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Results webcast. We are pleased to have you join us. Today, the call is hosted by myself, I'm Sandrine Brunel, Head of Corporate Communications, and Taron Ovanissian is Head of Finance M&A and Investor Relations. The presentation will be given by Paul Martengel, our new Chief Executive Officer, and Abib Ramdani, our Chief Financial Officer and Deputy Chief Executive Officer. Before we begin, I remind you that the slides and additional financial materials presented here are available in our investor section of our corporate website. The replay of this meeting will be available at the conclusion of the meeting. At the end, you can submit your questions using the chat feature located in the bottom right-hand corner of your screen. We will answer all questions during the Q&A session or follow up with Taron afterwards if we run out of time. It's now my pleasure to turn the floor to Paul Martingale.

Thank you, Sandrine, and good afternoon, everybody. It's really my pleasure to be here, my first results presentation in Virbac, and especially to be here at a time where we're announcing a very, very strong and solid first half of the year, which of course has got nothing to do with me. It really is thanks to the continued strong performance and excellent work of Habib and all the team around the world at Virbac. I'm absolutely delighted and excited to join the company. As you can imagine, it's been some time that I've been having conversations with the company, reading about the industry and learning about the incredible world of animal health, and I couldn't be more excited to finally have joined. It's day number 11 for me, so apologies if I'm not able to answer the most detailed questions. But I'm very, very lucky again to have such a strong team and especially to have Habib here with me today who will be able to answer those questions. And in the future, I'm sure and I look forward to having deeper discussions and conversations with you all. Just very, very quickly, I've had a career of over 25 years now across FMCG and pharma consumer healthcare businesses. The last 11 years between Boehringer Ingelheim the merger and integration with Sanofi Consumer Healthcare, and then the acceleration and eventual value creation by spinning off that business into the Appella business unit. So, a very interesting experience. I've had the pleasure and the privilege to work all over the world, in the Americas, Asia, and across Europe, and do hope that I can bring a little bit of that international perspective and flavor to this great Virbac business. But for now, my only priority is to onboard, to listen, to learn, to spend time with our team, but also with other key stakeholders, including yourselves. I look forward to engaging with you, to listening. and hearing your perspectives on the industry and the Virbac business and to engaging in the conversations that we need to have to see how we can continue, first of all, the great performance that Virbac has shown over the last years. It really is incredible to see. I think we've broadly doubled the size of this business over the last 10 years and therefore, of course, my first priority is how we can continue and perhaps accelerate that great performance but also how we can then shape this future into the 2030, 2035 horizon given the exciting and dynamic changes happening in animal health. Again, very much look forward to engaging with you much deeper in the future. But for today, it's really a pleasure to hand over to Habib, who will take us through the majority of the presentation. I will be here, of course, for any Q&A if you should have any questions later on. But again, thank you for your attention. Thank you for engagement with Virbac. And over to you, Habib.

