Virbac SA · EURONEXT:VIRP
Virbac SA — FY2018 Earnings Presentation
50 slides from Virbac SA's earnings presentation, March 2019
Slide 1: 2018 results & perspectives
2018 results & perspectives March 2019
Slide 2: 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
Slide 3: Agenda
AGENDA 2018 financial highlights Main 2018 achievements Update business • USA • Chile • Emerging markets Main 2019 priorities Appendix : 2019 agenda 3
Slide 4: 2018 Financials – Summary (1/4)
2018 FINANCIALS – SUMMARY (1/4) • Solid organic growth of 4.5% driven by all areas • Sales growth aligned with market growth despite distribution stock decrease in USA • Margin growth 7.7% • Sales increase in the USA (+5.7% @ constant rate) • Sentinel : sales from distributors to clinics flat, decre
Slide 5: 2018 Financials – Summary (2/4)
2018 FINANCIALS – SUMMARY (2/4) Average rates USD GBP JPY MXN AUD ZAR BRL INR CHF CLP A 2017 1,13 0,88 128 21,3 1,47 15,0 3,60 73,6 1,11 732 A 2018 1,17 0,88 130 22,7 1,58 15,6 4,31 80,8 1,15 757 Variance A18/A17 -3,1% -0,7% -1,7% -6,3% -6,7% -3,6% -16,5% -9,0% -3,7% -3,3% Average rates NZD COP CRC
Slide 6: 2018 Financials – Summary (3/4)
2018 FINANCIALS – SUMMARY (3/4) • Positive net profit from ordinary activities : 31.5 M€ vs. 29.5 M€ @ real rate • Lower net costs of financing (debt switch from $ to €) • Unfavorable exchange rate impact of ~7 M€ mainly linked to CLP • 2018 Net profit : 21.0 M€ (vs. 1.8 M€ in 2017) impacted, beyond
Slide 7: 2018 Financials – Summary (4/4)
2018 FINANCIALS – SUMMARY (4/4) 2018 Last perspectives vs actuals : Perspectives 2018 Actuals 2018 • Organic growth Low single digit +4.5% √ • EBIT Adj.1 ratio @ constant rate ~+1pt +1.3pt √ • Net Debt reduction @ constant rate ~30M€ 48 M€ √ 1. EBIT Adjusted : Current Operating profit before depreci
Slide 8: Consolidated Sales
CONSOLIDATED SALES Million euros 2018 2017 Var.% Consolidated sales 868.9 861.9 +0.8% - Exchange rate impact vs. 2017 32.2 Consolidated sales at constant rates 901.1 861.9 +4.5% - change in perimeter 0.0 Consolidated sales, pro-forma at 901.1 861.9 +4.5% constant exchange rates 8
Slide 9: Sales Organic Growth 2015-2018 at Constant Exchange Rate
SALES ORGANIC GROWTH 2015-2018 @ CONSTANT EXCHANGE RATE 1 % Growth at constant rate and scope 2015 2016 2017 2018 Total Group -5,4% 4,5% -0,5% 4,5% Total Group excl. USA 3,1% 3,2% 3,6% 4,4% • Return to a good level of organic growth at group level considering the US destocking effect • Acceleration
Slide 10: Sales Evolution
SALES EVOLUTION 2018 5.8% 5.7% M€ 6.6 -32.2 23.4 2.7% 9.2 861.9 868.9 7 M€ (0.8%) at actual rates 39.2 M€ (4.5%) at constant rates A 2017 Europe ROW US Exchange rates A 2018 10
Slide 11: Sales Growth by Region
SALES GROWTH BY REGION 2018 At constant rates Europe North America 347.0 M€ 124.1 M€ +2.7% +5.7% Asia 155.7 M€ +7.0% Africa/Middle East 33.9 M€ Latin America +9.5% 153.0 M€ +4.8% Pacific 87.4 M€ +3.9% 11
Slide 12: Sales Growth by Segment - Companion Animals
SALES GROWTH BY SEGMENT - COMPANION ANIMALS 2018 At constant rates A 2017 475.4 Parasiticides 140.4 (-6.1%) - 9.3 Other 99.8 (13.6%) 12.2 Biologicals 75.3 (9.9%) 6.9 Antibiotics/Dermatology 71.3 (5.6%) 3.9 Specialties 67 (14.6%) 8.7 Petfood 40.4 (26.2%) 8.4 Exchange rate - 12.1 0 (0%) A 2018 494.2 1
Slide 13: Sales Growth by Segment - Food Producing Animals
