Virbac SA · EURONEXT:VIRP
Virbac SA — H1 2016 Earnings Presentation
48 slides from Virbac SA's earnings presentation, September 2016
Slide 1: 2016 Half Year Financials and Strategic Update
2016 Half Year Financials and Strategic Update September 2016
Slide 2: Agenda
AGENDA 2016 results Virbac strategic perspectives Appendix : 2016 Agenda 2
Slide 3: H1 2016 Financials - Summary (1/3)
H1 2016 FINANCIALS - SUMMARY (1/3) P&L : • Solid organic growth outside of the US and Chile : • +6.1% in Europe • +7.7% in the rest of world (outside of US and Chile) • Slight sales increase in the US (+0.7%) • Gradual ramp-up of production and sales of legacy products • Sentinel sales decrease due
Slide 4: Exchange Rate Evolution 2016 vs 2015
EXCHANGE RATE EVOLUTION 2016 VS 2015 Average exchange rate at the end of June USD GBP JPY MXN AUD ZAR BRL INR CHF CLP H1 2015 1,11 0,73 134,1 16,9 1,42 13,3 3,32 70,1 1,06 690,2 H1 2016 1,11 0,78 123,3 20,2 1,52 17,2 4,11 75,0 1,10 770,5 Variance A16/A15 0,0% -6,3% 8,8% -16,3% -6,4% -22,6% -19,1% -6
Slide 5: H1 2016 Financials - Summary (2/3)
H1 2016 FINANCIALS - SUMMARY (2/3) P&L : • Positive Net profit: 13.1 M€ vs. -3.8 M€ in 2015 : • 2015 included 7.9 M€ of non-recurring expenses (IFRS principles related to purchase price allocations in acquisitions) • 2016 included -9.7 M€ of taxes vs. 0 M€ in 2015 5
Slide 6: H1 2016 Financials - Summary (3/3)
H1 2016 FINANCIALS - SUMMARY (3/3) FINANCIAL SITUATION : • Stabilization of total debt despite usual increase during H1 • Net Debt @ 607 M€ vs. 605 M€ in 2015 • On-going improvement of Net Debt on EBITDA ratio • From 7.3 in June 2015 to 5.8 in June 2016 6
Slide 7: Consolidated Sales
CONSOLIDATED SALES H1 2016 Million euros H1 2016 H1 2015 Var.% Consolidated sales 430.0 432.3 -0.5% - Exchange rate impact vs. 2015 18.0 Consolidated sales at constant rates 448.0 432.3 +3.6% - change in perimeter (0.5) Consolidated sales, pro-forma at constant exchange rates 447.5 432.3 +3.5% 7
Slide 8: 2016 Quarterly Growth of Sales
2016 QUARTERLY GROWTH OF SALES* H1 2016 Semester: +3.6 % * ( ) : 2015 8
Slide 9: Sales Evolution
SALES EVOLUTION H1 2016 M€ +2.6% +0.7% +6.1% +7.7% without Chile +15.7 (+3.6%) at cst rates -2.3 (-0.5%) at actual rates 9
Slide 10: Breakdown of Top 15 Countries (82% of Sales)
BREAKDOWN OF TOP 15 COUNTRIES (82% OF SALES) H1 2016 at constant rates H1 2016 4 countries decreasing : 6 countries with more than 10% growth : Chile, Germany, Australia and RSA Greater China, Brazil, UK, New Zealand, Benelux and France 2 countries with a growth below 5% : 3 countries with 5% to 10%
Slide 11: Sales Growth by Region
SALES GROWTH BY REGION H1 2016 at constant rates North America : 72.4 M€ Europe : 171.2 M€ +0.7% +6.1% Asia : 61.8 M€ Africa/Middle East : +9.8% 14.5 M€ Latin America : +4.7% Pacific : 68.0 M€ -2.9% 42.1 M€ +2.1% 11
Slide 12: Sales Growth by Segment: Companion Animals
SALES GROWTH BY SEGMENT COMPANION ANIMALS H1 2016 at constant rates A 2015 242.4 Parasiticides 55.9 (+5.9%) 3.8 Endectocides 43.6 (-2.7%) 1.2 Biologicals 37.8 (+3.3%) 1.3 Antibiotics/Dermatology 33.1 (+21.0%) 6.0 Specialties 25.5 (+5.0%) 1.2 Petfood 14.8 (+12.1%) 1.6 Horses 10.7 (-1.9%) -0.2 Other 3
Slide 13: Sales Growth by Segment: Food Producing Animals
