.2016 25

  26. Slide 26: Use of funds

    USE OF FUNDS M€ capex Working capital Dividends Acquisitions Other1 = net debt Net cash flow increase 377.3 -1.2 408.4 Free Cash Flow 2016 : - 83,4 2015 : + 8,4 23.9 0 22.3 -58.0 42.5 0.7 20.8 -56.4 -71.8 40.0 -51.6 3.9 2015 2016 26 1. Including translation variance

  27. Slide 27: Evolution of net debt

    EVOLUTION OF NET DEBT 2016 M€ Net debt Net Cash CAPEX Working Acquisitions Dividends Others Net debt opening flow Capital closing 605.0 -71.8 40.0 547.1 -51.6 0.7 3.9 20.8 31.12.2015 31.12.2016 31.12.2016 31.12.2015 27

  28. Slide 28: Balance sheet analysis

    BALANCE SHEET ANALYSIS M€ 1149.0 1134.3 1149.0 1134.3 221.5 177.6 Working capital Shareholder’s equity 438.4 473.6 Minority interests 105.6 + LT reserves Fixed assets 927.5 956.7 113.6 605.0 547.1 Net financial debt 31/12/2015 31/12/2016 31/12/2015 31/12/2016 INVESTED CAPITAL CAPITAL EMPLOYED 28

  29. Slide 29: Debt situation

    DEBT SITUATION 2016 Q1 Q2 Q3 Q4 Financing available : ~585 M€ Financing available : ~530 M€ • Banking pool : ~420 M€ • Banking pool : ~420M€ Waiver requested and • Schuldschein : ~100 M€1 • Schuldschein : ~30 M€2 obtained • Bi-lateral : ~65 M€ • Bi-lateral : ~80 M€ from Banking pool Covenant : Coven

  30. Slide 30: Balance sheet – financial ratios

    BALANCE SHEET – FINANCIAL RATIOS 2014.12 2015.12 2016.12 138.0 % 115.5% 45.6% Net debt / Shareholder’s equity Group’s share 10.7 7.6 1.9 Net debt / Net cash-flow 7.0 4.9 1.4 Net debt / Operating cash-flow 30

  31. Slide 31: Shareholding

    SHAREHOLDING Number of shares : 8 458 000 In Shares In Voting Rights Treasury Treasury shares shares 0.0% 0.3% Public Public Dick Family 33.1% 49.1% 49.7% Employees Dick Family savings plan 65.8% Employees 1.1% savings plan 0.9% 31

  32. Slide 32: Agenda

    AGENDA 2016 results Virbac 2017 perspectives Appendix : 2016 agenda 32

  33. Slide 33: The Virbac roadmap

    THE VIRBAC ROADMAP 2015-2017 2005-2014 2018 … « Setback and « Roaring decade » « Back to growth » recovery » 33

  34. Slide 34: The Virbac roadmap 2005-2014: Roaring decade

    THE VIRBAC ROADMAP 2005-2014 « Roaring decade » • Focus : growth and step by step profitability improvement § Strong organic growth : 6.6% p.a. § Operating profit improvement : up from 10% to 14% of sales • Organic growth drivers § Geographies : strong growth in the US and emerging markets, moder

  35. Slide 35: The Virbac roadmap 2015-2017: Setback and recovery

    THE VIRBAC ROADMAP 2015-2017 « Setback and recovery » • Focus : compliance, quality, market shares regains (US), cost control, debt reduction § Low organic growth (around 1% p.a.) § Operating profit : plummeting in 2015, gradually recovering • Organic growth drivers § Geographies : strong growth

  36. Slide 36: The Virbac roadmap 2018 and beyond: Back to growth

    THE VIRBAC ROADMAP 2018 … « Back to growth » • From 2018 and beyond : organic growth, profitability improvement, debt reduction § Organic growth in the 5% range § Operating profit ratio increasing steadily to come back to the 2014 level (~14%) • Organic growth drivers § Geographies : US, emerging