Thank you, Paul. Thank you, Paul. And we are extremely happy to have you on board to lead our next phase of development, Paul. So, I'm going to take you, as usual, through our financial results, as well as a few words on strategy, execution, and perspective, and as it has been said, we'll end up the session with a Q&A. So, very briefly, a summary of what we have achieved in the first half of 2025. You can see that we have delivered a very solid top line growth during the first half of 2025 with 5.6% of organic growth. And it's a very sane top line development as well. It's sane because it's a good mix between price impact at around 3% and volume impact at 2%. We have also had the benefit of contribution of new product launches. I will come back to that later on. And finally, this performance has been delivered with top line growth in all of our geographies, with the exception of Pacific. I'm going also to come back to that. So that's for the top line. Regarding the EBIT adjusted, we have posted €135 million of EBIT adjusted for the first half of 2025, which translates into an 18.3% of EBIT adjusted as a ratio to top line. First, it's globally aligned with our expectations, so no surprise for us with that level. It is, although a bit decreasing versus last year, as you can see, by 2.4 points at constant exchange rate, and it's essentially linked to temporary effect and calendar effect, as I'm going to go through in the next slides. The net results stand at 82.2 million euros for the first half of 2025, which is slightly below last year, but again linked to the EBIT adjusted evolution as well. We have had financial costs increase for this semester linked to the exchange rate, notably the CLP, the Chilean peso, which has evolved negatively versus the euro, and we have part of our interco exchange debt that is not covered. So we are having that impact for the first semester of 2025. Let's move now to elements of balance sheets and cash flow. You can see at the bottom of the slide that our net debt stand at 200 million euros, slightly above that, which is an increase of 30 million euros. The consequence of three elements. First, our net cash flow. is more or less at 100 slightly below 100 million euro evolution of our net cash flow is in line with the evolution of our operational results and we have two further elements the first one is the working capital requirements at 72 million euro it's the usual seasonality impact that we have we have a working capital requirements quite high during the first semester and then a positive development during the second part of the year, which is very typical for us. It happens every year, and we have seen that this year. Nonetheless, it's slightly below last year. Again, this is linked to some work that we are doing to maintain our level of stock inventory. That has been an area of focus for the past years now. And finally, capex, you see that we have increased our level of capex, nearly double our level of capex spending when we compare the first half 2025 with the first half 2024. This is significant, yes, but it's deliberate. It's deliberate and it's linked to the rollout of all of our industrial transformation and the main projects that we are engaging in. Very briefly on the exchange rate impact, you see that we are having a negative impact on both the top line and the bottom line, with a good portion of it coming from Latin America, as you can see on the slide with the size of the bubbles. And in addition to impact in absolute value, we are also having an impact in our ratio of EBIT adjusted. which has been decreasing by 0.7 points linked to the evolution of the exchange rate. So this is for the big picture. I will move to sharing with you some insights on the revenue growth drivers. And then I will move to the P&L statements, balance sheet, and cash flow, and we'll move to the strategic elements. So, top line, I share it, 7, slightly above 7% evolution and 5.6% growth at actual rate and perimeter, which means without the positive impact of the acquisition of Sasaea in Japan. If we look at on these slides where this growth is coming from, from a geographical standpoint, We can see the very solid development of our top line in most of the geographies, nearly all of the regions, with the exception of Pacific. We are decreasing by around 8% in Pacific. I've had the opportunity to comment on that at the end of the first trimester. We have suffered from climatic changes. and market conditions in Australia, notably, which impacted our top line dynamic, impacted the market and the top line dynamic. The market has started to rebound in the first semester. We have not really entirely benefited from that, linked to some stock impact that we had with one distributor, notably. But we are very confident that we will see a rebound during the next part of the year, and I'll come back to that in a minute. You can see that we have a very solid performance in the Americas, both North America and Latin America. North America is growing 6%. I'll come back to the performance of the U.S. in the next slide. So let me concentrate in Latin America. We have a very solid 8% growth in that region, which is fueled by Our two main countries, Mexico and Brazil. Brazil has had a nice rebound during the second trimester. After the first trimester, that has been a little bit more difficult. We are benefiting from a nice dynamic in our ruminant product portfolio in that country. I'll come back to Mexico in the next slide, but we're also having a good performance in Colombia. The only areas where we are lagging a little bit versus last year is Chile, but it's not a surprise. It's what we expected. We have notably one parasiticides product that is suffering against competition. We used to be in a monopolistic situation, and we are now facing another entrance, which has an impact on both the volume and our price, but again, not unexpected. Europe, 7.2%, very solid growth in Europe. A lot of countries, a lot of sub-regions in Europe are contributing quite nicely. This is the case for Western Europe, with a nice development of our ruminant portfolio, as well as companion animal. The case for Central and Eastern Europe as well. We are also benefiting from the positive impact of the acquisition in Turkey. Come back to that. So a nice performance overall in Europe. with maybe the exception of France, where we have a more stable dynamic for the first half, but I'll come back to that in the next slides. EMEA, which is India, Middle East, and Africa for us, a very, very solid, excellent performance, 8 percent. India contributing nicely to that development. And finally, Far East Asia, you see the double-digit growth, which is essentially attributable, obviously, to the acquisition of Sasaya that has a nice impact, obviously, on that region. A part of that, at constant perimeter, the top line growth is at around 3% for 5 Asia, negatively impacted by the market condition in Vietnam, where there is a swine-porcine epidemic that is impacting the market and us. But a part of that, a good dynamic in the other countries, and a renewed positive dynamic in China as well, after a first trimester that has been more atone. I wanted to take a few minutes to talk about some countries. The first three countries are the ones that are contributing the most in the top-line growth in absolute value, Mexico, USA, and India. And France and Australia are two countries from our top five where we've seen a stable growth for France and, as I mentioned, a decrease of our top-line performance in Australia. So Mexico, 15% growth, a very nice development with a strong contribution of some of the product that we are targeting. You see pet food, 40%. Mexico, in terms of pet food activity for us, is part of our top three countries. We are delivering year after year and taking some nice position in that country. We are also having a development of our companion animal vaccines. as well as some swine vaccine that have been recently launched in Mexico. So a very good performance across the board, and looking forward, we expect also double-digit growth for the end of the year. USA, 6% growth for the first semester. We will end up, we expect to end up at a double-digit growth as well. It's actually 6%, but with a negative and temporary effect on the stock level at distributors. The sellouts are quite positive, would be at a double-digit growth, slightly above 10% at constant level of stock at the distribution. And it's coming from the product that we are targeting, dental specialty and dermatology. So a performance in USA that is quite aligned with what we've been doing in the past. India, 6.8% growth at constant exchange rate. for the first half 2025. A strong performance here. We have a very diversified activity, a solid backbone in India on ruminant, but we are semester after semester diversifying our activities in India, and you can see that the growth is coming from all different angles. And in addition to the top line growth, we are