Animal health: an unchanged market trend?
Indeed, the market continued to develop very satisfactorily in 2012, with its regional components being relatively unchanged compared with 2011. Europe is still exhibiting low growth rates of around 2% in spite of the still adequate growth in companion animals. As in 2011 the United States has shown rather strong growth, three times greater than in Europe, with growth being similar for companion animals and food producing animals. In the rest of the world, growth has remained reasonably high in spite of a very noticeable slowdown in Latin America.

How is Virbac performing on this market?
The Group has once again progressed more quickly than the market with organic growth of 8.2%. The most remarkable growth comes from the United States, where Virbac experienced an increase of over 20%, partly due however to the closure of an industrial site manufacturing a competitor to the antiparasitic Iverhart, now the Group's foremost product. This has made the United States subsidiary Virbac's most important after France, a logical development given the respective market sizes. Virbac has also gained shares of the companion animal market in Europe thanks to the first full year of the CaniLeish vaccine, which experienced remarkable success in Spain, Greece and to a lesser extend in Italy. The company has also gained market shares in Latin America (Brazil, Mexico) and Asia (India, Japan). The only losses in market share are in Europe, in food producing animals, where Virbac declined slightly in an almost stable market.

2012: major year for acquisitions
2012 will undoubtedly be remembered as a year of external growth. The acquisition of Stockguard in 2012 allowed us to become a key player in the dairy cattle market in New Zealand, and the acquisition of rights in Multimin in Australia further reinforced our positions in this country, now the Group's third largest subsidiary. Continuing the divestment done in the United States a few years ago, Virbac also sold its activities over the counter (pet shops and garden centres) in France and the Netherlands to better equipped market players. Conversely, the Dutch and Belgian subsidiaries, which were only 75% owned, are now wholly owned subsidiaries. However, the highlight of the year is undoubtedly the 51% participation, with option of subsequent purchase of the remaining 49%, in Centrovet in Chile. This company, leader in animal health on the Chilean market, has enjoyed remarkable development in aquaculture, which already accounts for two thirds of its turnover. Aquaculture seems to have a bright future, fish representing the most efficient source of protein for the world's growing nutritional needs. There are not many market players in animal health specialising in aquaculture, and Centrovet is characterised in particular by its technological leadership in oral vaccines.

What about the financial results?
Operating profitability has increased again from 13.8% to 14.1% of turnover, which is actually a similar performance to that of 2011 if we take into account the increase of 0.6 point in the ratio of R&D expenditure to turnover which we wanted in order to reinforce the Group's medium-to-long-term innovation capability. Cash generation, on the other hand, is one area where performance has been superior to 2011. The €58.7 million in free cash flow generated thanks to the careful control of working capital requirements has enabled us to limit the increase in the Group's net debt to equity ratio to 38.7% in spite of the year's very substantial programme of acquisitions.

What can we expect in 2013?
As in 2012, Virbac expects a slight growth in European markets, but a continuing satisfactory trend in the United States and in the rest of the world.

At the beginning of April, Virbac’s United States subsidiary announced to its distributors that it had halted temporarily the commercialisation of its internal antiparasitic Iverhart Plus due to the fact that some batches recently produced, were or might be below specification in the potency level of one of the actives before the expiry date of the product. To compensate for this interruption of supply and to replace the recalled batches, Virbac United States is offering to its customers, for a six-month period, the product Iverhart Max at the price of Iverhart Plus.

This event, combined with weak activity in the first quarter, will make it more difficult to achieve the ambition announced with the publication of the 2012 results, of an organic growth of 5 to 7% and an increase of half a point in operating profitability. However, taking into account the acquisitions completed in 2012, the growth potential of recently launched products, and that of the emerging countries, the Group remains confident that it can generate global double digit growth of its revenues and operating result.

Éric Marée