2018 half year results & perspectives. September 2018

Transcription

1 2018 half year results & perspectives September 2018

2 AGENDA 2018: half year results Financial results Focus USA Strategy execution & perspectives Appendix : 2018 agenda 2

3 2018 FINANCIALS SUMMARY (1/3) H _ 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 M increase of Ebit adjusted (Ebita 1 constant exchange rate (+21.7%) Improvement in the US profitability (+4.6 M constant rate yoy) Good contribution of all regions Continued R&D investment while cautious spending elsewhere Unfavorable Forex impact On sales (-24.5 M ) On Ebita (-4.4 M ) 1. Current operating profit before depreciations of assets arising from acquisitions 3

4 2018 FINANCIALS SUMMARY (2/3) H Average rates USD GBP JPY MXN AUD ZAR BRL INR CHF CLP A A 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 COP CRC PHP THB VND TWD CNY KRW DKK A A Variance A18/A17-9.1% -8.5% -11.6% -14.0% -2.1% -11.0% -6.7% -3.3% -5.4% -0.1% 4

5 2018 FINANCIALS SUMMARY (3/3) H Positive net profit from ordinary activities : 16.8 M vs real rate Negatively impacted by exchange (-3.6 M ) Net profit: 12.6 M vs M in 2017 impacted, beyond exchange rate, by : Non-recurring expenses in 2018 : 1.2 M - Restructuring of the French logistics structure 3.4 M - Depreciation of 2018 half year deferred taxes in the USA Increase of total debt by 27 M Net 487 M vs. 460 M at year end 2017 Essentially linked to usual seasonality of working capital need Net debt decrease -56 M yoy On-going deleverage of the company (Net debt on Ebitda ratio) From 7.3 in June 2015 to 4.39 in June 2018 below half year banking covenant commitment of 5.0 5

6 CONSOLIDATED SALES H Million euros Var.% Consolidated sales % - Exchange rate impact vs Consolidated sales at constant rates % - change in perimeter 0.0 Consolidated sales, pro-forma at constant exchange rates % 6

7 SALES EVOLUTION H M 4.5% % -3.8% M (-1.7%) at actual rates 17 M (3.9%) at constant rates A 2017 Europe ROW US Exchange rates A

8 SALES GROWTH BY REGION H At constant rates North America 62.2 M -3.8% Europe M +4.5% Latin America 76.6 M +4.2% Africa/Middle East 16.6 M +3.8% Asia 75.2 M +8.0% Pacific 46.2 M +5.8% 8

9 SALES GROWTH BY SEGMENT - COMPANION ANIMALS H A At constant rates Parasiticides 68.7 (-14.9%) 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 A (0%)

10 SALES GROWTH BY SEGMENT - COMPANION ANIMALS EXCL. USA H A At constant rates 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 A

11 SALES GROWTH BY SEGMENT - FOOD PRODUCING ANIMALS H A At constant rates Other bovine products 69 (16.4%) 10.6 Bovine antibiotics 33.4 (7.4%) 2.4 Bovine parasiticides 25.5 (-0.7%) Aquaculture 22.6 (-14.1%) Antibiotics swine/poultry 18.6 (-12.1%) Other swine/poultry 12.6 (5.6%) 0.7 Exchange rate A

12 SALES BREAKDOWN BY REGION AND BUSINESS H Europe North America Other developped countries* Emerging countries 41.7% 13.2% 12.1% 33.0% (39.6%) (14.8%) (11.9%) (33.7%) Companion Animals 56.6% (55.3%) 30.7 % (28.6 %) 12.9 % (14.5 %) 4.7 % (4.5%) 8.4 % (7.7 %) Food Producing Animals 42.3% (43.0%) 10.7 % (10.6 %) 7.2% (7.2 %) 24.4% (25.3 %) Others 1.2% ( ) : 2017 * Australia. New Zealand. Japan. Korea 12

13 2018 PROFIT & LOSS STATEMENT H in M H % H % Variation Net sales % Gross margin on material cost % External expenses % Personnel expenses % Other expenses % Depreciation and amortization % Net provisions (excluding inventories) % Current operating profit before depreciation of assets arising from acquisitions % Amortization of intangible assets arising from acquisitions % Operating profit from ordinary activities % Other non-current income and expenses Operating profit % Net financial expenses % Profit before tax % Income tax expense % Including non-current tax expense Share in earnings - Equity method Net result of consolidated entities from ordinary activities % Net result of consolidated entities % Non-controlling interests Net result - Group's share % 13

14 BREAKDOWN OF EBIT ADJUSTED 1 EVOLUTION H M Current operating profit before depreciations of assets arising from acquisitions 2. RDL : Research, Development & Licensing 14

15 EVOLUTION OF CASH-FLOW H % Operating cash flow Net cash flow +4.8 % 31.5 H H

16 USE OF FUNDS H M Net cash flow Capex Working capital Dividends Acquisitions Other 1 = net debt increase Free Cash Flow H : H : H H Including translation variance 16