SALES GROWTH BY SEGMENT - FOOD PRODUCING ANIMALS 2018 At constant rates A 2017 375.2 Other bovine products 135.3 (12.5%) 16.1 Bovine antibiotics 67.7 (3.1%) 2.1 Bovine parasiticides 48 (-1.1%) - 0.6 Aquaculture 44.6 (-17.3%) - 9.7 Antibiotics swine/poultry 39.3 (-5.6%) - 2.4 Other swine/poultry 28.9
Slide 14: Sales Breakdown by Region and Business
SALES BREAKDOWN BY REGION AND BUSINESS 2018 Other developped Europe North America countries* Emerging countries 40.4% 13.8% 11.8% 34.0% (39.8%) (13.6%) (12.0%) (34.5%) Companion Animals 56.9% 29.8 % 13.3 % 5.1 % 8.6 % (28.7 %) (13.4 %) (5.1%) (7.9 %) (55.2%) Food Producing 24.9% Animals 41.9% 10.4 %
Slide 15: Profit & Loss Statement at Real Rates
PROFIT & LOSS STATEMENT AT REAL RATES 2018 2018 % 2017 % in M€ Net sales 868.9 100.0 861.9 100.0 Gross margin on material cost 574.6 66.1 558.4 64.8 Net expenses 457.8 52.7 451.6 52.4 Amortizations, depreciations and provisions 28.7 3.3 26.5 3.1 Current operating profit before depreciation of assets
Slide 16: Breakdown of EBIT Adjusted Evolution
BREAKDOWN OF EBIT ADJUSTED1 EVOLUTION 2018 2.5 -2.7 2.7 M€ -7.1 8.7 3.7 88.1 80.3 2 1 Ebit adjusted : current operating profit before depreciations of assets arising from acquisitions 2 RDL : Research, Development & Licensing 16
Slide 17: Contribution of the US Operations to the EBIT Adjusted
CONTRIBUTION OF THE US OPERATIONS TO THE EBIT ADJUSTED1 2018 Margin Impact Excluding R&D M$ 10.7 -2.2 12.0 1.5 2.0 A 2017 New Contract Margin improvements OPEX increase A 2018 Manufacturing (one-time (Volume, cost absorption, revenue) gross to Net) 17 1 Ebit adjusted : current operating profit befor
Slide 18: Evolution of Cash-Flow
EVOLUTION OF CASH-FLOW 119.3 107.0 +11.5% Operating cash flow Net cash flow 70.0 62.5 +12.1% 2017 2018 18
Slide 19: Evolution of Free Cash-Flow
EVOLUTION OF FREE CASH-FLOW M€ 2017 2018 33.9 5.2 38.2 25.4 70.0 62.5 3.1 4.2 49.6 44.5 33.1 28.9 19
Slide 20: Evolution of Net Debt
EVOLUTION OF NET DEBT 2018 M€ 4.2 3.1 1.3 6.3 70.0 33.9 460.0 426.1 Closing net debt @ constant rate : 412.2 M€ ( -48 M€) Opening net debt Net cash flow Capex WCR Acquisitions Dividends Other Closing net debt 20
Slide 21: Balance Sheet Analysis
BALANCE SHEET ANALYSIS 1,000.9 M€ 991.0 M€ 1,000.9 M€ 991.0 M€ 130.3 134.9 460.0 426.1 104.5 104.6 870.6 856.1 436.4 460.3 2017 2018 2017 2018 Fixed assets Net financial debt Working capital Non controlling interests + LT reserves Shareholder's equity INVESTED CAPITAL CAPITAL EMPLOYED 21
Slide 22: Financing - Debt Situation
FINANCING - DEBT SITUATION Situation Dec. 2017 Situation Dec. 2018 Financing available : ~611 M€ Financing available :~620 M€ • Banking pool (RCF1) : ~420M€ • Banking pool (RCF1) : ~420M€ Financial covenant 2022 maturity 2020 maturity (Net debt/Ebitda) at • BEI : ~90 M$ • BEI : ~90 M$ December, 2018
Slide 23: Balance Sheet – Financial Ratios
BALANCE SHEET – FINANCIAL RATIOS 2016.12 2017.12 2018.12 115.5% 105.4% Net debt/Shareholder’s equity 92.6% Group’s share 7.6 7.4 6.1 Net debt/Net cash-flow 4.9 Net debt/Operating cash-flow1 4.3 3.6 1 The methodology for calculating the bank covenant differs slightly from the accounting method 23
Slide 24: New IFRS Accounting Standards
NEW IFRS ACCOUNTING STANDARDS • Standards applicable to financial years beginning on or after January 1, 2018 • IFRS 9 - Financial instruments • Classification, valuation and de-recognition of financial assets and liabilities [new impairment model, new hedge accounting model] • No material impact fo
