Virbac SA · EURONEXT:VIRP
Virbac SA — FY2017 Earnings Presentation
55 slides from Virbac SA's earnings presentation, March 2018
Slide 1: 2017 results & perspectives
2017 results & perspectives March 2018
Slide 2: Agenda
AGENDA 2017: results • Financial results • Focus US Perspectives Appendix: 2018 agenda 2
Slide 3: 2017 Financials – Summary (1/3)
2017 FINANCIALS – SUMMARY (1/3)_ • Solid organic growth outside USA • Sales growth 3.6% • Margin growth 5.6% • Too slow ramp up in the USA • Sales decrease in 2017 compared to 2016 due to a stocking effect in distribution in 2016 (~25 M$) and lower than expected sales ex-distributors (+4%) • Slight
Slide 4: 2017 Financials – Summary (2/3)
2017 FINANCIALS – SUMMARY (2/3) • Net profit: 1.8 M€ vs 37.9 M€ in 2016 impacted by : • Non-recurring expenses in 2017: • 6.3 M€ - Impairment on CaniLeish and restructuring cost in the USA ( vs. -2.6 M€ profit in 2016 linked to IFRS principles related to purchase price allocations in acquisitions) •
Slide 5: 2017 Financials – Summary (3/3)
2017 FINANCIALS – SUMMARY (3/3) 2017 last perspectives vs actuals : Perspectives 2017 Actuals 2017 • Organic growth ~2016@cst rate -0.5% √ • Ebit adj.1 ratio @ constant rate ~9.5% 9.3% √ • Net debt reduction ~30/50 M€ 87 M€ √ 1. Ebit adjusted : current operating profit before depreciations of assets
Slide 6: Consolidated Sales
CONSOLIDATED SALES Million € 2017 2016 Var.% Consolidated sales 861.9 871.8 -1.1% - Exchange rate impact vs. 2016 5.3 Consolidated sales at constant rates 867.2 871.8 -0.5% - Change in perimeter 0.0 Consolidated sales, pro-forma at constant 867.2 871.8 -0.5% exchange rates 6
Slide 7: Sales Evolution
SALES EVOLUTION M€ 21.7 -30.8 4.4 -5.3 5.6% 1.3% -20.2% 871.8 861.9 -9.9 M€ (-1.1%) at actual rates -4.7 M€ (-0.5%) at constant rates A 2016 Europe ROW US Exchange rates A 2017 7
Slide 8: Sales Growth by Region
SALES GROWTH BY REGION At constant rates Europe North America 340.9 M€ 121.1 M€ +1.3% -20.2% Asia 145.6 M€ Africa & Middle East +10.8% 29.3 M€ Latin America +0.2% 146.6 M€ Pacific +7.0% 83.7 M€ -2.6% 8
Slide 9: Sales Growth by Segment - Companion Animals
SALES GROWTH BY SEGMENT - COMPANION ANIMALS At constant rates A 2016 507.6 Parasiticides 153.5 (-16.1%) - 30.0 Other 90.2 (-1.2%) - 1.1 Antibiotics/Dermatology 70.2 (2.1%) 1.5 Biologicals 69.8 (-6.2%) - 4.7 Specialties 59.5 (12.8%) 6.8 Petfood 32.1 (5.6%) 1.7 Exchange rate - 6.4 0 (0%) 9 A 2017 475.
