2016 annual results
Monday, March 13, 2017
Strong rebound in profitability in 2016
Annual net revenue reached 871.8 M€, a +2.3% growth, impacted by the unfavorable evolution of exchange rates; at comparable rates, growth was + 4.5%, of which + 4.4% organic growth. With the exception of the Aquaculture, growth was driven by a good performance in all regions, which benefited from the growth of the new parasiticides products launched recently in Europe, the dynamism of the food producing ranges in the emerging markets, and the gradual ramp-up in the US of the historical range, even though it is somewhat lower than the expectations at the beginning of the year. It should also be noted that the United States benefited from a stocking effect from distributors in 2016, linked to the return to the market of certain products at the end of the year, in particular Iverhart Max, to a very gradual recovery of sales to clinics of reintroduced products, as well as price increases as of January 1st.
The current operating profit before depreciation of assets arising from acquisitions is, as expected, up significantly in the second half (€ 43.2 million compared to € 39.7 million in the first half). Over the year as a whole, it therefore stood at € 82.9 million, up sharply (+44.2%) compared to last year, despite the negative impact of 9.7 M€ of the exchange rates. This change is mainly due to the improvement in the US operating contribution generated on the one hand by the increase in the margin linked to the gradual recovery of the historical activity; and on the other hand to lower costs for depreciation and destructions of inventories and lower consulting costs. The other regions also contributed to the improvement in current operating profit thanks to the growth in activity and margin and good control of expenses. The current operating profit before depreciation of assets arising from acquisitions to revenues thus stood at 9.5% in 2016 and 10.4% at constant exchange rates.
The net profit - Group share amounts to 34.6 M€, a +268% increase compared to 2015. It includes, on one hand, the decrease of the amortization expense of intangibles assets related to acquisitions (16.5 M€ compared to 19.2 M€ in 2015); and on the other hand non-recurring expenses of purely accounting nature, resulting from the application of IFRS principles related to Business combinations (such as the cancellation of a debt on securities no longer applicable in 2016); and lastly, the decrease in financial expenses, due to a favorable currency impact, mainly in the Chilean subsidiary, which is benefiting from a more favorable USD / CLP parity this year. This impact offsets the increase in financial expenses.
From a financial standpoint, the decrease in the Group's net debt compared to 2015 stems mainly from good control of working capital requirements. Overall, the net debt level, has declined, as expected in the second half of the year (-57.9 M€) to 547.1 M€. At the end of 2016, these financial elements enable the Virbac group to meet its obligations to its banking pool, renegotiated as part of the waiver application, which was obtained unanimously in December 2016.
2017 should see moderate growth of the Group's operations at constant exchange rates. The outlook remains moderate in Europe and very good for Asia-Pacific and Latin America. In the United States, the latest products that are still absent from the market and do not require a change in their registration files will be marketed again in the first months of the year. In parallel, as a consequence of the lifting of the warning letter end 2016, Virbac United States can finally work on file variations and consider new registrations. The volume of business ex-distributors will continue to grow well in this country. On the other hand, ex-Virbac sales are expected to be close to 2016 : the products sold to distributors at the end of 2016, such as Iverhart Max, will have to be sold before the restocking orders take momentum. In Chile, the aquaculture market remains disrupted, so the Group does not yet expect an improvement in the outlook in this country.
In this context, the Group's organic growth at constant exchange rates in 2017 should be at a low-single digit level (the evolution of 1st quarter sales is expected to be negative compared to 2016). The gradual recovery in the United States should result in an improvement in the margin. R&D spending will increase slightly as a ratio on sales in order to pursue development programs. As a result, the Group anticipates an improvement in the current profit before depreciation of assets arising from acquisitions to sales, which should be around +0.5 points at constant exchange rates, but could rise more at current exchange rates. On the financial front, the recovery in profitability and a strict control of the capital employed should allow for the continuation of the deleveraging that will occur during the second half of the year, given the Group's usual pattern of generation and consumption of cash, and should be between 30 and 50 million €.
A SFAF meeting for analysts will be held on Monday 13 March at 2.30 pm in the Salon Club des Arts & Métiers, 9bis avenue d'Iéna - 75116 Paris.
For those who cannot get there, a webcast is provided. INFORMATION FOR PARTICIPANTS
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