Slide 25: 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 1,0% savings plan 0,8% 25
Slide 26: Agenda
AGENDA 2018 financial highlights Main 2018 achievements Update business • USA • Chile • Emerging markets Main 2019 priorities Appendix : 2019 agenda 26
Slide 27: Main 2018 Achievements (1/2)
MAIN 2018 ACHIEVEMENTS (1/2) Back to growth Long term competitivity 4.5% at constant rates (0.8% at real rates) • Closing and sale of French logistic platform > +6.5% in companion animals • Closing of manufacturing site in Brazil > + 5.6% in FPA (w/o Aquaculture) • « Competitivity review » of main m
Slide 28: Main 2018 Commercial Achievements (2/2)
MAIN 2018 COMMERCIAL ACHIEVEMENTS (2/2) Countries • ~ 50% of the commercial affiliates have a double digit growth at constant exchange rates • Underperforming countries mainly limited to Chile (-8.6%) & Spain (-3.6% due to Floron & CaniLeish) Product ranges growth at constant rates Busters programs
Slide 29: Agenda
AGENDA 2018 financial highlights Main 2018 achievements Update business • USA • Chile • Emerging markets Main 2019 priorities Appendix : 2019 agenda 29
Slide 30: USA (1/5)
USA (1/5) In market performance +7.4% (accelerating since beginning of 2018) 1 • Sentinel flat • Other ranges: +21% • Dental ranges (“Buster program”): +30% growth Ex-Virbac performance +5.5% (double digit growth without destocking) • Destocking of Sentinel in distribution (~12 M$) • Other ranges: +
Slide 31: USA - Virbac Sales per Ranges 2015-2018 (2/5)
USA - VIRBAC SALES PER RANGES 2015-2018 (2/5) 2015 2018 Other products Other 29% Sentinel Sentinel products 47% Iverhart 63% 49% 8% Iverhart 4% 31
Slide 32: US In-Market Performance at Clinic Level (3/5)
US IN-MARKET PERFORMANCE AT CLINIC LEVEL (3/5) (M$ ) Sales from Virbac to distrib.1 Sales from distrib. to clinics2 (extended sales) 2017 2018 2018 vs. 2018 vs. 2017 2017 Sentinel 77.8 66.3 -15% - 0.5% Iverhart 3.8 5.6 +48% +28% Others 51.5 68.53 +33% +21% 133.1 140.4 +5.5% +7.4% Total Destocking at
Slide 33: USA - Sales from Distribution to Clinics Evolution 2017-2018 (4/5)
USA - SALES FROM DISTRIBUTION TO CLINICS EVOLUTION 2017-2018 (4/5) 2017 2018 Total sales +4% Total sales +7.4% Other products +19% Other products +21% Sentinel -2% Sentinel -0.5% 0 40 80 120 160 200 0 40 80 120 160 200 33
Slide 34: USA – Main Areas of Focus in 2019 (5/5)
USA – MAIN AREAS OF FOCUS IN 2019 (5/5) Local management reinforced Margin improvement • Increase of production volumes in St. Louis + reduction of IPC (indirect production costs) • Reduction of Gross to Net programs • Prices increases in 2019 New products roll-out as expected Sale of Fort Worth off
Slide 35: Agenda
AGENDA 2018 financial highlights Main 2018 achievements Update business • USA • Chile • Emerging markets Main 2019 priorities Appendix : 2019 agenda 35
Slide 36: Chilean Portfolio – Different Dynamics (1/4)
CHILEAN PORTFOLIO – DIFFERENT DYNAMICS (1/4) • Aquaculture – 19% • Other species +25 % (cyclical market) Companion animals: +49% Injectable vaccines: - 9% Ruminants: +10% Oral vaccines: - 34% Pigs & Poultry: +21% Antibiotics: - 46% Other products: + 13% 36
Slide 37: Chile - Cyclical Aquaculture Market (2/4)
CHILE - CYCLICAL AQUACULTURE MARKET (2/4) Source : Sernapesca – Ministerio de Economía, Fomento y Turismo - Gobierno de Chile 37
Slide 38: Chile - Cyclical Aquaculture Market (3/4)
