Virbac SA · EURONEXT:VIRP
Virbac SA — H1 2018 Earnings Presentation
46 slides from Virbac SA's earnings presentation, September 2018
Slide 1: 2018 half year results & perspectives
2018 half year results & perspectives September 2018
Slide 2: Agenda
AGENDA 2018: half year results • Financial results • Focus USA Strategy execution & perspectives Appendix : 2018 agenda 2
Slide 3: 2018 Financials – Summary (1/3)
2018 FINANCIALS – SUMMARY (1/3) H1 2018 _ • Solid organic growth outside of the USA • Sales growth 5.3 % • Margin growth 6.0% • Slight sales decrease in the USA (-2.6 M€) due to destocking effect however continued growth of sales at clinic level • + 8.8 M€ increase of Ebit adjusted (Ebita1) @ consta
Slide 4: 2018 Financials – Summary (2/3)
2018 FINANCIALS – SUMMARY (2/3) H1 2018 Average rates USD GBP JPY MXN AUD ZAR BRL INR CHF CLP A 2017 1.10 0.86 122 20.9 1.44 14.3 3.44 71.0 1.08 714 A 2018 1.19 0.88 131 23.1 1.57 14.9 4.15 79.6 1.17 740 Variance A18/A17 -8.1% -2.0% -7.0% -9.5% -8.4% -3.9% -17.1% -10.8% -7.9% -3.6% Average rates NZD
Slide 5: 2018 Financials – Summary (3/3)
2018 FINANCIALS – SUMMARY (3/3) H1 2018 • Positive net profit from ordinary activities : 16.8 M€ vs. 16.0 M€ @ real rate • Negatively impacted by exchange (-3.6 M€) • Net profit: 12.6 M€ vs. 16.0 M€ in 2017 impacted, beyond exchange rate, by : • Non-recurring expenses in 2018 : 1.2 M€ - Restructur
Slide 6: Consolidated Sales
CONSOLIDATED SALES H1 2018 Million euros 2018 2017 Var.% Consolidated sales 430.0 437.5 -1.7% - Exchange rate impact vs. 2017 24.5 Consolidated sales at constant rates 454.5 437.5 +3.9% - change in perimeter 0.0 Consolidated sales, pro-forma at 454.5 437.5 +3.9% constant exchange rates 6
Slide 7: Sales Evolution
SALES EVOLUTION H1 2018 M€ 5.8% -3.8% 11.8 -2.5 -24.5 4.5% 7.7 437.5 -7.5 M€ (-1.7%) at actual rates 430.0 17 M€ (3.9%) at constant rates A 2017 Europe ROW US Exchange rates A 2018 7
Slide 8: Sales Growth by Region
SALES GROWTH BY REGION H1 2018 At constant rates Europe North America 177.8 M€ 62.2 M€ +4.5% -3.8% Asia 75.2 M€ +8.0% Africa/Middle East 16.6 M€ Latin America +3.8% 76.6 M€ +4.2% Pacific 46.2 M€ +5.8% 8
Slide 9: Sales Growth by Segment - Companion Animals
SALES GROWTH BY SEGMENT - COMPANION ANIMALS H1 2018 A 2017 241.9 At constant rates Parasiticides 68.7 (-14.9%) - 12.6 Other 49.4 (21.1%) 9.2 Biologicals 35.7 (6.7%) 2.3 Specialties 35.1 (22.8%) 6.7 Antibiotics/Dermatology 34.8 (6.7%) 2.3 Petfood 19.5 (28%) 4.3 Exchange rate - 10.9 0 (0%) A 2018 243.