Slide 10: Sales Growth by Segment - Companion Animals excl. USA
SALES GROWTH BY SEGMENT - COMPANION ANIMALS EXCL. USA At constant rates A 2016 356,5 Parasiticides 76 (-1,6%) - 1,3 Biologicals 69,8 (-6,2%) - 4,7 Other 68,9 (4,1%) 2,7 Antibiotics/Dermatology 59,9 (3,7%) 2,1 Specialties 53,2 (11,9%) 5,7 Petfood 32,1 (5,6%) 1,7 Exchange rate - 2,8 A 2017 359,9 10
Slide 11: Sales Growth by Segment - Food Producing Animals
SALES GROWTH BY SEGMENT - FOOD PRODUCING ANIMALS At constant rates A 2016 355.2 Other bovine products 130 (8.4%) 9.9 Bovine antibiotics 69.1 (-0.5%) - 0.3 Aquaculture 56.5 (8.6%) 4.6 Bovine parasiticides 51.9 (8.8%) 4.1 Antibiotics swine/poultry 42.8 (0.2%) 0.1 Other swine/poultry 25 (2.3%) 0.6 Exch
Slide 12: Sales Breakdown by Region and Business
SALES BREAKDOWN BY REGION AND BUSINESS Other developped Europe North America countries* Emerging countries 39.8% 13.6% 12.0% 34.5% (39.4%) (17.4%) (12.2%) (31.0%) Companion Animals 55.2% 28.7 % 13.4 % 5.1 % 7.9 % (28.7 %) (17.3 %) (5.4%) (6.8 %) (58.2%) Food Producing 6.7 % 26.1 % Animals 43.5% 10.7
Slide 13: 2017 Profit & Loss Statement
2017 PROFIT & LOSS STATEMENT in M€ 31/12/2017 % 31/12/2016 % Variation Net sales 861,9 100,0 871,8 100,0 -1,1% Gross margin on material cost 558,4 64,8 571,7 65,6 -2,3% External expenses 179,0 20,8 181,9 20,9 -1,6% Personnel expenses 263,1 30,5 269,7 30,9 -2,4% Other expenses 9,4 1,1 10,2 1,2 -7,2%
Slide 14: Breakdown of Ebit Adjusted Evolution
BREAKDOWN OF EBIT ADJUSTED1 EVOLUTION 0.8 -10.6 11.0 M€ -5.9 2.4 -0.3 82.9 80.3 2 14 1. Current operating profit before depreciations of assets arising from acquisitions 2. RDL : Research, Development & Licensing
Slide 15: Evolution of Cash-Flow
EVOLUTION OF CASH-FLOW 110.7 106.8 -3.6% 71.8 Operating cash flow 62.5 Net cash flow -12.9% 31.12.2016 31.12.2017 15
Slide 16: Use of Funds
USE OF FUNDS Net cash flow Capex Working capital Dividends Acquisitions Other1 = net debt M€ increase Free Cash Flow 2017 : - 49.7 2016 : - 83.4 0 -58.0 -87.1 5.2 38.2 -25.4 -62.5 40.0 -51.6 -42.6 -71.8 20.8 3.9 0.7 2016 2017 16 1. Including translation variance
Slide 17: Evolution of Net Debt
EVOLUTION OF NET DEBT 2017 M€ Net debt Net Cash CAPEX Working Acquisitions Dividends Others Net debt opening flow Capital closing 547.1 38.2 -62.5 -25.4 5.2 460.0 -42.6 31.12.2017 31.12.2016 17
Slide 18: Balance Sheet Analysis
BALANCE SHEET ANALYSIS 1 134.3 M€ 1 000.9 M€ 1 134.3 M€ 1 000.9 M€ 177.6 130.3 473.6 436.3 113.6 104.6 956.7 547.1 870.6 460.0 31.12.2016 31.12.2017 31.12.2016 31.12.2017 Fixed assets Working capital Net financial debt Minorit interests + LT reserves Shareholder's equity 18 INVESTED CAPITAL CAPITAL
Slide 19: Debt Situation – Improved Liquidity and Easing of Covenant in 2018
DEBT SITUATION – IMPROVED LIQUIDITY AND EASING OF COVENANT IN 2018 Situation early 2017 Situation early 2018 Financing available : ~530 M€ Financing available : ~620 M€ • Banking pool (RCF1) : ~420 M€ Additional financing • Banking pool (RCF1) : ~420M€ • Schuldschein : ~30 M€ obtained from BEI • BEI
Slide 20: Balance Sheet – Financial Ratios
BALANCE SHEET – FINANCIAL RATIOS 2015.12 2016.12 2017.12 138.0 % 115.5 % 105.4 % Net debt Shareholder’s equity Group’s share 10.7 7.6 7.4 Net debt/Net cash-flow 7.0 4.9 4.3 Net debt/Operating cash-flow 20
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 2017: results • Financial results • Focus US Perspectives Appendix: 2018 agenda 22
Slide 23: US In-Market Performance at Clinic Level
US IN-MARKET PERFORMANCE AT CLINIC LEVEL ($(M$ m) ) Sales from Virbac to distrib.1 Sales from distrib. to clinics2 (Extended sales) 2016 2017 2017 vs. 2017 vs. 2016 2016 Sentinel 88.7 80.7 -9% -2% Iverhart 19.8 3.6 -81% + 50% Others 60.5 52.1 -14% + 13% 169.1 136.5 -19% + 4% Total 1 Net sales ex-Vir
Slide 24: The 2016-2017 US Rubber Band Effect
THE 2016-2017 US «RUBBER BAND» EFFECT Virbac Distributor Virbac Distributor sales sales sales sales M$ 169 ~+$25 M1 137 ~-$9 M1 2016 2017 1 Virbac estimates based on Stock-in-Trade information 24 Net sales ex-Virbac. Does not include Gross to Net adjustments not allocated by product (~$2-3 M)
