Virbac : annual sales comparable to 2016 at constant exchange rates after strong fourth-quarter growth

Virbac: annual sales comparable to 2016 at constant exchange rates after strong fourth-quarter growth

Public release dated January 16, 2018

Quarterly consolidated sales
Virbac's sales in the fourth quarter totaled EUR 231.5 million, an increase of +2.6% (+7.8% at constant exchange rates) compared to the same period in 2016, a period which also registered a high level of sales. All areas showed positive organic growth over the period, including double digit growth outside of the United States and Europe, driven by sustained activity in India, Australia, Chile, Brazil and Mexico. Europe registered positive organic growth (+2%). At constant scope, US net sales rose over the quarter (+6%) thanks to sales of the Sentinel range that offset a declining Iverhart range, impacted by an unfavorable base effect compared to the fourth quarter in 2016. Over this quarter, the Group had recorded substantial sales of Iverhart Max linked to its return to the market at the very end of the year and to inventory build-ups across the distribution chain. Like the third quarter, ex-distributor sales enjoyed continued growth over the last quarter (around 4%).

Annual year-to-date sales
They totaled EUR 861.7 million compared to EUR 871.8 million last year, a slight decrease of -0.6% at constant exchange rates (-1.2% at actual rates).

From a regional perspective, in the United States, sales over the entire year decreased by   -23%, including -20% at constant exchange rates, although they continue to grow in terms of ex-distributor sales (around 4%). As a result of stocking in distribution at the end of 2016 and sales ex-distributors below expectations, the Iverhart range was down sharply in ex-Virbac sales, despite a 50% increase in ex-distributor sales. Ex-Virbac sales of the Sentinel range fell by -11% at constant exchange rates, while ex-distributor sales declined only slightly over the period (  -2%); this discrepancy is due to increased stock levels across the distribution chain between 2015 and 2016. It should be noted that even though there was significant restocking of the distributors over the last quarter, overall distributor stocks of the American products are hovering at levels slightly below those at the end of 2016.

Outside of the United States, the Group posted growth of +3.4%, including +3.6% at constant exchange rates. In Europe, there has been slight growth at constant exchange rates (+0.8%), boosted by the performance of the United Kingdom, Italy, Poland and Belgium, despite an overall downturn in the vaccine and external parasiticide ranges.

In the rest of the world, organic growth continues to be strong in many emerging countries, in particular Brazil, Mexico, China, Chile, as well as India, which returned to double-digit growth in the second semester after the effects of the entry into force of the new VAT in mid 2017, as well as demonetization at the end of 2016. The Pacific region showed a slight decline over the year as a result of a decision to stop products in New Zealand.

In terms of species, sales in the companion animals segment dropped overall by -5.2%, at constant exchange rates and scope, primarily due to the United States. Outside of the United States, business in this segment has grown by +0.7%, including organic growth of 1.5%. The most negatively impacted ranges, compared to the same period in 2016, are the parasiticide and canine vaccine ranges, the latter being impacted by a temporary reduction in production capacity. Conversely, the specialty ranges, dermatology, pet food and hygiene continued to perform well.

In the food producing animals segment, overall growth amounted to +5.7%, including +5.4% at constant exchange rates. At constant exchange rates and scope, all sectors posted healthy growth: bovine at +5.8%; industrial (swine and poultry) at +1.2%; and finally aquaculture at +8.8%, thanks to vaccine sales in Chile and sales of the nutraceutical and bioremediation ranges in Asia.

Outlook
In the United States, the US subsidiary finalized the transfer of production of Sentinel Spectrum to the St. Louis facility, secured the required FDA (Food and Drug Administration) authorizations and marketed the first product batches. As of 2018, Sentinel Spectrum will no longer be manufactured at the Group partner's facility located in Puerto Rico.

In 2017, the Group's adjusted current operating profit, should be, as expected, around the same level as in 2016 as a ratio on sales at constant exchange rates, while debt reduction continued over the second half of the year, impacted favorably by the Euro-dollar exchange rate, which should result in a greater than expected annual debt decrease. The Group's net debt to EBITDA ratio is expected to be below the financial covenant of 4.75, as negotiated with the Group's partners for December 2017.

¹ Identical growth at constant exchange rates and scope is the organic growth of sales, excluding the impact of exchange rate changes, by calculating the indicator for the financial year in question and that for the previous financial year on the basis of identical exchange rates (the exchange rate used is that in effect for the previous financial year), and excluding the impact of changes in scope, by calculating the indicator for the financial year in question on the basis of the scope of consolidation for the previous financial year.