Slide 10: Sales Growth by Segment - Companion Animals excl. USA
SALES GROWTH BY SEGMENT - COMPANION ANIMALS EXCL. USA H1 2018 At constant rates A 2017 178.6 Parasiticides 39.7 (0.2%) 0.1 Biologicals 35.7 (6.7%) 2.3 Other 35.2 (12.8%) 4.1 Specialties 29.2 (13.6%) 3.6 Antibiotics/Dermatology 28.6 (3%) 0.9 Petfood 19.5 (28%) 4.3 Exchange rate - 6.0 A 2018 187.9 10
Slide 11: Sales Growth by Segment - Food Producing Animals
SALES GROWTH BY SEGMENT - FOOD PRODUCING ANIMALS H1 2018 At constant rates A 2017 188.3 Other bovine products 69 (16.4%) 10.6 Bovine antibiotics 33.4 (7.4%) 2.4 Bovine parasiticides 25.5 (-0.7%) - 0.2 Aquaculture 22.6 (-14.1%) - 4.0 Antibiotics swine/poultry 18.6 (-12.1%) - 2.6 Other swine/poultry 1
Slide 12: Sales Breakdown by Region and Business
SALES BREAKDOWN BY REGION AND BUSINESS H1 2018 Other developped Europe North America countries* Emerging countries 41.7% 13.2% 12.1% 33.0% (39.6%) (14.8%) (11.9%) (33.7%) Companion Animals 56.6% 30.7 % 12.9 % 4.7 % 8.4 % (28.6 %) (14.5 %) (4.5%) (7.7 %) (55.3%) Food Producing 24.4% Animals 42.3% 10.
Slide 13: 2018 Profit & Loss Statement
2018 PROFIT & LOSS STATEMENT H1 2018 in M€ H1.2018 % H1.2017 % Variation Net sales 430.0 100.0 437.5 100.0 -1.7% Gross margin on material cost 285.0 66.3 286.6 65.5 -0.6% External expenses 87.8 20.4 89.4 20.4 -1.8% Personnel expenses 133.5 31.1 136.4 31.2 -2.1% Other expenses 5.7 1.3 5.9 1.4 -3.6% D
Slide 14: Breakdown of Ebit Adjusted Evolution
BREAKDOWN OF EBIT ADJUSTED1 EVOLUTION H1 2018 4.6 -2.4 M€ -4.4 1.9 2.0 2.8 45.2 40.7 2 1. Current operating profit before depreciations of assets arising from acquisitions 14 2. RDL : Research, Development & Licensing
Slide 15: Evolution of Cash-Flow
EVOLUTION OF CASH-FLOW H1 2018 +6.1% Operating cash flow 59.5 Net cash flow 56.1 +4.8 % 33.0 31.5 H1.2017 H1.2018 15
Slide 16: Use of Funds
USE OF FUNDS H1 2018 M€ Net cash flow Capex Working capital Dividends Acquisitions Other1 = net debt increase Free Cash Flow H1 2018 : +23.1 1.7 2.3 1.7 H1 2017 : +21.5 27.1 35.0 39.5 -27.3 -4.1 0 18.0 16.6 -31.5 -33.0 H1 2017 H1 2018 1. Including translation variance 16
Slide 17: Evolution of Net Debt
EVOLUTION OF NET DEBT H1 2018 M€ Net debt Net Cash CAPEX Working Acquisitions Dividends Others Net debt opening flow Capital closing 487.1 1.7 2.3 39.5 16.6 -33.0 460.0 30.06.2018 31.12.2017 17
Slide 18: Balance Sheet Analysis
BALANCE SHEET ANALYSIS H1 2018 1 121.5 M€ 1 036.5 M€ 1 121.5 M€ 1 036.5 M€ 217.7 165.6 471.9 450.2 106.6 99.2 903.8 870.9 543.0 487.1 H1.2017 H1.2018 H1.2017 H1.2018 Fixed assets Working capital Shareholder's equity Minority interests + LT reserves Net financial debt INVESTED CAPITAL CAPITAL EMPLOYE
Slide 19: Debt Situation – Easing of Covenant and RCF Maturity
DEBT SITUATION – EASING OF COVENANT IN 2018 AND POSTPONEMENT OF RCF MATURITY Situation Dec. 2017 Situation Sept. 2018 Financing available :~620 M€ Financing available : ~610 M€ • Banking pool (RCF1) : ~420M€ 2020 maturity • Banking pool (RCF1) : ~420M€ Financial covenant 2022 maturity • BEI : ~90 M$
Slide 20: Balance Sheet – Financial Ratios
BALANCE SHEET – FINANCIAL RATIOS H1 2018 2017.06 2017.12 2018.06 115.1 % 105.4 % 108.2 % Net debt Shareholder’s equity Group’s share 8.6 7.4 7.4 Net debt/Net cash-flow 4.8 4.3 4.1 Net debt/Operating cash-flow1 1. The methodology for calculating the bank covenant differs from the accounting method. 2
Slide 21: Shareholding