SALES GROWTH BY SEGMENT FOOD PRODUCING ANIMALS H1 2016 at constant rates A 2015 185.2 Bovine antibiotics 31.0 (+16.8%) 4.8 Bovine parasiticides 24.2 (+0.3%) 0.1 Other bovine products 56.9 (+1.3%) 0.8 Antibiotics swine/poultry 20.9 (-5.4%) -1.3 Other swine/poultry 11.8 (+13.8%) 1.5 Aquaculture 28.3 (
Slide 14: Sales Breakdown by Region and Business
SALES BREAKDOWN BY REGION AND BUSINESS H1 2016 Other developped Europe North America countries* Emerging countries 40.8% 16.8% 12.0% 30.4% (38.5%) (16.6%) (12.1%) (32.8%) Companion 30.2 % 16.8 % 5.0 % 6.6 % Animals 58.6% (27.9 %) (16.5 %) (4.7 %) (6.9 %) (56.1%) Food Producing Animals 40.3% 10.3 % 6
Slide 15: 2016 Profit & Loss Statement
2016 PROFIT & LOSS STATEMENT H1 2016 30/06/2016 % 30/06/2015 % V ar iat ion in M€ Net sales 430.0 100.0 432.3 100.0 - 0.5% Gross margin on material cost 287.3 66.8 278.7 68.4 3.1% External expenses 95.9 22.3 98.2 22.7 -2.3% Personnel expenses 135.4 31.5 127.4 29.5 6.3% Other expenses 4.5 1.0 11.1 2.
Slide 16: Breakdown of EBIT Adjusted Evolution
BREAKDOWN OF EBIT ADJUSTED EVOLUTION H1 2016 M€ Patent Litigation 16
Slide 17: Contribution of the US Operations to EBIT Adjusted excl. R&D
CONTRIBUTION OF THE US OPERATIONS TO THE EBIT ADJUSTED & EXCL. R&D H1 2016 M$ +2.2 -0.2 +5.7 +5.3 * On legacy business *** Other : Include Sentinel (Margin and Expenses) & Other Expenses 17 ** Both margin and OPEX (on legacy business)
Slide 18: Evolution of Cash-Flow
EVOLUTION OF CASH-FLOW H1 2016 M€ 52.0 +19.9% 43.4 32.9 86.4 35.2 +6.7% Operating cash-flow (« EBIT DA ») Net cash-flow 30.06.2015 30.06.2016 18
Slide 19: Use of Funds
USE OF FUNDS H1 2016 M€ Net cash flow capex Working capital Dividends Acquisitions Other* = net debt increase 367.7 -0.2 Impact of Free cash flow on debt 2016 : -2.9 435.8 2015 : +44.4 23.9 56.2 1.7 2.3 18.5 0 2.3 H1 2016 12.2 -56.4 -35.2 H1 2015 21.2 20.1 -33.0 H1 2016 19 * Including translation va
Slide 20: Evolution of Net Debt
EVOLUTION OF NET DEBT H1 2016 M€ Net debt Net Cash CAPEX Working Acquisitions Dividends Others Net debt opening flow Capital closing 605.0 0.0 2.3 606.8 605.0 12.2 2.3 -35.2 20.1 Au 31.12.2015 Au 31.12.2014 30.06.2016 31.12.2015 20
Slide 21: Balance Sheet Analysis
BALANCE SHEET ANALYSIS H1 2016 M€ 1171.4 1171.4 1159.2 1159.2 Working capital 247.3 237.8 Shareholder’s equity 430.7 443.0 Minority interests 108.3 + LT reserves Fixed assets 924.1 921.4 109.4 632.4 606.8 Net financial debt 30/06/2015 30/06/2016 30/06/2015 30/06/2016 INVESTED CAPITAL CAPITAL EMPLOYE
Slide 22: Balance Sheet - Financial Ratios
BALANCE SHEET - FINANCIAL RATIOS H1 2016 2015.06 2015.12 2016.06 146.8 % 138.0 % 137.0% Net debt / Shareholder’s equity Group’s share 9.59 10.74 8.63 Net debt / Net cash-flow 7.28 7.0 5.83 Net debt / Operating cash-flow 22
Slide 23: Shareholding
SHAREHOLDING H1 2016 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 65.7% Employees 1.2% savings plan 0.9% 23
Slide 24: 2016: Financial Perspectives
2016 : FINANCIAL PERSPECTIVES • Sales organic growth : 4.5% to 6.5% • EBITA perspective : above 10% at constant exchange rates • Net debt reduction : around 50M€ • End of year Net Debt/EBITDA ratio : around 4.5 at constant exchange rates 24
Slide 25: Agenda
AGENDA 2016 results Virbac strategic perspectives Appendix : 2016 Agenda 25
