- Organic Growth: 11.3% at constant exchange rate and scope.
- Volume Effect: More than 7% increase.
- Price Effect: Positive impact of around 3.5%.
- Acquisitions Contribution: 5 points of additional top line growth from Globion and Sasaeah.
- EBIT-Adjusted: Increase of around EUR40 million, reaching 21.3% ratio to revenue.
- Gross Margin: Increased by 3 points.
- Operating Expenses: Ratio to revenue improved to 44.1% from 44.7% last year.
- R&D Investments: Increased by 15% year on year.
- Net Profit: Slightly below EUR100 million, up from around EUR75 million in 2023.
- Net Debt: EUR254 million, up from minus EUR52 million at the end of December 2023.
- Sales Growth: 16% growth or 15.1% on a published basis.
- Regional Performance: Europe 12.3%, North America 22.2%, Latin America 11%, India, Middle East, and Africa 19%, Far East Asia rebound, Pacific slightly negative.
- Segment Performance: Companion animals 40%, farm animals 60%, with notable growth in swine and poultry.
- Operating Cash Flow: 30% increase.
- Net Cash Flow: 30% increase.
- CapEx Investments: Increased with further acceleration expected in the second part of the year.
- Free Cash Flow Generation: Expected around EUR60 million for the full year.
- Net Free Cash Flow: Around zero during the first semester.
- Net Debt to EBITDA Ratio: Below 1%.
- EBITDA Ratio: 21.4%.
- Net Income: Increased from EUR75 million to close to EUR95 million.
Release Date: September 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Virbac SA (FRA:V16, Financial) reported a strong organic growth of 11.3% at constant exchange rates and scope, reflecting exceptional market momentum.
- The company achieved a significant increase in EBIT-adjusted, reaching an all-time high ratio to revenue of 21.3%, driven by volume increases and favorable pricing.
- Recent acquisitions, Globion and Sasaeah, contributed positively, adding around 5 points to the top-line growth and 0.5 points to profitability.
- Virbac SA (FRA:V16) experienced robust performance across all geographies except the Pacific region, with notable growth in Europe, North America, and Latin America.
- The company maintained a favorable financial position with a net debt on EBITDA ratio below 1%, ensuring strong liquidity and potential for further M&A activities.
Negative Points
- The Pacific region underperformed, showing a slight negative growth due to challenging market dynamics.
- Increased financial expenses were noted, linked to higher financial debts and unfavorable exchange rate impacts.
- Operating expenses grew, albeit at a slower pace than revenue, slightly impacting the ratio to revenue.
- The net debt situation worsened, moving from a net cash positive position at the end of December 2023 to a net debt of EUR 254 million by June 2024, primarily due to acquisitions.
- The company anticipates a seasonal drop in margins in the second half of the year, influenced by lower sales and higher costs.
Q & A Highlights
Q: What is the reason for the phasing in of R&D expenditure? And to what level do you anticipate for 2025 the expenditure?
A: The main reason for the phasing of R&D expenditure is our annual budget cycle, which tends to result in more expenses during the second part of the year. We expect the R&D expenditure to be around 8.5% of sales for 2025, though this could vary depending on project intensity.
Q: How should the contribution from acquisitions behave in 2025? Will we see some accretive effect or not?
A: We expect a positive impact from acquisitions, similar to the 0.5% contribution seen in 2024. However, the exact impact will depend on ongoing integration efforts. Current acquisitions should be accretive if they come to realization, and we will have an additional quarter of contribution from Sasaeah.
Q: How did the headcount evolve?
A: We have added approximately 500 people, with around 400 from the Sasaeah acquisition and fewer from Globion. We continue to add staff in key areas such as manufacturing, vaccines, and R&D to support our growth.
Q: Can we have an update on CapEx for 2024 and 2025, given your HQ and the petfood manufacturing sites projects?
A: We have an intense CapEx program with several key projects progressing as planned. We expect to spend around EUR100 million in CapEx for 2024, though actual spending may be slightly less, with some expenditures moving to 2025. The HQ project is also progressing according to plan.
Q: Do you observe any slowdown in US revenues as Vetoquinol said?
A: No, we do not expect any slowdown. We are transforming our US position and have made decisions that should pay off. We remain confident and do not see any slowdown in our US market performance.
Q: Could you please comment on the development of specialized e-commerce platforms, notably in the United States? Are they gaining market share? What are the impacts on your business model, prices, marketing?
A: E-commerce platforms are gaining market share, especially for non-prescription products. We have developed web shops to keep vets in the loop while benefiting from home delivery and direct payment. This approach allows us to maintain our relationship with vets while leveraging the growth of e-commerce.
Q: Given the mix from some of your recent deals, how should we think about your longer-term margin target?
A: We aim to be at or above the average profitability level of the animal health market, targeting around 20% EBITDA. Our recent acquisitions, particularly in livestock vaccines, should be accretive and help us achieve this goal.
Q: What would be the normative level of R&D in the long run, not to create a break in the effect of launch?
A: Our R&D spending will depend on opportunities and needs. We have significantly increased R&D spending to prepare for upcoming product launches, particularly in parasiticides. We will adjust spending based on the opportunities available, ensuring no break in the effect of launches.
Q: Given the very strong margin development in the first semester, your full-year guidance implies an abnormally high drop in margin in the second semester versus the first semester. Is there any particular reason for this decline? Or is your guidance being conservative?
A: The expected margin drop is due to seasonality, with higher costs and lower sales in the second half of the year. We also tend to be conservative in our guidance, ensuring we invest if sales are there. This year, the seasonal effect is slightly above normal due to a very strong first semester.
Q: Are there any particular reasons for the CEO departure and will this have an impact on M&A strategy?
A: The CEO departure is for personal reasons and will not impact our M&A strategy. We have a strong M&A profile in place, and the strategy will continue as planned.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