SHAREHOLDING Number of shares : 8 458 000 In Shares In Voting Rights Treasury shares Treasury 0.0% shares Public 0.4% Public Dick Family 33.1% 49.1% 49.7% Employees Dick Family savings plan 65.8% Employees 1.1% savings plan 0.8% 21
Slide 22: Agenda
AGENDA 2018: half year results • Financial results • Focus USA Strategy execution & perspectives Appendix: 2018 agenda 22
Slide 23: US In-Market Performance at Clinic Level
US IN-MARKET PERFORMANCE AT CLINIC LEVEL H1 2018 (M$ ) Sales from Virbac to distrib.1 Sales from distrib. to clinics2 (extended sales) 2017 2018 2018 vs. 2018 vs. 2017 2017 Sentinel 40.2 26.3 -35% - 5% Iverhart 3.2 3.3 +3% +21% Others 27.4 38.33 +40% +17% 70.9 68.0 -4% +2% Total Destocking at distri
Slide 24: US Market Shares Internal Parasiticides for Dogs
US MARKET SHARES INTERNAL PARASITICIDES FOR DOGS Dispensed $ MAT 40% 30% 33.3% 33% 29% 20% 21.6% 10% 14.4% 12.3% 11.6% 7.8% 0% 6.2% 1.8% December 15 June 16 December 16 June 17 December 2017 June 2018 Sentinel Brand 1 Brand 2 Brand 3 Brand 4 Source: Kynetec 24
Slide 25: Contribution of the US Operations to the Ebit Adjusted
CONTRIBUTION OF THE US OPERATIONS TO THE EBIT ADJUSTED1 H1 2018 Excluding R&D M$ Margin Impact +1.1 4.0 +2.3 OPEX decrease +1.5 Margin improvements A 2018 (Absorption, gross to net) -0.9 New contract manufacturing A 2017 one-time revenue 1 Current operating profit before depreciations of assets aris
Slide 26: Agenda
AGENDA 2018 half year results Strategy execution & perspectives Appendix : 2018 agenda 26
Slide 27: Strategy Definition – Areas of Focus
STRATEGY DEFINITION – AREAS OF FOCUS • Geographies USA Emerging countries • Species & segments Companion animals Ruminants Aquaculture Swine • Value Chain Innovation (RD&L) Manufacturing & Quality Commercial 27
Slide 28: Strategy - From Definition to Execution
STRATEGY - FROM DEFINITION TO EXECUTION Vision : a unique, innovative and agile company shaping the future of animal health, empowering and engaging each employee to enrich the customer experience. Vision & Values : entrepreneurship, innovation, engagement, customer- Values driven, attention to peop
Slide 29: Key Projects Illustration
KEY PROJECTS ILLUSTRATION Cost control 29
Slide 30: Strategy Execution Timeline – Executive Summary
STRATEGY EXECUTION TIMELINE – EXECUTIVE SUMMARY US improvement plan (Commercial, Manufacturing, Innovation) Petfood Geo-extension Entry in the US Food Non pharmaceutical - programs producing animal market regulated products Partnerships China development Commercial Virbac-busters Swi
Slide 31: Strategy Execution – Areas of Focus (1/4): Geographies
STRATEGY EXECUTION – BACK TO GROWTH – AREAS OF FOCUS (1/4) GEOGRAPHIES USA EMERGING MARKETS SHORT TERM = BACK TO GROWTH SHORT TERM = BRAZIL, INDIA, CHINA in CA 1. YTD June 2018 in-market 1. YTD June 2018 ex-Virbac performance performance1 vs. 2017 at constant rate vs. 2017 at constant rate Brazil :
Slide 32: Strategy Execution – Areas of Focus (2/4): Companion Animals
STRATEGY EXECUTION – BACK TO GROWTH – AREAS OF FOCUS (2/4) SPECIES COMPANION ANIMALS 1. YTD June sales growth vs. 2017 3. New products & commercial in- At constant rate licensing Petfood +28% Iverhart Max Soft Chew CA Specialties +23% (USA, end of Q2-2018) Moxiheart chewable in Japan MSD’s deals in
Slide 33: Petfood: +28% Growth vs. June 2017 at Constant Rate
PETFOOD : +28% GROWTH VS. JUNE 2017 AT CONSTANT RATE Organic growth of current ranges (gain MS%) Launch of dietetic range + new products Double digit growth in all countries Geo-extension B2C strategy, digital & e-commerce 33
Slide 34: To Create and Build Virbac Buster Products
