Virbac SA · EURONEXT:VIRP
Virbac SA — FY2014 Earnings Presentation
51 slides from Virbac SA's earnings presentation, March 2015
Slide 1: 2014 Financials and Strategic Update
2014 Financials and Strategic Update March 2015
Slide 2: Agenda
AGENDA 2014 results Virbac strategic perspectives 2015 Agenda 2
Slide 3: Key Points on 2014 Financial Performance (1/2)
KEY POINTS ON 2014 FINANCIAL PERFORMANCE (1/2) Growth of revenue : +5.0% EBIT growth : +3.9% of which organic : +6.3% Net profit : +5.1% • Significant rebound in H2 : • launch of new products in Europe; • re-introduction of Iverhart Plus in the USA. • Exchange rates favorable since Q3 but revenue an
Slide 4: Key Points on 2014 Financial Performance (2/2)
KEY POINTS ON 2014 FINANCIAL PERFORMANCE (2/2) • Operating profit grows by almost 4% and net profit grows by 5% after strong performance in H2; • Good generation of free cash-flow with the reduction of CAPEX needs after completion of important projects (France and Mexico) in recent years; • Debt-to-
Slide 5: Consolidated Sales
CONSOLIDATED SALES 31.12.2014 Million euros 2014 2013 Var.% Consolidated sales 773.1 736.1 +5.0% - Exchange rate impact vs. 2013 (14.3) Consolidated sales at constant rates 787.4 736.1 +7.0% - change of perimeter (5.3) Consolidated sales, pro-forma at constant exchange rates 782.1 736.1 +6.3% 5
Slide 6: 2014 Quarterly Growth of Sales
2014 QUARTERLY GROWTH OF SALES* +9.8% 10% +9.3% * Pro forma sales, excluding impact of exchange rates 8% 6% Year +6.3% +4.3% 4% +1.8% 2% 180.5 M€ 185.8 M€ 202.7 M€ 204.1 M€ 0% Q1 Q2 Q3 Q4 6
Slide 7: Sales Evolution 2014
SALES EVOLUTION 2014 M€ 800 Organic growth +6.3% +0.7% -2.0% +5.0% 5.2 780 773.1 -14.2 760 20.1 740 736.1 25.9 720 700 680 660 2013 2014 640 Existing Acquisitions Exchange (1) New products (1) Business (Full year impact) Rates 7 New products + existing products in new markets
Slide 8: Breakdown of Top Countries by Organic Growth
BREAKDOWN OF TOP 14 COUNTRIES (80% OF SALES) BY ORGANIC GROWTH 2014 CHILE (Aquaculture) : slightly negative 5 countries with more than 10% growth : Mexico, India, RSA, 10.4% Two countries below UK, Germany 30.5% 5% growth : 20.5% Spain – USA 38.6% 6 countries with 5% to 10% growth : France, Australi
Slide 9: Sales Growth by Region
2014 SALES GROWTH BY REGION at constant scope North America : Europe : 323.0 M€ 103.6 M€ +7.4% +1.4% Asia : 96.8 M€ Africa/Middle East : +12.1% 30.5 M€ Latin America : +13.3% Pacific : 139.2 M€ 80.0 M€ +3.1% +6.9% 9
Slide 10: Growth by Segment 2014: Companion Animals
GROWTH BY SEGMENT 2014 At constant COMPANION ANIMALS exchange rates Net Growth at constant rates Businesses / Ranges Revenue - 5% to 0% to +5% to +10% to < - 5% > 15% 2014 (M€) 0% +5% +10% +15% Companion Animals 418.1 4.2% Parasiticides 102.3 1.7% Biologicals 73.1 0.8% Antibiotics/Dermatology 76.9 1
Slide 11: Growth by Segment 2014: Food Producing Animals
GROWTH BY SEGMENT 2014 At constant FOOD PRODUCING ANIMALS exchange rates Net Growth at constant rates Businesses / Ranges Revenue - 5% to 0% to +5% to +10% to < - 5% > 15% 2014 (M€) 0% +5% +10% +15% Food Producing 342.5 11.6% Animals Bovine parasiticides 46.1 14.3% Bovine antibiotics 70.2 11.1% Othe
Slide 12: Sales Breakdown by Region and Business