also improving our profitability in that country. So a very solid performance, and we shall expect trend for the remainder of the year, with one possible question mark linked to the indirect impact on the overall Indian economy and market linked to the tariff. So that's only a question mark that we may have on that country. Minus 0.4, so more or less stable. We used to have some growth in that country. It's essentially linked to two product lines. One of them, we shared that earlier this year on pet food. We have seen a slowdown of our pet food activity in France. with notably one of our e-commerce partners that have seen some sales decrease, and we are also having some impact, we think during the first semester, linked to the introduction of new packaging. So, as we move from the old to the new packaging, it may have disrupted a little bit the supply chain. We have also an impact on vaccine. We are slightly decreasing on vaccine. We have had a very, very solid, extremely high 2024 years. You remember that we have had a strong rebound in vaccine, especially during the first semester. So we are comparing to a very high base, and we have some competitors that have also returned to the market after some stock out on vaccine. Looking forward, we expect back to growth. We have some positive early sign of development, redevelopment, rebound of our pet food activity with some promotional activities that has been done to stimulate the demand with that e-commerce platform, as well as now the new packaging introduction that is behind us. So, that's for France. And finally, Australia, you see a negative evolution of our top line. I commented about the overall market condition. There are signs of recovery that are quite positive with the price of meat, as well as the climatic situation. So, looking forward, we expect a progressive rebound of our activity in Australia. So, this is a snapshot of some of the key countries from a contribution standpoint, and we thought it would be useful to say a few words on them. Let me move now, after we've covered the performance by geography, let me move to the performance by segment and by sub-segment within companion animal and farm animals. Farm animals continue to represent around 40% of our turnover. Companion animals, 60%. If we look at companion animals, where the growth is coming from, there are two central pillars that are important. powering the top-line development for that semester. One of them is pet food, a strategic product portfolio that we have. You see a double-digit growth. We are benefiting from a nice development and compensating the situation in France with a top-line growth in many geographies, including Mexico, and obviously the benefit of the acquisition of MOPSAN. We have also the specialties product line that is doing quite well. We are benefiting from some product launches that is fueling that sub-segment, including Ursolix and as well as Trilotab, which is a product against cushing disease for cats. And your Solic is a movement disorder type of product. So they are reinforcing our specialty franchise and contributing nicely to the top line growth, enabling us to have a double digit top line growth. You see vaccines stable after a record year in 2024 with a very significant rebound, again, especially in the first semester. So we've been able to maintain the top line growth in vaccine. And then parasiticides, antibiotics, dermatology, and others that are also contributing quite well between 3% to 6%. So, a very solid performance, 5% at actual rate and 7% at constant exchange rate. Let me move now to farm animals. You see the nice dynamic in farm animals is powered, fueled by a very strong performance in our ruminant segment, which is also a testimony to our portfolio, the diversity of our portfolio. Ruminant has been doing quite well for that semester, and we expect it to continue. Also, it may a little bit slow down. And it's being driven by some of our product lines, such as antibiotics with a double digit growth, nutritionals as well. as vaccines that have done quite well during the semester. We had some nice vaccines lunch and we won a tender in Europe for one of our vaccines, which has had a nice impact during that semester. You see aquaculture slightly below, last year, essentially linked to the parasiticized product I mentioned earlier, on which we have increased competition. But also, nice development, nice performance for farm animals, segment overall, as you can see on the slides. Very briefly, the sales breakdown by region and segment has not fundamentally changed versus what we shared last year. So let me move now to the profit and loss statements. So you see the yellow line, which is our EBIT adjusted, which stands at 18.3% versus 21.4%. We have a slight decrease in the ratio of our gross margin and material costs. when we compare the first semester 2024 with the first semester 2025. We have also an increase of our expenses, personal and external expenses. Part of it is linked to the acquisition of MOPSAN, which obviously we acquired as well an infrastructure. And the rest is linked to some of our projects, the development of our activity, the reinforcement of some of our team in industrial and R&D as well. So overall, we are, as you can see on the slide, losing three points versus 2024, which is essentially linked to temporary effect versus last year. Two-thirds of that decrease is linked to the gross margin, where we have essentially two effects. The first one is linked to write-off. which is a typical element that we have within pharmaceutical companies. But we have had last year a level of write-off during the first semester of 2024 that has been quite low versus the level of write-off for the entire year. 30% of our write-off has been recognized in first half of 2024 and 70% in first half of 2020, in second half of 2024 last year, 30-70, whereas this year we expect much more balanced split of our write-off between the first half and the second half. So we see, when you compare only the first semester, the significant increase of our write-off, which is, again, only linked to a calendar effect versus last year. So that explains part of it. The second element is The fact that we have stopped, closed temporarily one of our manufacturing sites to operate a maintenance activity, which was anticipated, but which has an impact during the first part of the year in terms of fixed cost non-absorption, which obviously will reverse as we resume the production during the second part of the year. So those two are really temporary effects, which explain part of it. The remaining one-third impact is linked to the calendarization of our OPEX expenditure on sales, marketing, and administrative, as well as R&D, where we have slightly more balanced, again, split of our costs in 2025 versus what we had in 2024, and to a lesser extent, We're also recognizing slightly more legal fees, temporary legal fees for that first semester. So when you put all of that together, that explains the decrease of our ratio of EBIT adjusted But this is completely aligned with our internal expectation, and we are very confident that we will end up at what we have guided for the full year, which is 16%. So moving from 18.3% for the first semester to 16% for the entire year. If we go now down to the P&L statement, you see what I mentioned earlier, the financial costs, which are increasing versus last year, essentially linked to the negative impact on exchange rate for the CLP. And to contrary, you see the improvement of our tax costs, which is essentially linked to the decrease of our profits during the first semester. The effective tax rate is slightly increasing, by the way, when we compare first semester 2024 with first semester 2025, essentially linked to the mix of countries that we are having. With, notably, the internalization or the acquisition of SASEA in Japan, the tax rate is slightly above what we have as an average for the group. Let me move to the net free cash flow evolution. You see, and we compare on that slide the first semester of 2025 with the first semester 2024. We have generated a net cash flow of slightly below 100 million. I shared that earlier during the summary. We are spending slightly more than 50 million euros in capex. Again, no surprise. That was expected. The working capital needs stand at 72 million euros. which, all in all, when you put all that together, we have a net debt situation that is moving from €168 million to €201 million. Nevertheless, our net debt on EBITDA ratios stand at close below, significantly below one as of June 2025, so we continue, despite the heavy investment that we are having, we continue to have a very favorable balance sheet situation, as you can see on the next slide, with some very favorable ratio as well. That put us favorably to consider some further acquisitions down the road. The shareholding structure has not changed fundamentally versus March 2025. Last time we presented, the company continues. The share