Slide 26: Strategic Perspectives
STRATEGIC PERSPECTIVES • US • Aquaculture • Antibiotics : Risks and opportunities • R&D portfolio • Non pharma regulated products and petfood • Emerging markets 26
Slide 27: US
US • Inspection by the FDA of the St Louis site from August 9th to September 7th • 5 observations • Responses by Virbac before September 28th • Decision by the FDA expected in a 2 to 6 months period • Legacy products : • Slow ramp up of Iverhart + • Expected return of Iverhart Max before year end •
Slide 28: St Louis Operational Performance Status
ST LOUIS OPERATIONAL PERFORMANCE STATUS 120 33 90 23 45 6 Number of SKU’s Average production and back in production quality review lead time in days (major products) 28 Mid 2015 End 2015 Mid 2016
Slide 29: Perspectives for US Legacy Portfolio
PERSPECTIVES FOR US LEGACY PORTFOLIO ($ million, excluding Sentinel) 136.6 Around Around 90 90 * 54.2 2014 Actual 2015 Actual 2016 Perspective 2016 Perspective (March) (September) 29 * linked to Iverhart Max relaunch
Slide 30: US: Sentinel and New Products
US • Sentinel: • Market share loss following the agressive relaunch of Interceptor, in the context of a slightly declining market • New products : • Launch of Effipro Plus and Effitix Plus in the fall, providing Virbac with a very comprehensive range of parasiticides for companion animals 30
Slide 31: US Market Shares: Internal Parasiticides for Dogs (Doses)
US MARKET SHARES : INTERNAL PARASITICIDES FOR DOGS (DISPENSED DOSES) Dispensed doses MAT Jul. 15 vs Jul. 16 4,2% Brand n°5 4,4% 6,6% Brand n°4 (new) 1,0% 13,9% Brand n°3 15,6% 14,8% Sentinel (Flavor Tabs 15,9% + Spectrum) 46,3% Brand n°1 45,2% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 45,0
Slide 32: US Market Shares: Internal Parasiticides for Dogs ($)
US MARKET SHARES : INTERNAL PARASITICIDES FOR DOGS (DISPENSED $) Dispensed $ MAT Jul. 15 vs Jul. 16 7,4% Brand n°5 7,7% 5,0% Brand n°4 (new) 0,8% 27,1% Brand n°3 30,0% 13,9% Sentinel (Flavor Tabs 14,4% + Spectrum) 33,7% Brand n°1 32,2% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 32 Source: Gfk
Slide 33: Virbac US Parasiticide Portfolio in 2017
VIRBAC US PARASITICIDE PORTFOLIO IN 2017 ECTOPARASITICIDE ENDOPARASITICIDE MOLECULES Flea adulticide Tick adulticide Larvicide Repellency Heartworn Intestinal worms Tapeworm Milbemycine Sentinel TAB Lufenuron Milbemycine Sentinel Spectrum Lufenuron Praziquantel Ivermectine Iverhart + Pyrantel Iverme
Slide 34: Aquaculture: Key Factors in Salmon Production
AQUACULTURE • Key factors in salmon production Sharp reduction of the Chilean salmon production in 2016 (-24% vs last 4 years average) due to the massive algae bloom and to a lower extent to SRS (bacterial infection) International price of salmon up 50% in 2016 to a 30 years high due to an imbal
Slide 35: Aquaculture: Impact on Centrovet and Perspectives
AQUACULTURE • Impact on Centrovet and perspectives Very high sales of Antibiotics in 2015 (Veterin), going down sharply in 2016 Decline of vaccine usage by salmon producers in 2015 (perception of lower efficacy) resulting in reduction of vaccine sales in 2015 and low sales in H1 2016 Expected
Slide 36: Antibiotics - Risks and Opportunities