17 EVOLUTION OF NET DEBT H M Net debt opening Net Cash flow CAPEX Working Capital Acquisitions Dividends Others Net debt closing

18 BALANCE SHEET ANALYSIS H M M M M H H H H Fixed assets Working capital Shareholder's equity Minority interests + LT reserves Net financial debt INVESTED CAPITAL CAPITAL EMPLOYED 18

19 DEBT SITUATION EASING OF COVENANT IN 2018 AND POSTPONEMENT OF RCF MATURITY Situation Dec Financing available :~620 M Banking pool (RCF 1 ) : ~420M 2020 maturity BEI : ~90 M$ Schuldschein : ~30 M 3 Bi-lateral : ~95 M Covenant 2 : : : : : : : 3.75 Financial covenant (Net debt/ebitda) at June, 2018 : 4.39 < 5.00 Situation Sept Financing available : ~610 M Banking pool (RCF 1 ) : ~420M 2022 maturity BEI : ~90 M$ Schuldschein : ~30 M 3 Bi-lateral : ~85 M Covenant 2 : : : : : Revolving credit facility 2. Net debt on Ebitda 3. Relaxation obtained in H

20 BALANCE SHEET FINANCIAL RATIOS H % % % Net debt Shareholder s equity Group s share Net debt/net cash-flow Net debt/operating cash-flow 1 1. The methodology for calculating the bank covenant differs from the accounting method. The main difference comes from the Ebitda calculated either on 12 mobile months for the bank covenant or only 6 months multiply by 2 for the accounting method. 20

21 SHAREHOLDING Number of shares : In Shares In Voting Rights Public 49.1% Treasury shares 0.4% Employees savings plan 0.8% Dick Family 49.7% Employees savings plan 1.1% Public 33.1% Treasury shares 0.0% Dick Family 65.8% 21

22 AGENDA 2018: half year results Financial results Focus USA Strategy execution & perspectives Appendix: 2018 agenda 22

23 US IN-MARKET PERFORMANCE AT CLINIC LEVEL H (M$ ) Sentinel Iverhart Others Total Sales from Virbac to distrib vs % % % % Sales from distrib. to clinics 2 (extended sales) 2018 vs % +21% +17% +2% Destocking at distributor s level equivalent to ~10 M$ ex-virbac sales 1 Net sales ex-virbac 2 Sales from distributors to clinics. Does not cover 100% of distribution and does not cover alternate channels (such as web platforms) 3 Include a contract manufacturing one-time revenue of 1.5M$ 23

24 US MARKET SHARES INTERNAL PARASITICIDES FOR DOGS Dispensed $ MAT 40% 30% 20% 10% 33% 29% 14.4% 33.3% 21.6% 12.3% 0% 11.6% 7.8% 6.2% 1.8% December 15 June 16 December 16 June 17 December 2017 June 2018 Source: Kynetec Sentinel Brand 1 Brand 2 Brand 3 Brand 4 24

25 CONTRIBUTION OF THE US OPERATIONS TO THE EBIT ADJUSTED 1 H M$ Excluding R&D Margin Impact OPEX decrease A 2017 New contract manufacturing one-time revenue Margin improvements (Absorption, gross to net) A Current operating profit before depreciations of assets arising from acquisitions 25

26 AGENDA 2018 half year results Strategy execution & perspectives Appendix : 2018 agenda 26

27 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

28 STRATEGY - FROM DEFINITION TO EXECUTION Vision & Values Vision : a unique, innovative and agile company shaping the future of animal health, empowering and engaging each employee to enrich the customer experience. Values : entrepreneurship, innovation, engagement, customerdriven, attention to people, sustainability Strategy Geographies : USA, Emerging countries Species & segments : companion animals, Ruminants, Aquaculture, Swine Value Chain : Innovation, Manufacturing & Quality, Commercial Execution Key projects & priorities identified to roll-out strategy Creation of a Board office to support execution Creation of a Global Network Team for better alignment 28

29 KEY PROJECTS ILLUSTRATION Cost control 29

30 STRATEGY EXECUTION TIMELINE EXECUTIVE SUMMARY US improvement plan (Commercial, Manufacturing, Innovation) Petfood Non pharmaceutical - regulated products Commercial Virbac-busters programs Emerging markets (India, Brazil, China in CA) Commercial licensing Sites performance review Geo-extension programs Partnerships Swine vaccines Entry in the US Food producing animal market China development (in other species than CA) Breakthrough innovations: Innovation Virbac-busters programs Short term Mid-Long term 30