SALES BREAKDOWN BY REGION AND BUSINESS 2014 North Other developed Emerging Europe America countries* countries 42.6% 13.4% 12.3% 31.8% (41.8%) (13.8%) (12.7%) (31.7%) 5.4% 6.9% Companion 28.9% 12.9% 54.1% (6.9%) Animals (13.2%) (5.6%) (55%) (29.1%) Food producing 44.3% 24.6% 13.4% 6.3% animals (43%)
Slide 13: 2014 Profit & Loss Statement
2014 PROFIT & LOSS STATEMENT 31/12/2014 % 31/12/2013 % Variation in M€ Net sales 773.1 100,0 736.1 100,0 +5.0% Gross margin on material cost 528.5 68.4 504.7 68.6 +4.7% External expenses 164.6 21.3 159.0 21.6 +3.5% Personnel expenses 210.9 27.3 196.5 26.7 +7.4% Other expenses 12.6 1.6 16.6 2.3 -2.4%
Slide 14: Breakdown of EBIT Growth in 2014
BREAKDOWN OF EBIT GROWTH IN 2014 M€ 130 +22.2 120 -9.0 110 -3.0 109.0 104.9 -3.4 -2.7 100 90 80 70 EBIT EBIT 60 2013 2014 Net margin Sales & Marketing R&D Other Exchange expenses rates 14
Slide 15: Evolution of Cash-Flows
EVOLUTION OF CASH-FLOWS M€ 140.2 +3.8% 140 135.0 120 105.2 +7.3% 100 98.1 80 60 40 Operating cash-flow (« EBIT DA ») 20 Net Cash-flow 0 2013 2014 15
Slide 16: 2014 Cash-Flow Statement
2014 CASH-FLOW STATEMENT (million euros) Sources of funds Uses of funds Cash-flow 105.2 Intangible assets 4.4 Sale of assets 0.4 Tangible assets 35.7 Sale of treasury shares 0.5 Dividends 26.4 Working capital 34.6 Acquisitions 23.5 Other 4.3 Total Sources of funds 106.1 Total Uses of funds 128.9 Inc
Slide 17: Evolution of Free Cash-Flow
EVOLUTION OF FREE CASH-FLOW M€ 110 105.2 100 98.1 90 80 70 60 -40.1 50 40 -59.3 30.5 30 -34.6 20 10 9.0 -29.8 0 Net CAPEX Working Free Net CAPEX Working Free cash- capital cash- cash- capital cash- flow flow 2013 flow flow 2014 17
Slide 18: Evolution of Net Debt
EVOLUTION OF NET DEBT M€ 200 23.5 196.6 37.0 178.1 25.5 150 16.2 34.2 133.9 2.8 Debt from -30.5 Acquired entities -9.0 100 50 Net debt Free Dividends Acquisitions Net debt Free Dividends Acquisitions Net debt Dec 2012 cash- and other Dec 2013 cash- and other Dec 2014 flow flow 18
Slide 19: Balance Sheet Analysis
BALANCE SHEET ANALYSIS (million euros) 736.1 736.1 642.8 642.8 Working Capital 169.0 105.0 Shareholder ’s 430.9 equity 360.9 Fixed assets 537.8 567.1 Minority 103.8 108.6 interests + LT reserves 178.1 196.6 Net financial debt 2013 2014 2013 2014 INVESTED CAPITAL CAPITAL EMPLOYED 19
Slide 20: Balance Sheet – Financial Ratios
BALANCE SHEET – FINANCIAL RATIOS 2012.12 2013.12 2014.12 49.3% 45.6% 38.7% Net debt / Shareholder’s equity Group’s share Net debt / Net cash-flow 1.45 1.82 1.87 Net debt / Operating cash-flow 1.27 1.32 1.40 20
Slide 21: Exposure to Exchange Rate Fluctuations: Group Revenue
EXPOSURE TO EXCHANGE RATES FLUCTUATIONS Order of magnitude based on 2014 Group revenue Emerging € Other “strong currencies” $ Forex impact on revenue is mostly translational as 95% of revenue is generated by affiliates. 21
Slide 22: Exposure to Exchange Rate Fluctuations: Operating Profit
EXPOSURE TO EXCHANGE RATES FLUCTUATIONS Order of magnitude based on 2014 Operating profit TRANSACTIONS TRANSLATION Buy 35 M$ Emerging € (net) 25% 25% Other 15% 75 M€ 35% 50% 50% “strong Sell “Strong Emerging currencies” (net) currencies” $ Most transactions are hedged centrally (1 year basis) 22
Slide 23: Financing
