(News Bulletin 247) – The veterinary laboratory did not succeed this time in thwarting the slowdown in the animal health market. Virbac saw its sales contract over the first three months of 2023. Despite this delay in ignition, it confirms its financial objectives for the current year.

The slowdown in the animal health market is catching up with Virbac. The Maralpin veterinary laboratory saw its sales contract in the first three months of 2023. In the first quarter of 2023, Virbac achieved sales of 314.8 million euros, down 1. 3% at constant exchange rates and perimeter compared to the same period of 2022.

In addition to the normalization of the animal health market, the company also mentions “stock effects observed in distribution at the end of 2022 in anticipation of the price increases carried out at the beginning of this year”. The activity of the first quarter is in “retreat as imagined”, underlines TP ICAP Midcap in its note of the day devoted to Virbac.

At the level of the zones where Virbac operates, the good momentum observed in the Northern Europe (+4.7% at constant exchange rates) and Southern Europe (+3.2%) zones made it possible to offset the significant slowdown in sales in France in the United Kingdom. In the end, activity in the Europe zone limits its decline to -1.4% at real rates (-0.7% at constant exchange rates).

In Asia-Pacific (-3.3% in published data), sustained sales of the food producing animal ranges are behind good growth in Australia and New Zealand (respectively +10.1% and +8.8% at constant exchange rates). They thus weight the decline in activity observed in the other Asian countries. In the United States, sales contracted by 4.4% at constant exchange rates, compared with “a fourth quarter (+38.6%) which included launches”, recalls the analysis office.

The group also suffered from the sharp decline in its sales in Chile. The activity of its subsidiary in this country fell sharply to -38.3% at actual rates (-41.1% at constant exchange rates), marked by the poor performance of the aquaculture segment . The group has been penalized by the lack of sale of a pest control product in distribution since July 2022, following the suspension by the Chilean maritime authority of the marketing authorization for this product. Virbac also indicates that it suffered from the sharp drop in sales of the antibiotic ranges and, to a lesser extent, that of vaccines.

The pet market is shrinking faster

Excluding Chile, the Latin America region recorded the strongest growth in the group at +21.9% at real rates (+13.0% at constant exchange rates), driven in particular by the strong contribution of Brazil and Mexico (respectively + 19.4% and +17.8% at constant exchange rates).

As for sales to pets, they were down 3.1% (at constant exchange rates) over the quarter. They are penalized by the underperformance of the dermatology and antiparasitic ranges which occurs “after a 2022 financial year with organic growth of 11.9% while the fourth quarter of 2022 included purchases in anticipation of price increases”, underlines TP ICAP Midcap. Only the petfood range (food) holds its own and progresses by 10% over the quarter.

As for the activity of food producing animals, it recorded a slight drop to -1.6% (-1.0% at constant rates), mainly linked to the drop in aquaculture activity (-43.1% at constant rates). constant exchange rates) and to a lesser extent the decline in the pig business (-4.8% at constant exchange rates) largely offset by the ruminant sector which grew by +5.3% at constant exchange rates constants.

Annual ambitions renewed

A small consolation prize, this hitch does not hamper Virbac’s annual ambitions as confirmed last January.

“However, the group maintains its annual guidance given the landing of Q1 which remains solid in absolute value and reassuring sell-out data in certain geographies”, explains Sarah Thirion, Equity Strategist at TP ICAP Midcap.

For 2023, Virbac confirmed its adjusted current operating income margin forecast of between 13% and 14% at constant exchange rates as well as organic growth within a range of 4 to 6%. The company is also maintaining its research and development investment forecasts, as set out at the end of 2022. Virbac also forecasts a constant cash position at the end of 2023 compared to the end of 2022, excluding any acquisitions and at a rate of constant changes.

“The short-term momentum is less sustained in a context of normalization of the underlying market, inflation and the group’s desire to accelerate its investments to build growth and future profitability” underlines Sarah Thirion.

To avoid being left behind by its competitors, the veterinary laboratory Virbac is forced to put its hand in its pocket but in the long term, the analyst recalls that the “group operates in a rather defensive growth market (4-5% in history) that it will address with reinforced industrial facilities and a consistent pipeline of launches over the 2021-2026 period, which enshrines the group’s strategic priorities and will make it possible to improve the mix, outperform the market and improve its profitability for strive for a target of around 20% between 2025 and 2030”.

“The company is insensitive to changes in rates and has a healthy financial situation to support the organic and external development of the laboratory”, adds the analyst who is to be kept on Virbac with a target price of 294 euros.

For Oddo BHF, the decline in turnover announced Monday evening after the market seems temporary. The design office is not alarmed, however, and remains “fundamentally positive”, because in its Midcap France health universe, animal health confers “a defensive profile”.

“Our overall perception has changed little: in the short term (2023), the momentum will not be very buoyant since the veterinary market is suffering from unfavorable base effects, while beyond that, growth and margins will deteriorate. improve”, indicates Oddo BHF which however downgrades its opinion to neutral after this quarterly activity point.

On the Paris Stock Exchange, Virbac’s quarterly performance is sanctioned. The title of the veterinary laboratory fell 4.7% to post the largest drop in the SBF 120 on Tuesday morning.