31 STRATEGY EXECUTION BACK TO GROWTH AREAS OF FOCUS (1/4) GEOGRAPHIES USA SHORT TERM = BACK TO GROWTH EMERGING MARKETS SHORT TERM = BRAZIL, INDIA, CHINA in CA 1. YTD June 2018 in-market performance 1 vs at constant rate Sales growth vs. 2017: +2% without Sentinel: +18% 2. Commercial Virbac-buster program Dental ranges +21% 3. New products (RTC/Innovation) RTC: return of Ketochlor Launch of Iverhart Max Soft Chew MID-LONG TERM = FPA ENTRY 1. YTD June 2018 ex-virbac performance vs at constant rate Brazil : +13% India: +19% China (CA): +14% 2. Adapted GOST 2 programs to each country LONG TERM = CHINA > Entry in other species (Swine, Aqua) 1 Sales from distributors to clinics. Does not cover 100% of distribution and does not cover alternate channels (such as web platforms) 2 Goal objectives strategies and tactics 31

32 STRATEGY EXECUTION BACK TO GROWTH AREAS OF FOCUS (2/4) SPECIES COMPANION ANIMALS 1. YTD June sales growth vs At constant rate Petfood +28% CA Specialties +23% 2. Commercial Virbac-buster programs 3. New products & commercial inlicensing Iverhart Max Soft Chew (USA, end of Q2-2018) Moxiheart chewable in Japan MSD s deals in Europe Elanco s deals in Latin America Suprelorin +16% Dentals +36% 32

33 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

34 TO CREATE AND BUILD VIRBAC BUSTER PRODUCTS (LONG TERM) Innovation R&D pipeline (generation of new ideas) Life cycle management (label extensions, new species, new claims) Business Development Virbac buster Commercial Boost of commercial investments Geo-extensions Medical trials (KOL, Phase IV studies) Digital reach, market access Differentiated Products, high sales, high margin contributors 34

35 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

36 STRATEGY EXECUTION BACK TO GROWTH AREAS OF FOCUS (3/4) SPECIES RUMINANTS 1. YTD June sales growth vs 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

37 STRATEGY EXECUTION BACK TO GROWTH AREAS OF FOCUS (4/4) SPECIES AQUACULTURE SHORT/MID/LONG TERM 1. Active Geo-extension New distributors (new countries) Regulatory investments (new products) 2. Vaccines technologies Strong area of focus SWINE SHORT/MID/LONG TERM 1. Vaccines: YTD June vs. 2017: -16% at cst rate 2. New products: PCV2 launch to come 3. Geo-extension level I (Asia, Latin America) over coming years 4. Partnerships LONG TERM = TO ASSESS GEO-EXTENSION LEVEL II (USA, Europe) 37

38 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-pharmaq (Zoetis) GM in Chile in September ROW: YTD June vs. 2017: +3.8% Plenty of opportunities - Investments in Vietnam - Strengthening of the local organization Regulations - India / EU shrimps importation 38

39 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 reduce capex requirements & secure long term supply. Transfer of products completed France closing of warehouse: logistics externalization completed in May Innovation Distribution agreement L4 MSD/ Leucogen FeLV to complete the vaccine ranges in Europe New products launched in first semester: peak sales (Year 3) potential > 10 million Access to a new cancer therapy product Commercial excellence & attractiveness Licensing deals with one of top 4 players: distribution of Elanco s Companion animals current and future ranges in Colombia & Mexico (including new products) Exclusive distribution of ruminants vaccine in Europe Exclusive distribution of parasiticide product in Japan Digitalization (Customer journey & experience) 39

40 ESTIMATED PEAK SALES POTENTIAL OF MAIN R&DL PROJECTS (September, 2018) Launch Year Companion Animals M Food Producing Animals M 2019 Anti-infectives Non pharma products 12 Vaccines Parasiticides Parasiticides Dermatology Non pharma products 20 Parasiticides Anti-infectives Specialities Parasiticides Anti-infectives

41 VIRBAC STRATEGY - INCREASE PROFITABILITY 1 key objective 3 main levers ~15% of Ebita 1 US infrastructure leverage Top-line revenue growth St. Louis profitability improvement plan Entry in FPA Profitable growth in other geographies Leveraging emerging countries dynamism Controlling cost of doing business in all countries In-licensing agreements ~10% of Ebita 1 Margin optimization 1. Ebita: current operating profit before depreciations of assets arising from acquisitions Innovation Portfolio management & rationalization Virbac busters (focus) 41

42 2018 UPDATED PERSPECTIVES SUMMARY 2018 organic growth 1 : low single digit Ebit adj. 2 ratio: + ~1 constant rate Debt reduction: ~ 30 constant rate (no dividends paid by Virbac SA) 1. At constant exchange rates and scope 2. Ebit adjusted : current operating profit before depreciations of assets arising from acquisitions 42

43 AGENDA 2018: half year results Strategy roll-out & perspectives Appendix: 2018 agenda 43

44 2018 AGENDA April 12* June 20 July 17* September 17* October 11* January 17, 2019* Q1 sales Annual shareholders meeting Q2 H1 sales Half year financial results Q3 sales Q4 Full year sales * After market close 44

45 Thank you for your attention 45

46 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 the date of this presentation, such statements do not constitute guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside Virbac s control, including but not limited to any risk described in the reports and documents regularly made available to the public and filed to the AMF. Investors and security holders may obtain a free copy of such documents at : corporate.virbac.com 46