continues to be owned at slightly more than 50% by the Dick family, having also slightly more than 66% of voting rights. So this is it for the financial results. I will move to the second part of that presentation. I'll take a couple of minutes. As we have presented some short-term results, we wanted to take some moments to address also our mid-term vision As you know, we have a mid-term vision that has been unchanged now for several years that represents our North Pole, our compass, with a clear roadmap against which we are delivering with one clear target, which is to reach 20% EBIT adjusted as a ratio to net revenue by 2030. And we are on route to deliver that with the expected 16% at the end of this year of EBIT adjusted as a ratio to revenue, which again has been unchanged since January 2025 when we first shared with our expectation for the 2025 years. So these slides summarize our strategy framework. At the heart of it, at the center, lies obviously our portfolio, where we have defined the how to win and the where to play. We continue to have three main levers for transformation. The how to win, which are innovation, acquisition, and competitiveness. You know that we made the decision a few years back to increase our level of spending in R&D, to accelerate that as a ratio to revenue, moving from around 6.5 to around 8.5. So we'll end the year at around 8.5 as a ratio to revenue of R&D spending, which enable us to increase the number of projects that we had within our portfolio. Acquisitions, we've been quite active recently with three main acquisitions in the last 18 months. We continue. That continues to be an area of priority for us, an area of focus. We have the team in place. We continue to be looking for programmatic M&A, small to mid-size, and we complement that by a dynamic licensing that we are doing, and I'm going to comment that on the next slide, to illustrate that on the next slide. And finally, competitiveness. We have a relentless focus on competitiveness, leveraging our transformation, all of our industrial projects, as well as implementing in all of our manufacturing site competitivity program in order to to boost our gross margin so those are really the three key levers we are applying them on the where to play which is defined by geography spaces and segments So, on geography, we continue to try to improve our positioning in all countries where we are present with a specific focus in USA and China, the two major countries. We are trying to enrich our portfolio of products available for the Chinese market and to develop as well as we have had the opportunity to share and illustrate in the past few years our North America business by leveraging our current product, but also innovation as well as the entering into new segments, pet food and food producing farm animals in the U.S. From a species, we have two backbones, as you know, companion animals and ruminants. We continue to be extremely focused on those two backbones for us. You have seen the nice growth of our ruminant activity during the first semester. We have also had a nice growth on our companion animal segment. And we have two ventures that we are continuing to nurture, aquaculture and swine. And in order to power that, we are also focusing on two important dimensions, process digitalization with some transformation program. I had the opportunity to talk about ERP manufacturing execution system in the past, rollout that we are doing, modernization of those systems, and I'll come back to that on the next slide. And most important, most important, our teams our people, our talents, we remain committed to nurture the Wehrmacht culture by working on our purpose, by working on ethics, and by working on, as well, great place to work. So I wanted to illustrate a bit of our progressives that we have made during the first semester of 2025. along the dimensions of that strategic framework. First portfolio, product launches. We've had an excellent contribution of some of our new products. I mentioned that. Trilotab, Ursolix, our swine vaccine that have been rolled out after having been launched in Asia and have been rolled out in other countries, including Mexico, as you have seen. We have also that new product that have benefited from a tender in Europe that has fueled the growth. We have had a nice contribution in the first semester from product launches. And we expect more to come with two key products to be launched. Vicali, obviously, our medicalized pet food. We've had the opportunity to talk about it. That's a unique type of product that we are going to launch in the coming weeks in Europe. Innovation. Our R&D pipeline is progressing well. It doesn't mean that we don't have setback, obviously, and that's part of R&D. We all know that. But globally, we are making some good progress. We are very proud to share with you that we have launched our first Chinese product developed in China. That was part of our strategy to accelerate the enrichment of our portfolio in China, and we've been able to launch the first product developed in China for China. And as we are working on innovation new products, we are also managing life cycle of our existing products. And our R&D teams in some geographies are quite busy with submission of updated R&D and regulatory files based on the local requirements for product approval renewals. Industrial transformation. I will be very brief. We have some key projects. You know that we have increased our level of investments. We are working on many of them in parallel with our biology unit, French Phylogenetic Center, and globally we are making some good progress. Acquisitions, we have nothing announced as part of merger and acquisition for the first semester. We are working nevertheless on some topics. We continue to be busy. It continues to be a priority for us, but obviously we need to be true to them. And we are also working on continuing the integration of our recent acquisitions. We've been nonetheless very active in licensing. As you can see on the slide, we had a very extremely solid first semester, much higher than what we had had in the recent past, with nine commercial licensing deals that have been signed and three technological licensing deals as well. Digital infrastructure rollout. I mentioned it. We have finalized. We have had the go-live for our major industrial transformation with ERP manufacturing execution system and laboratory information management system in France and U.S. And we are holding out the wave two with an ambition to deploy these core models in all of our countries in the coming years. And great place to work. This is a key focus that we have. Each country is rolling out its own action plans, and we are working globally with a strong focus on diversity and inclusion. I wanted to end this presentation before moving to guidance with a quick word on integration, M&A integration. We are very proud of the progress that we are making on two fronts, Japanese acquisition and Turkish acquisition. You can see on Japanese acquisition we are moving ahead on a lot of HR topics with leadership now fully in place to drive our business in Japan. We are making some good progress in packaging harmonization as well to provide one single entity, brand image in Japan following the acquisition of Sasaya. And what is quite remarkable is the fact that we are able at the same time to ensure business continuity and even business acceleration. And you see that we are ahead of our objective for the Japanese entities with 6% ahead of our budget. So we are delivering a very strong first semester while progressing on the integration, which as you can imagine is not necessarily a very easy one. Turkey, we mentioned that we made a strategic acquisition. It's a long-term acquisition. Turkey market is an important market for Europe. It will continue to grow, we have that conviction, and through the acquisition of Mopsad we have considerably secured and solidified our position in that market. You can see on the slide that we are also progressing, making nice progress in terms of integration in all dimensions, IT, HR, and we are also delivering some strong results at the end of the first semester. So let me finish by sharing with you our renewed confidence on our full year 2025 guidance. We, by the way, share it first in January, if I remember well, we have confirmed it in March, and now in July, and now in September, we expect a top line growth, net revenue growth of 4 to 6%, with an additional point linked to the acquisition of SASEA, so 5 to 7%, including SASEA at constant exchange rate. We expect an EBITDA margin at around 16%. That constant exchange rate might be a little bit below that due to the negative impact of exchange rate. It's still tough to anticipate fully for the full year, but that constant exchange rate, we confirm the 16%. And net debt evolution at around 80% is also confirmed. So this is it for the end of June results presentation, and I'm very happy to open the Q&A sessions.