Slide 25: 2017 US Achievements & Progress
2017 US ACHIEVEMENTS & PROGRESS Industrial Commercial • Successful transfer of Sentinel Spectrum & • Defense of Sentinel products management of Humacao hurricane related • Progressive in-market ramp-up of Iverhart issues • In-market growth of other ranges • 13 products «return to commerce» (RTC) (de
Slide 26: US Status of Legacy Products Manufactured in St. Louis Plant
US CURRENT AND FUTURE STATUS OF LEGACY PRODUCTS MANUFACTURED IN THE ST. LOUIS PLANT Number of products sourced from Share of ex St. Louis St. Louis, sold in 2014 2014 net sales 57 100% 6% Discontinued 7% RTC* to be confirmed 21 14 % 2018/2019- Expected RTC* 1 9 73 % RTC* as of December 31, 2017 26 2
Slide 27: US Heartworm Market (Canine Only)
US HEARTWORM MARKET (CANINE ONLY) Ivermectine Milbemycine Competitor 1 Virbac 4% Virbac 35% 66 M 49 M doses doses Competitor 3 Competitor 2 115 millions of doses ≈ dispensed per year 27 Source: Kynetec
Slide 28: US Market Shares Internal Parasiticides for Dogs
US MARKET SHARES INTERNAL PARASITICIDES FOR DOGS Dispensed $ MAT 40% 30% 33% 33.3% 29% 20% 23.3% 10% 14.4% 12.6% 7.8% 10.3% 0% 6.7% 1.8% December 15 June 16 December 16 June 17 December 2017 Sentinel Brand 1 Brand 2 Brand 3 Brand 4 28 Source: Kynetec
Slide 29: Contribution of the US Operations to the Ebit Adjusted
CONTRIBUTION OF THE US OPERATIONS TO THE EBIT ADJUSTED1 Excluding R&D M$ Adjustment of the US structure done in Q4 2017 29 1. Current operating profit before depreciations of assets arising from acquisitions
Slide 30: Agenda
AGENDA 2017 results Perspectives Appendix : 2018 agenda 30
Slide 31: Strategy – Areas of Focus
STRATEGY – AREAS OF FOCUS • Geographies USA Emerging countries • Species & segments Companion animals Ruminants Aquaculture Swine • Value Chain Innovation Manufacturing Commercial 31
Slide 32: Virbac Global Positions
GLOBAL POSITIONS 11 affiliates in 32 (+1) subsidiaries Top 5 Presence in 100+ countries VIRBAC Historical 5 years CAGR outside of USA 5.2% Market share Europe ~ 6% North America ~ 2% Historical 3 years CAGR Asia/Pacific/RSA ~ 7% outside of USA 3.3% Latin America ~ 8% 32
Slide 33: USA
USA To recover & gain market share Companion animals USA To enter the To increase profitability Food production Manufacturing site animals market of St. Louis 33
Slide 34: Emerging Markets (1/4)
EMERGING MARKETS (1/4) Low cost of entry Growing above world average Commercial structures Markets CAGR 5 years 9.5% > 3.6% already in place (subsidiaries), Markets CAGR 3 years 7.0% > 3.1% need of more products (on average 50 products per country in emerging markets vs. 90 in developed countries) E
Slide 35: Emerging Markets (2/4) - China
EMERGING MARKETS (2/4) • China Companion animals - Well established brand & image in companion animals - 8% of tier-1 tier-2 families in China own pets vs. 70% in the USA - 10 000 pet hospitals but still 70% of them are small-scale Swine - High potential > 50% of worldwide hog population (x7 tim
Slide 36: Emerging Markets (3/4) - Brazil
EMERGING MARKETS (3/4) • Brazil Largest beef trader with > 15% of world beef production (>210 M cattle) - 57% of total AH market of Brazil Virbac has strongest market growth both in 2016 & 2017 in ruminants - Prices increases, new commercial organization, multiples business models across the cou
Slide 37: Emerging Markets (4/4) - India
EMERGING MARKETS (4/4) • India 1.3 B people, fast growing middle class 1st dairy producer & consumer, 300 M bovines (190 M cattle, 110 M buffaloes) - 160 M tons produced (growing 5% vs 2% world average), cost competitive (low input-low output) Virbac #1 in overall Indian market - 12% CAGR over
Slide 38: Strategic Bets for the Future
SPECIES Bets for Strategic the future
Slide 39: Companion Animals
COMPANION ANIMALS Petfood • Best in class • Recognized as such • Few competitors • New business models (home delivery) • Higher ROCE Prevention • Vaccines Parasiticides Virbac busters • • Higher profitability • Less complexity • Visibility (brand) & Non pharma products sustainability (product) • His