CHILE - CYCLICAL AQUACULTURE MARKET (3/4) Source : Sernapesca – Ministerio de Economía, Fomento y Turismo - Gobierno de Chile 38
Slide 39: Chile – Main Areas of Focus in 2019 (4/4)
CHILE – MAIN AREAS OF FOCUS IN 2019 (4/4) Local management reinforced • Recruitment of ex-Pharmaq / Zoetis GM in Chile Base business • Opportunity of market share gains in injectable vaccines • Prices increases • Lack of traction of antibiotics & oral vaccines • Export markets and geo-extension • Gr
Slide 40: Agenda
AGENDA 2018 financial highlights Main 2018 achievements Update business • USA • Chile • Emerging markets Main 2019 priorities Appendix : 2019 agenda 40
Slide 41: Double Digit Growth in Key Emerging Markets (1/2)
DOUBLE DIGIT GROWTH IN KEY EMERGING MARKETS (1/2) BIC countries India # 11th largest WW market # 1 in market 3rd affiliate of Virbac Brazil 10.2% growth # 3rd largest WW market # 11th in market 10th affiliate of Virbac China 23.3% growth # 2nd largest WW market Top 8% (#130 company in market) Today
Slide 42: Other Emerging Markets (2/2)
OTHER EMERGING MARKETS (2/2) Asia To accelerate our growth • Swine entry (vaccines) • Geo-extension of our Africa PCV2 vaccine +10% growth in 2018 • To geo-expand our business model (communities) Latin America • To partner (excluding Chile) +16% growth in 2018 • Good level of margin • To focus on op
Slide 43: Agenda
AGENDA 2018 financial highlights Main 2018 achievements Update business • USA • Chile • Emerging markets Main 2019 priorities Appendix : 2019 agenda 43
Slide 44: Main 2019 Priorities
MAIN 2019 PRIORITIES Competitivity (Target 15%) • Industrial focus • Profitable growth in all regions (margin & opex ratios) • Business development boost • HQ costs optimization Busters & portfolio management • Innovation • Commercial (Petfood, Suprelorin, Veggiedents, others) Digital & systems (acr
Slide 45: Estimated Peak Sales Potential of Main R&D Projects
ESTIMATED PEAK SALES POTENTIAL OF MAIN R&D PROJECTS (March, 2019) Launch Companion Animals M€ Food Producing Animals M€ Year • Anti-infectives Specialities • Vaccines 16 12 • 2019 • Dermatology • Parasiticides • Non pharma products • Parasiticides • Parasiticides 2020 • Vaccines 21 • Minerals 14 • N
Slide 46: 2019 Perspectives – Summary
2019 PERSPECTIVES – SUMMARY 2019 organic growth1: between 4% and 6% Ebit adj.2 ratio: + ~1 pt @ constant rate Debt reduction: ~ 30 M€ @ constant rate (no dividend paid by Virbac SA) 1. At constant exchange rates and scope 2. Ebit adjusted : current operating profit before depreciations of assets ari
Slide 47: Ambition
AMBITION 1 key objective 3 main levers ~15 of Ebita % 1 • Top-line revenue growth (around 2022) US infrastructure • St. Louis profitability leverage improvement plan • Entry in FPA • Leveraging emerging Profitable growth in countries dynamism • Controlling cost of doing other geographies business in
Slide 48: Agenda
AGENDA 2018 financial highlights Main 2018 achievements Update business • USA • Chile • Emerging markets Main 2019 priorities Appendix : 2019 agenda 48
Slide 49: 2019 Agenda
2019 AGENDA April 11* Q1 sales June 18 Annual shareholders’ meeting July 16* Q2 – H1 sales September 16* Half-year financial results September 17 SFAF meeting - 1st half 2019 financial & strategic information October 11* Q3 sales January 16, 2020* Q4 – Full year sales * After market close 49
Slide 50: Shaping the future of animal health
Shaping the future of animal health =