Thank you very much, Habib. Thank you, Paul. Wow. The Q&A session is definitely open. We have, if not 16, it will be 17 questions. A lot. So, Taron, perhaps you can start.

Yes. Let's start with the question. The first one is coming from Laurent Gelabar. The question is, what is the total impact of semester one, gross margin of X, from the deferred costs, is it around plus or minus 10 million?

Yeah, what we have shared is two-thirds, that's what I mentioned, two-thirds of the decrease versus last year is linked to the gross margin, and a good portion of that is linked to the temporary effect. I can try to be a little bit more specific. The... impact of the temporary stop of the manufacturing site is a few million euro for the first semesters, and it's also a few million euros of write-off impact that we are having. Again, when we compare to 2024, that was exceptionally low in the first semester of 2024.

Next question still from Laurent is what is the impact of Forex on the EBITDA margin? Should we anticipate 70 percentage points similar to S1?

Yeah, so Laurent answered himself the question. It's 70 basis points impact of exchange rate on the margin. So, moving from 19 to 18.3, just to make it simple. And it's difficult to really anticipate what we will have, because obviously it could change on a month-to-month basis. So, between zero to 70 points, it's something that we could be having for the entire year.

Next question is from Vincent Norman. He asks, can you comment on the impact of R&D spending in H125 compared to H124? Is this acceleration in R&D spending in line with your medium-term plans, or have you been forced to accelerate its spending to meet deadlines?

Yes, no, it's completely in line. We have 0.4 points more. of R&D as a ratio to net revenue when we compare the first half 2024 to the first half 2025. So we have a slight acceleration of R&D spending. We guided for 0.3 points more for the full year. So with 0.4 points for the first semester, we are perfectly in line with what we expect for the full year.