Slide 40: Veterinary HPM – Recognized as Best in Class
VETERINARY HPM – RECOGNIZED AS BEST IN CLASS PREVENTIVE DIETETIC RANGE RANGE 2015 2017 Unique nutritional approach High in protein, low in carbohydrates 40
Slide 41: Ruminants
RUMINANTS Virbac not present in more than 50% of markets • USA, Canada, China, Japan, etc. But good product range & high market share when present • # 1 in India and in Uruguay • Top 3 in Australia, RSA and smaller countries 7.5 B$ • MS% > 10% in 8 countries Strong local footprint with local 2 nd la
Slide 42: Aquaculture (1/2)
AQUACULTURE (1/2) 10 billion people in 2050 World per capita fish consumption 9.9 kg in 1960 | 14.4 kg in 1990 > 20 kg today and > 27 kg in developed countries No 1 source of animal protein Most efficient protein producer (feed conversion index, thermoregulation) Market: the most significant growth
Slide 43: Aquaculture (2/2)
AQUACULTURE (2/2) Virbac: top 3 worldwide player First in class through innovation • Emerging diseases • Oral vaccines Warm water species • Innovation • Geo-extension, species extension • Services Cold water species • To plan entry in Norway, UK/Ireland 43
Slide 44: Swine
SWINE Focus in Asia • > 35% of global swine market Focus on vaccines • > 55% of global swine market 4.2 B$ 44
Slide 45: Virbac Value Chain Focus
VIRBAC VALUE CHAIN FOCUS R&DL Manufacturing Commercial • Innovation • Concentration > ROCE • Virbac DNA • Quality & Productivity «Closer to customers, • Geo-extension on core technologies Better through people» • External Partnerships • Commercial excellence Competitiveness 45
Slide 46: Estimated Peak Sales Potential of Main R&DL Projects
ESTIMATED PEAK SALES POTENTIAL OF MAIN R&DL PROJECTS Launch Companion Animals M€ Food Producing Animals M€ Year 2019 • Anti-infectious (USA) 10 • Vaccines (ROW) 10 • Non pharma products (Geo-extension) • Parasiticides (ROW) • Parasiticides (USA/Europe) 2020 • Dermatology (USA) 20 • Parasiticides (Eu
Slide 47: Manufacturing: 2/3 of Sales Produced In-House (18 Sites)
MANUFACTURING: 2/3 OF SALES PRODUCED IN-HOUSE (18 SITES) France USA Taïwan Mexico Vietnam Australia Chili Brazil 5 Major sites (45% of sales) Uruguay South 13 other sites (22% of sales) Africa New Zealand 47 Third parties & CMOs (33% of sales)
Slide 48: Manufacturing - To Improve ROCE and Dilute Risks
MANUFACTURING - TO IMPROVE ROCE AND DILUTE RISKS Sites Technologies Third parties • Concentration on • In-house mastery of • Scale effect our 5 major sites key technologies available ─ Quality & productivity (including vaccines, ─ Consolidation of extruded products) • Leverage of CMO volumes & compl
Slide 49: Commercial: Competitive Advantages/Differentiation
COMMERCIAL : COMPETITIVE ADVANTAGES/DIFFERENTIATION The Virbac DNA Commercial excellence Innovative Closeness to customers Entrepreneurship Preferred & long term partner Engagement Key account management Customer driven Focus on customer experience Attention to people Virbac sale
Slide 50: 2018 Perspectives – Summary
2018 PERSPECTIVES – SUMMARY • 2018 organic growth1: low single digit • Ebit adj.2 ratio: + ~0.5 pt @ constant rate • Debt reduction: ~ 30 M€ (no dividends paid by Virbac SA) 1. At constant exchange rates and scope 50 2. Ebit adjusted : current operating profit before depreciations of assets arising
Slide 51: Ambition
AMBITION 1 key objective 3 main levers ~15 of Ebita % 1 US infrastructure • Top-line revenue growth • St. Louis profitability leverage improvement plan • Entry in FPA • Leveraging emerging Profitable growth in countries dynamism • Controlling cost of doing other geographies business in all countries
Slide 52: Agenda
AGENDA 2017: results Perspectives Appendix: 2018 agenda 52
Slide 53: 2018 Agenda
2018 AGENDA April 12* Q1 sales June 20 Annual shareholders’ meeting July 17* Q2 – H1 sales September 14* Half-year financial results October 11* Q3 sales January 17, 2019* Q4 – Full year sales * After market close 53
Slide 54: Thank you
Thank you for your attention Shaping the future et Virbac
Slide 55: 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