TO CREATE AND BUILD VIRBAC BUSTER PRODUCTS (LONG TERM) Innovation Commercial R&D pipeline (generation of new ideas) Virbac Boost of commercial investments Life cycle management (label extensions, new species, new claims) buster Geo-extensions Medical trials (KOL, Phase IV studies) Business Developme
Slide 35: Virbac Buster Commercial Programs - Early Candidates
VIRBAC BUSTER COMMERCIAL PROGRAMS - EARLY CANDIDATES Investing to develop “Virbac busters” through a pilot approach in selected countries Suprelorin in Germany VIRBAC BUSTER program Veterinary HPM in UK Veggiedent Chews in USA 35
Slide 36: Strategy Execution – Areas of Focus (3/4): Ruminants
STRATEGY EXECUTION – BACK TO GROWTH – AREAS OF FOCUS (3/4) SPECIES RUMINANTS 1. YTD June sales growth vs. 2017 at constant rate Strategic countries: - Brazil +29% - India +19% Strategic segments: - Vaccines +37% - Nutritional complements +18% 2. New affiliate in Turkey (impact mid-term) 36
Slide 37: Strategy Execution – Areas of Focus (4/4): Aquaculture, Swine
STRATEGY EXECUTION – BACK TO GROWTH – AREAS OF FOCUS (4/4) SPECIES AQUACULTURE SWINE SHORT/MID/LONG TERM SHORT/MID/LONG TERM 1. Active Geo-extension 1. Vaccines: YTD June vs. 2017: -16% at cst rate New distributors (new countries) 2. New products: PCV2 launch to come Regulatory investments (new
Slide 38: Aquaculture Focus - Different Dynamics
AQUACULTURE FOCUS - DIFFERENT DYNAMICS Chile: YTD June vs. 2017: -18.1% Competitive pressure - Antibiotics (florfenicol price) - Multi-valent vaccines (injectables and oral vaccines) Growth opportunities > Increasing capacity in Chile - Emerging diseases - KAM approach - Recruitment of ex-Pharma
Slide 39: 2018 Half Year Achievements for Ebita Value Creation
2018 HALF YEAR ACHIEVEMENTS FOR EBITA VALUE CREATION Manufacturing, quality & supply focus St. Louis optimization: Sentinel spectrum in-house, CMO activity for third parties (signed & initiated), new products Iverhart Max Soft Chew Brazil closing of the plant: manufacturing externalization to re
Slide 40: Estimated Peak Sales Potential of Main R&DL Projects
ESTIMATED PEAK SALES POTENTIAL OF MAIN R&DL PROJECTS (September, 2018) Launch Companion Animals M€ Food Producing Animals M€ Year • Anti-infectives • Vaccines 2019 • Non pharma products 12 • Parasiticides 10 • Parasiticides • Parasiticides 2020 • Dermatology 20 • Anti-infectives 15 • Non pharma prod
Slide 41: Virbac Strategy - Increase Profitability
VIRBAC STRATEGY - INCREASE PROFITABILITY 1 key objective 3 main levers ~15 of Ebita % 1 US infrastructure • Top-line revenue growth • St. Louis profitability improvement plan leverage • Entry in FPA • Leveraging emerging countries dynamism Profitable growth in • Controlling cost of doing other geogr
Slide 42: 2018 Updated Perspectives – Summary
2018 UPDATED PERSPECTIVES – SUMMARY • 2018 organic growth1: low single digit • Ebit adj.2 ratio: + ~1 pt @ constant rate • Debt reduction: ~ 30 M€ @ constant rate (no dividends paid by Virbac SA) 1. At constant exchange rates and scope 2. Ebit adjusted : current operating profit before depreciations
Slide 43: Agenda
AGENDA 2018: half year results Strategy roll-out & perspectives Appendix: 2018 agenda 43
Slide 44: 2018 Agenda
2018 AGENDA April 12* Q1 sales June 20 Annual shareholders’ meeting July 17* Q2 – H1 sales September 17* Half year financial results October 11* Q3 sales January 17, 2019* Q4 – Full year sales * After market close 44
Slide 45: Thank you
Thank you for your attention 45
Slide 46: 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