Thank you, Abib. A question for Paul from Sarah Thirion. Does Paul Martingale support the ambition of a margin around 20% by 2030, or should we assume adjustments for this forecast in the coming months?

Thank you very much for the question. Again, it's my 11th day, beginning of my third week, so far too soon for me to think about changing anything at all. What I do believe from all the conversations with the team, with the investors, is that our commitment towards the 20% in 2030 is really essential to prove the credibility of our team and the sustainability of our growth. And, of course, we want to be a top line in the growth story, but that needs to be healthy growth. And so I believe that the 20%, 2030 target is clear, has been shared, and is what we will continue to work with. I don't believe in any reason to change that. It's a great signal of operational excellence and healthy growth in the future.

Next question is coming from Mark. The margin degradation in H1 is an increase in R&D efforts as percentage of revenues. Is this a one-off effect or is there a shift from what had been previously announced?

Again, this increase is perfectly in line with what we have stated for the full year. We said that we will increase for the full year again our R&D as a ratio to net revenue by 0.3 points to move to 8.5, and the 8.5 has been announced a few years back. So we finished the year 2024 at 8.2, and we said we will continue to 8.5 for the full year, so 0.3 point more. And we have done for the first semester 0.4. So it's perfectly aligned with what we have said and with the vision to reach the 8.5% of R&D investment to revenue.

Thank you, Abib. So, Sarah, we already answered the question you asked, so we go to the question of Drew. Drew, it's a question for you, Paul. Could you provide some context on how you would think about the future M&A? It might be too early, but any early thoughts on product lines, geographies, size, and maximum balance sheet leverage would be useful.

Well, a little bit like the question to Habib earlier, it may have answered itself. It's definitely too early for me to come in with any strong perspective. I'm here to listen, to learn. I will be putting a lot of focus right now, of course, apart from just listening and learning on our execution in market with our customers, with the vets, on our operational excellence. That's probably where I can add most value in the very short term to try to continue our momentum. But in every conversation I've had, it's been very, very clear that acquisitions should and will remain a very, very strong part of our Virbac growth model. And I know the team has been working very hard. We've had conversations in the last week already about certain targets and certain opportunities, as Habib said. It always takes two to tango. But I can see already, and we've already spent time on M&A as a key potential driver to accelerate our growth and to also make strategic plays in certain areas which you're already aware of. So there wouldn't be any surprise there in where we're looking. And we'll, of course, continue to update you as anything progresses.

Thank you, Paul. So, Taron, I'll let you ask the six or seven questions of our friend Christophe Guenet.

Yes, let's tackle them one by one. First one is, can you elaborate a bit on India contribution on profit? Is higher than group average? When do you see the subsidiary in 2030?

Thank you, Christophe Raphael. So I cannot be very specific because we are not disclosing that type of information. What I can say, and we've been stating that in the past, is that India used to be below the average and they've done a remarkable journey of improving the profitability in India year after year with the benefit of the top line growth and a strong focus on procurements and gross margin locally. So they are gradually improving, contributing to the improvement at group level as well. And they are not very far from the group average as we speak.

Next question is similar to the India contribution profit. What is the EBIT contribution for the US subsidiary? And can you update us on the remain carry forward tax loss credit?

Yes, so here as well, we are not sharing that level of details, but the U.S. is one of the key drivers for profitability improvement at group level. We've been able, and we've shared that in the past, we have more or less a fixed cost structure. at the level of the manufacturing sites, commercial organization as well. So any additional top line translate nicely into bottom line.

We have a technical issue.

We are working on it.

Right. Yes, so we're back. Sorry, we had a technical issue that had been fixed by the team. Thank you for that. So I think I was cut off when I was answering the question regarding the deferred tax. So yes, we continue to have that. It has not been recognized in our balance sheet. If you remember, we depreciated it. We have never recognized them again in our balance sheet. So, we will be able to benefit from that as we make profit in the U.S. It's been two years now that we have made slight fiscal tax profits in the U.S., and we've been able to reverse part of it, and we will continue to do that in the future. So, that will have a positive slight impact on our tax income as we move forward.

Similar question. Can you share the top five subsidiaries in terms of EBITDA contribution?

We cannot. It's not an information that we are sharing, but I mean, as you can imagine, many of the top five countries in top line are also top five countries contributor in bottom line, given the size of the top line.

What should we expect in CapEx for full year 2025 and for 2026?

Yes, we have stated that we'll be above €100 million for 2025. You've seen that we are slightly above €50 million, so we will be above €100 million for the year. And that will be the same for 2026 and maybe a few years down. We have a very heavy CAPEX program with some important industrial projects that we are moving forward. So nothing has really changed on that front.

Is it possible to have an update of pet food manufacturing, of the new pet food manufacturing site?

