(News Bulletin 247) – The veterinary laboratory confirms its objectives for this year, after having published 2023 annual accounts in line with its expectations.

Virbac unveils a copy without surprise. The annual achievement of the veterinary laboratory is in line with the 2023 objectives which were raised in December 2023, on the basis of a rebound in activity at the end of the year, then renewed last January.

For the year 2023, Virbac’s turnover therefore increased by 4.9% at constant exchange rates and scope in 2023 (+2.5% in published data), to €1.25 billion. euros. The overall performance revealed by the veterinary laboratory “demonstrates the resilience” of its economic model which was “put to the test by two intrinsic and unfavorable one-off effects” in the year 2023. “It is, as a reminder, the temporary limitation of our production capacities for vaccines intended for companion animals, and the cyberattack that occurred on June 19, which forced us to shut down factories for several weeks,” recalled Virbac.

Over the past financial year, Europe particularly stood out, with turnover up 5.8% at constant rates, as did Asia/Pacific (+4% at constant rates). Regarding the latter zone, the robustness of activity in India (+6.1% at constant rates), in Australia and New Zealand (respectively +4.9% and +6.7% at constant rates) made it possible to largely offset the decline observed in China (-10.8% at constant rates).

An achievement “in line with objectives”

For the year 2023, Virbac has therefore unveiled a current operating income ratio before amortization of assets resulting from acquisitions (adjusted Ebit margin), at 15.1%, down 0.2 points year-on-year. However, it is in line with the expectations of the company which said it was targeting an EBIT margin of 15% for 2023.

“This performance is due to a price effect of around +5% and a more favorable product mix which partially offset the increase in research & development expenses,” details Stifel in its note published this Wednesday morning.

A little further down in the accounts, Virbac’s group share of net income is almost stable at 121.3 million euros compared to 121.9 million euros a year earlier. But Virbac’s profits nevertheless exceeded the expectations of Stifel, which was counting on a net profit, group share, of 118 million euros.

The generation of available cash flow has for its part decreased significantly, to 52.4 million euros in 2023, compared to 79.4 million euros in 2022. Virbac explains this erosion of its cash generation by an increase in “expenses for investment with, among other things, the completion of two company acquisition operations (GS Partners in the Czech Republic closed in May and Globion in India closed in November) for an amount of approximately 55 million euros, as well as the impact of the share buyback program for approximately 20 million euros.

“Virbac’s 2023 achievement is in line with the objectives”, summarizes TP ICAP Midcap. For Stifel, the accounts published by Virbac bring “nothing new under the sun”. On the Paris Stock Exchange, Virbac lost 1.9% around 10:40 a.m. this Wednesday after this unsurprising publication.

Virbac also plans to propose to the next general meeting of shareholders the distribution of a net dividend of 1.32 euros per share for the 2023 financial year, an amount which reflects a stable return to shareholders compared to last year. .

2024 prospects renewed

Virbac is also renewing its outlook for the year 2024, first revealed last December. The company confirms that at this stage it expects revenue growth at constant rates and scope of between 4 and 6%. This objective corresponds to the growth that was expected by Virbac at the start of the year for 2023, before the company was forced to abandon this target in July 2023 given an animal health market which had then deteriorated. in the second quarter and a computer attack suffered in June of last year.

Still for 2024, Virbac expects a ratio of “current operating income before depreciation of assets resulting from acquisitions” (adjusted Ebit) to turnover, up 0.5 percentage points, around 15%. The veterinary laboratory adds that this level of profitability takes into account an intentional continuation of the increase in its investments in R&D, representing nearly +0.5 points as a percentage of turnover compared to 2023.

This objective is defined at constant scope and rates, where this objective was previously understood at constant exchange rates, notes Sarah Thirion, Equity Strategist at TP ICAP Midcap. This marginal change suggests that the 75 million euros in turnover linked to the recent acquisition of the Sasaeah group in Japan “must be less margined for the moment”, continues the specialist.

Unveiled in early March by Virbac, the acquisition of the Japanese animal health group should be finalized in early April. This external growth operation will provide Virbac with a leading position in vaccines for livestock in Japan, particularly cattle, and a broad portfolio of pharmaceutical products for all major species.

Virbac is also optimistic about its cash position, which should improve by 30 million euros at the end of December 2024. This objective, which excludes acquisitions, takes into account the investments planned over the period, estimated by the company around 100 million euros, and an acceleration of R&D efforts.

The veterinary laboratory also reaffirms its objective of achieving an adjusted Ebit ratio of 20% by 2030 with a level of research and development investments, which the group intends to “gradually bring back to its normative level in the coming years” and historical.

“The prospect of 20% in 2030 would assume an average annual improvement in the margin before depreciation of assets resulting from acquisitions of 70 basis points (i.e. 0.7 percentage point, Editor’s note), which now includes the recovery in the next years of R&D investments at the historic level of 6.5% of turnover (after 7.5% in 2022, 8% in 2023 and 8.5% in 2024 expected) which could limit the effects of launches in the medium term”, specifies TP ICAP Midcap which maintains its opinion to keep, with a price target raised to 296 euros, compared to 292 euros previously.

Stifel also renews its recommendation to keep on Virbac shares, as well as its price target of 349 euros, seeing few opportunities for the French group to favorably surprise the market. “Although management has kept its promises, at these valuation levels (P/E>24x), and given the fact that the stock market’s expectations were already in line with the company’s forecasts for 2024, we do not “We see no opportunity for positive surprises,” explains the design office.