FINANCING • 2014 borrowing capacity in place: Major Major Affiliates TOTAL: Affiliates 90 M€ Corporate 370 M€ capacity 90 M€ (France) 280 M€ • Sentinel acquisition: “bridge” loan 320 M€ (drawn in $ mainly) – 1 year term; + waiver obtained for all existing lines (covenants). Other • Global restru
Slide 24: Shareholding
SHAREHOLDING Number of shares : 8 458 000 Treasury shares Employees savings plan Employees 0,9% 0,3% 1,2% savings plan Other s 33,1% Others 49,7% 49,1% Dick Family 65,7% Dick Family In shares In voting rights 24
Slide 25: Agenda
AGENDA 2014 results Virbac strategic perspectives 2015 Agenda 25
Slide 26: USA: Sentinel acquisition, St. Louis plant
USA . Sentinel acquisition . Situation at the St. Louis manufacturing plant EUROPE and R.O.W 26
Slide 27: Companion Animals: Market Share USA
COMPANION ANIMALS: MARKET SHARE USA 30% 27.9% 2014 25% 22.4% 20% 15% 12.9% 10.5% 10% 6.8% 6.8% 6.5% 3.7% 5% 1.8% 1.1% 0% 27
Slide 28: Companion Animals: Market Share USA Proforma
COMPANION ANIMALS: MARKET SHARE USA Proforma 30% 25% 27.9% 22.4% 2014 20% 14.4% 15% 12.9% 10% 6.8% 6.5% 6.5% 5% 1.8% 1.1% 0% 28
Slide 29: Companion Animals: Top Markets
COMPANION ANIMALS: TOP 10 MARKETS Market share Virbac 13.1% 2014 12.8% 10.8% 9.8% 10% 7.4% 6.2% 6.4% 5.6% 5% 3.6% 2.3% Country 49.5% 7.4% 6.4% 4.7% 4.4% 4.1% 2.7% 2.6% 2.3% 2.2% market share USA United France Germany Italy Australia Canada Japan Brazil Spain Kingdom 29
Slide 30: Companion Animals: Top Markets Proforma
COMPANION ANIMALS: TOP 10 MARKETS Market share Virbac Proforma 2014 13.1% 12.8% 10.8% 9.8% 10% 7.4% 6.45% 6.2% 6.4% 5.6% 5% 2.3% Country 49.5% 7.4% 6.4% 4.7% 4.4% 4.1% 2.7% 2.6% 2.3% 2.2% market share USA United France Germany Italy Australia Canada Japan Brazil Spain Kingdom 30
Slide 31: Companion Animal Parasiticide Market (US/EU)
US/EU COMPANION ANIMAL PARASITICIDE MARKET ($3 BILLION) $1600m $570m EUROPE USA 4% 6,5% $300m $300m EUROPE 0% USA 0% 5% Virbac m.s. 28 31
Slide 32: Companion Animal Parasiticide Market (US/EU)
US/EU COMPANION ANIMAL PARASITICIDE MARKET ($3 BILLION) $1600m $570m EUROPE 10 % USA 4% 6,5% 4% $300m $300m EUROPE 0% USA 0% 5% Virbac m.s. 28 32
Slide 33: Companion Animal Parasiticide Market: Products
US/EU COMPANION ANIMAL PARASITICIDE MARKET Iverhart + Iverhart Max Sentinel Milpro EUROPE Effipro USA Effitix Effitix Milpro EUROPE USA Effipro Endo (worms) Endecto (combination) Ecto (fleas, ticks) 30 33
Slide 34: Specific Features of the Deal
SPECIFIC FEATURES OF THE DEAL Forced sale Sale by auction Deal direct competitor Worldwide competition Scope and terms of sale Sale price A 3-stakeholders Conditional sale sale Acquisition Novartis FTC arbitrator Security Speed 34
Slide 35: Sentinel Products
SENTINEL PRODUCTS Sentinel Flavor tabs Milbemycin, lufenuron Heartworm, roundworm, fleas (IgR) Dogs Flavoured tablets $ 771 million in 2014 Sentinel Spectrum Milbemycin, praziquantel, lufenuron Heartworms, roundworms, flatworms, fleas (IgR) Dogs Soft chews palatable tablets $22 million in 2014 35
Slide 36: The Acquired Rights
THE ACQUIRED RIGHTS USA Sentinel Flavor tabs Supply chain (exception R&D and from start to finish (raw materials, finished products) manufacturing) Milbemycin, lufenuron All rights (= interceptor + programme) Heartworms, roundworms, fleas (IgR) Sales history, Dogs (R&D, manufacturing, sales) custome