Yes, we are... So we have submitted all of the administrative requests for the new pet food site that we want to build to internalize our pet food production in France, in the south of France. So all submissions have been made. We have received positive. acceptance of all of those files and we are now in a classical i would say legal phase in france where we have some association that have submitted some legal claim that are currently being reviewed which is a classical phase after you submit all of your administrative file in France. And in the meantime, we are very much working towards getting ready to lay the first stone of that project, so finalizing all of the contracts and getting ready for that. We have some more updates before the end of the year on that front.

Last question from Christophe Gagné. For H2, how do you see the market evolution and your expected price effect?

I mean, we don't have a crystal ball. I would love to have a very confident answer on that question. What we've seen on the data that we have is a continued dynamic Q1. We have received recently, very recently, we are still analyzing them, but a very dynamic Q2 as well, which is a little bit surprising with the level of dynamism. It's fueled by some innovation that have been launched by some of the animal health players, notably monoclonal antibodies and isoxazoline, the combination, that are performing quite well. So in that market, we are slightly below. But we don't fight with the same arms, we don't have those products, and the market does not capture some of our product ranges, such as pet food, which is not part of that, and where we have a very strong development as well, as well as some pet care products that are key, central for us, that are not part of that. So if we respect for that, we think we are very close to that market. But it's quite dynamic, six, seven percent. We don't expect that to remain. We think it will ultimately stabilize at 4% to 5%, but we've not yet seen that for the first semester.

Thank you, Abib. And we continue. We have still one, two, three, four, five, something like that. More than five. Yes. The question is from Gail Concalabro. Can you provide more details on the phasing of stock destruction, product lines, and geographies that are concerned? as the production of the antigen, which was temporarily stopped, resumed.

So here as well, I won't be too specific on the write-off. What is important is that, I mean, all companies have a certain percentage of your revenue that are written off every year. We are not different from the other. You can also have some good years and some more difficult years. It's a mix of quality. for the quality and the safety of our product. If some production doesn't meet our guidelines, we won't release them, and we will return them off. And you have some type of production that are more exposed to that, such as the vaccines, biology products, it's more difficult than some non-living type of product, if I may say. You can also have part of it that is linked to forecasting, launch of new product and you don't necessarily anticipate or some market evolution. We have, for instance, some write-off in Australia linked to the situation that I've shared with you. So it's a combination of different nature. What is important here is more the phasing, and that's why we are talking about it. In the past, we are not really talking about it because, again, it's part of the of the business and obviously we are trying to optimize it and to decrease the percentage of it year after year gradually. It's also part of the improvement of our profitability. But here we are really talking about it because of the phasing. And again, last year was very unusual, 30% first semester and 70% second semester. And this year we expect it to be more balanced. So it triggers an impact on our profitability, which is temporary.

So what do you estimate the annual revenue shortfall to be?

No, we don't have any shortfall in revenue. It's a stock that we have that are written off, but there are no impacts on the top line.

It doesn't mean necessarily revenues, but on the margin, general loss, how much it would be?

Yes, we don't communicate the overall percentage of our write-off.

Next question is from Emily Pasquier. Could you give us your point of view on the mitigation of tariffs this year and in 2026? You have communicated a gross figure. What is your view on the net impact risk?

For the tariff? For the tariff, yes. So yes, we've shared that based on current available information, we expect the tariff impact to be at around 4 million Euro annual impact on our activity, which is, share that, 80% of our revenue in the US is made, will be made at the end of 2026. It's slightly below for 2025, but 80% at the end of 2026 will be made by products being produced locally in the US. So the impact that we have is on the 20% remaining. And on the 80%, it's some raw material or excipients that we are using for the production that are being sourced from outside of the US. So this is the 4 million euro impact. It's a gross impact, it's true. We may benefit from price increase to compensate for that. I say may benefit because we are not alone in the market. We are also very careful and very prudent in the positioning of our product versus the competition. product by product decision that shall be made to see how and whether we can offset all or part of that tariff increase. So it's linked to the competition, so it's difficult to come up now with an answer. What we can say is that We are trying to increase our price whenever it's possible to compensate for any impact, inflation impact and also tariff impact.

Can you remind us about your Forex coverage and cost impact?

Yes, so we are, first we have a natural aging on the P&L, profit and loss. In many countries, we are producing locally. In many countries, we have local activities, local sales force. In some countries we even have local R&D for instance, so this provides us with a sort of a natural ageing, which is working certain years quite well, some other years not as well. This year it was working a little bit less, because we have been impacted in some countries where we are also benefiting from product coming from outside of the country in different currencies. So that aging, natural aging that we have, depending on the years, is protecting us more or less. So that's on the P&L. Then we are obviously having an overall aging strategy on the cash flow that we have between the different subsidiaries that we have to protect the cash flow, the flow of cash. based on the buying in some currencies in some countries. We are doing all of that centrally for most of the countries, not all of them, but most of the countries. And it's a yearly aging strategy that we are having on the cash flow between the different Virbac affiliates. And finally, we have some coverage as well on the balance sheet linked on the debt. We have some cross-currency swap. that we are implementing. So I mentioned the Chilean peso, we are financing from France our Chilean affiliates, and part of that intercompany financing is protected through cross-currency swap. Given the price of that financial instrument, we have not covered 100%. But we are covering around 50, 60% of the exposure. And the rest is not a cash impact. It's not a cash impact.