ANTIBIOTICS - RISKS AND OPPORTUNITIES • Importance to Virbac Slightly more than 20% of global turnover, excluding aquaculture Region/specie split : - 50% Europe / 50% ROW - 40% companion animals/60% food producing animals • European context : growing pressure to reduce consumption Consumer pre
Slide 37: Antibiotics - Risks and Opportunities: ROW Context
ANTIBIOTICS - RISKS AND OPPORTUNITIES • ROW context : moderate or no pressure In the US, use of antibiotics as growth promoters banned from 2017 (more than a decade after Europe) In Asia / Pacific / Latin America : no sensitivity on the issue except some specific cases (dairy in New Zealand for
Slide 38: Antibiotics - Impact on Virbac
ANTIBIOTICS - IMPACT ON VIRBAC • Europe Expected decline of 3rd and 4th generation cephalosporin based products (Virbactan) Expected decline of Colistin based products (Multibio, Potencil) Gains expected on traditional penicillin based products (Shotapen) or sulfamid based products (Amphoprim)
Slide 39: Estimated Peak Sales Potential of the Main Innovation Projects
ESTIMATED PEAK SALES POTENTIAL OF THE MAIN INNOVATION PROJECTS Launch Companion Animals M€ Food Producing Animals M€ Year • External parasiticides (Europe) 2017 • Dermatology (Japan) 15 • Anaesthetics (US) • Dermatology (US) • Anti infectious (Europe) • Swine vaccine (Asia) 2018 25 • Internal parasi
Slide 40: Growth Drivers: Non Pharma Registered Products & Petfood
GROWTH DRIVERS : NON PHARMA REGISTERED PRODUCTS & PETFOOD IN THE VET CHANNEL >2 billions € >350 millions € Non pharma registered products Petfood in the vet channel dermatology dentals neutraceuticals 40 Source: CEESA, Petfoodindustry.com, National statistics
Slide 41: Non Pharma Registered Products
NON PHARMA REGISTERED PRODUCTS Market Attractiveness Virbac Strengths • Growth potential ( >5% p.a.) • Leadership position with around 25% • Short development cycles market share • Regulated, but not comparable to • Strong credibility in dermatology and pharma dentals, a bit less in neutraceuticals
Slide 42: Pet Food in the Vet Channel
PET FOOD IN THE VET CHANNEL Market Attractiveness Virbac Strengths • Sizable and growing market • Strong positions in France and Belgium • Strategic value for the vet (repeat • New innovative range (« HPM ») : purchase by petowners) - high protein content (35% vs 25% in average for competitors) • St
Slide 43: Perspectives in Emerging Countries
PERSPECTIVES IN EMERGING COUNTRIES 1st half sales growth (constant exchange rate) 2nd half <0% 0/+5% +5%/+10% +10%/+20% >20% perspectives India Mexico = Brazil = South Africa China / Taïwan = Colombia Viet Nam = Uruguay 43 2016
Slide 44: 2016: Financial Perspectives
2016 : FINANCIAL PERSPECTIVES • Sales organic growth : 4.5% to 6.5% • EBITA perspective : above 10% at constant exchange rates • Net debt reduction : around 50M€ • End of year Net Debt/EBITDA ratio : around 4.5 at constant exchange rates 44
Slide 45: Agenda
AGENDA 2016 results Virbac strategic perspectives Appendix : 2016 Agenda 45
Slide 46: 2016 Agenda
2016 AGENDA October 13* Q3 sales January 17, 2017*Q4 – Full year sales * After market close 46
Slide 47: Thank you
Thank you for your attention Shaping the future of animal health
Slide 48: 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