  37. Slide 37: US: 2017 perspectives

    US : 2017 PERSPECTIVES Share of 2016 Group Sales • Revenues 17,4% § Expected ex-Virbac flat sales due to a « rubber band » effect with distributors estimated at around $25m § All remaining products not requiring a variation of the registration dossier back during the year Easotic potentially back

  38. Slide 38: The 2016-2017 rubber band effect

    THE 2016-2017 « RUBBER BAND » EFFECT Virbac Distributors Virbac Distributors In M$ sales sales sales sales 167 ~167 ~$25m1 Others brands 62,5 Iverhart 17,5 Sentinel 87 2016 2017 1. Virbac estimates 38

  39. Slide 39: Aquaculture: 2017 perspectives

    AQUACULTURE : 2017 PERSPECTIVES Share of 2016 Group Sales • No growth expected, but still uncertainty 7,9% § Moderate increase of the biomass following the sharp reduction of 2016, coming from the « algae bloom » § Impact of the new live SRS vaccine from Pharmaq § Lower level of antibiotic consum

  40. Slide 40: Europe: 2017 perspectives

    EUROPE : 2017 PERSPECTIVES Share of 2016 Group Sales § Moderate growth expected, both in companion animals 38.6% and food producing animals § Growth drivers in companion animals : - Parasiticides : Effipro Duo and Effitix - Petfood :roll out of Veterinary HPM Preventive, launch of HPM Diet - Supre

  41. Slide 41: Latin America / Asia / Pacific: 2017 perspectives

    LATIN AMERICA / ASIA / PACIFIC : 2017 PERSPECTIVES Share of 2016 Group Sales Significant growth expected § Double digit growth expected in many key markets : 36.1% - India (subject to ending of liquidity crisis) - Brazil - China (CA, digital initiative) - Colombia (CA and FPA) - Most Asian countrie

  42. Slide 42: 2018 and beyond: growth factors and profitability improvement opportunities

    2018 AND BEYOND : GROWTH FACTORS AND PROFITABILITY IMPROVEMENT OPPORTUNITES Geographies § Rebound in the US • No more « rubber band » effect • Return to market of Easotic and later Soloxine • New products registered and launched from 2018 on • Margin improvements expected on Sentinel Spectrum (in S

  43. Slide 43: Across the board

    ACCROSS THE BOARD § Innovation Stronger flow of new products hitting the market from 2018 on § Cost control and debt control • Major effort to step up quality and compliance gradually leveled off (US, France) • Initiatives to maintain OPEX evolution strictly under revenue and margin growth • Initi

  44. Slide 44: Estimated peak sales potential of the main innovation projects

    ESTIMATED PEAK SALES POTENTIAL OF THE MAIN INNOVATION PROJECTS (March 2017) Launch Companion Animals M€ Food Producing Animals M€ Year • External parasiticides (Europe, US) 2017 12 • Anaesthetics (US) • Dermatology (US, Japan) • Swine vaccine (Asia) • Internal parasiticide for ruminants • Anti infec

  45. Slide 45: 2017 perspectives – summary

    2017 PERSPECTIVES – SUMMARY • 2017 Organic growth : low single digit • 2017 Q1 Organic growth : negative • EBIT Adj.1 Ratio : ~+0.5 pt vs 2016 @ constant rate • Debt reduction : 30 to 50 M€ (no dividends paid by Virbac SA) 45 1. EBIT Adjusted : Current Operating profit before depreciations of assets

  46. Slide 46: Agenda

    AGENDA 2016 results Virbac strategic perspectives Appendix : 2017 agenda 46

  47. Slide 47: 2017 agenda

    2017 AGENDA April 12* Q1 sales June 23 Annual shareholders’ meeting July 17* Q2 – H1 sales September 11* Half-year financial results October 12* Q3 sales January 16, 2018* Q4 – Full year sales * After market close 47

  48. Slide 48: Thank you

    Thank you for your attention Shaping the future of animal health

  49. Slide 49: Disclaimer

    Disclaimer This presentation contains forward-looking statements with respect to Virbac’s profitability and financial condition, business operations, projects and outlook. Although Virbac’s management believes that such forward-looking statements are based on reasonable assumptions, as made as of th

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