I still have a question from Emily. It's for you, Paul. What are your key focus in the next six months?

Well, thank you. Definitely my first and absolute focus is really on learning, learning this business, this industry, and of course the wonderful and very successful world of Virbac. So I'll be spending a lot of time in the next three to six months visiting our affiliates around the world. As you know, this is an industry with quite a lot of difference between different markets, Japan, Brazil, France, USA, so really important that I spend time in the local markets, visiting customers, visiting vets, really out there with our teams in the field, something that I believe very, very strongly in keeping an external focus, at the same time as visiting our affiliates, I'll be engaging with as many stakeholders as possible, and as I said, that will include this group here where I would really love and enjoy to connect with you and listen to your perspectives on the industry, on the market, and on, of course, Virbac and what we can do in the future. Then absolute focus number one is really Of course, trying to continue to drive the strong momentum that we've been delivering over the recent years and in the first half of the year. So really, how can we stay very focused after all the important investments we've made in CapEx, in R&D, in licensing, to really make sure we execute with excellence, that we're really close to our customers, that we're really on top of making every single launch and every activity we do as big as possible. to have the continued momentum, the continued space to reinvest to continue to grow in the future. So for now, it will really be a little bit, I would say, back to basics on execution focus and driving momentum. Of course, over the following perhaps six to 12 months, I look forward to perhaps engaging with you and sharing with you our thoughts and our vision perhaps more towards 2035 and how we might want to evolve our current strategy towards to continue the strong and impressive growth this business has shown over the last 10 years where we've doubled the size of the business. What would it take and what can we do to look at a vision and ambition like that for the future? So that's really where I'll be putting my time and effort in the coming weeks and months.

Great. Next question from Vincent Normand. Can you be more precise about some setbacks with R&D pipeline, any major R&D program impacted?

I mean, it's part of the day-to-day R&D. All companies that have R&D knows that you are facing difficulties, you overcome them, you find new solutions. So what I wanted to say is that it's not like we have 100 projects in our pipeline. It's not like 100 projects are moving exactly the way you want it. I cannot be more specific. We are not providing a lot of details, as you know, on what we have in our portfolio, but we will, as usual, in March, provide a yearly update on our portfolio, so stay tuned.

Next question from Marno Kadar. What about this one of legal expenses that increased notably in H1? Is this related to the launch of future products or is it linked to more litigation? And if it is related to the later, what does it consist of?

Yes, now it's there as well. It's a type of litigation that all companies are having. We are mentioning it because we have a slight increase. I think it's 1.2 million euros more first semester, so it plays also a role in the dilution of our profitability, and we know that it's temporary and it's versus 2024, but it's a little bit like the write-off. Every semester, every year, you have legal fees for some litigation that we may have in some of our countries.

Gentlemen, we have a question from Emily about transparency. So because of transparency, I'm going to transmit to the question. Can we expect more transparency on financial disclosure margin-wise per division in 2026?

I mean, we are already providing a lot of information from a top line and the overall margin at group level. For competitive reasons, you can imagine that there are elements of our performance that we don't want to share publicly. Anyhow, whenever there is something material that is happening, or whenever we have an evolution, we try to be extremely transparent in the elements that explain that evolution. We are perfectly aligned with the regulation in terms of what we are sharing, and we don't expect to provide going to more granularity as we move forward.

Last question from Laurent Delabarre. Could you comment on your licensing and commercial deeds?

Big stuff. No, there as well. We mention it because we have never had really the opportunity to talk about licensing. We've said in the past at some occasion that it's a nice add-on to what we are doing. The team in all of our geographies are very much involved in that as well, to identify opportunities. It's product that we add to our local pipeline, so it could be one product in one country. which is a good complement to our portfolio. We have the commercial infrastructure, so obviously it has a nice impact on the bottom line. So a part of the nine, for instance, there is one nice product on which we have had some good results in some countries, and we negotiated successfully with the owner of the product to extend Based on the success that we had in some countries, he was willing to provide us with the license in some other countries. So it's also a testimony to the quality of the work that the team is doing. And the technological licensing, it's quite important to rejuvenate our portfolio. And here I can be a little bit more specific because one technology license is monoclonal antibodies on which we have made a publication on our website. So it's not for tomorrow. It's not for the day after. It's quite a long-term perspective for that new technology. But we are very happy to have been able to secure that, which again will be a nice add-on to our R&D portfolio.

Thank you very much. We have still 73 colleagues, analysts, investors that are connected. We went through the list we received in the questions section or in the chat section. So we may have come to the end of the meeting, dear friends. Unless you have still questions to ask, perhaps I'll let you a couple of seconds to see if something is moving on the chat. If not, I want to thank you all on behalf of the VRBAC teams for your talents and loyalty to our company and wish you a very good day and a good week as well. Thank you, Paul. Thank you, Abib. Thank you very much. Thank you all of you.