Slide 37: The Recruitment Commando
THE RECRUITMENT « COMMANDO » 205 employees from Novartis interviewed in 1 week 130 offers of employment 91 new Virbac employees starting on January 5, 2015 Commercial Team X 2 : 180 people 37
Slide 38: Price Positioning of Virbac Heartworm Brands
PRICE POSITIONING OF VIRBAC HEARTWORM BRANDS 38
Slide 39: Perspectives
PERSPECTIVES • End of February : a very good start with $ 25 m • Top line synergies from end of 2015, based on : Doubled salesforce Sentinel customer base Strength of the Sentinel brand 39
Slide 40: St. Louis Industrial Site: Context
ST. LOUIS INDUSTRIAL SITE : CONTEXT • Historically a non pharmaceutical site, acquired in 1999 at the time of the Agri Nutrition deal • Gradual addition of FDA products (Iverhart Plus and Max, Equimax, EasOtic). Substantial investments to adjust the plant to raising pharmaceutical standards • Accele
Slide 41: St. Louis Industrial Site: Current Situation
ST. LOUIS INDUSTRIAL SITE : CURRENT SITUATION • Long and comprehensive FDA inspection in Nov / Dec 2014 • List of observations (« 483 » report) focused essentially on the weaknesses of the quality system, particularly on the QA processes • Sentinel products not involved (manufactured outside of St.
Slide 42: St. Louis Industrial Site: Perspectives
ST. LOUIS INDUSTRIAL SITE : PERSPECTIVES • Very limited recalls identified • Distribution and manufacturing resuming gradually in March/April • Low Q1 sales of Virbac legacy products. Impact on total 2015 sales yet to be assessed • Extra costs of consulting and legal fees 42
Slide 43: Europe: Successful Launch of New Products
EUROPE : SUCCESSFUL LAUNCH OF NEW PRODUCTS 43
Slide 44: 2015 New Products Perspectives
2015 NEW PRODUCTS PERSPECTIVES > 6 M€ > 25 M€ in 2014 in 2015 Partially offset by decline of antibiotics (France > 5 M€) 44
Slide 45: Rest of the World: Asia-Pacific
REST OF THE WORLD • Asia – Pacific • Double digit growth expected in emerging markets (India, South Africa) • Solid single digit growth expected in developed markets (Australia, New Zealand, Japan) 45
Slide 46: Rest of the World: Latin America
REST OF THE WORLD • Latin America • Double digit growth expected in Mexico and Colombia • Low growth expected in Brazil (country economics, reduction of parasiticides in ruminants, streamlining of low margin products) • Recovery expected in Chile in aquaculture (rebound of the bio mass). Significant
Slide 47: 2015 Financial Perspectives
2015 FINANCIAL PERSPECTIVES Sales • Organic growth comparable to 2014 (1) • Favourable impact of exchange rates Profit • Strong increase of the EBITA (2) • Impact of IFRS principles on Net profit currently assessed Debt • Net debt projected at around 3 X EBITDA at end of 2015 (1) Linked to timing of
Slide 48: Agenda
AGENDA 2014 results Virbac strategic perspectives 2015 Agenda 48
Slide 49: 2015 Agenda
2015 AGENDA April 15* Q1 sales June 24 Annual shareholders’ meeting June 30 Payment of 2014 dividend July 16* Q2 – H1 sales September 15* Half-year financial results October 15* Q3 sales January 14, 2016* Q4 – Full year sales * After market close 49
Slide 50: Thank you
ee // Thank you for your attention
Slide 51: 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