Virbac Sa Unsp/Adr

Good afternoon, everybody. Good morning for those who are further. I'm really happy to welcome you for this Alfea Results 2026. For those who don't know me, I'm Carole Monduchet. I'm the Global Head of Communication for Virbac. And I'm here along with the Investor Relations Director. And of course, on the floor today, we have Paul Martingale, our CEO, And we have Abhi Brandani with our CFO and BCT CEO. So I will leave the floor to Paul and Abhi to introduce you with our Althea results and the different perspectives we have. And after that, you will be able to ask your questions. But please do not hesitate to use the chat or the questions room to start to ask us your questions so that we're ready to shoot when they're over. Thank you so much.

Thank you, Carol. Good afternoon. Good morning, everyone. Welcome to this call and pleasure as always to connect with you, to take you through our half-year 2026 results and to connect that as well back to some of the strategic updates that we shared earlier this year. Maybe just to share a few high-level messages myself and then Habib will go deeper into some of the financials later on. Very, very solid, and we're very happy with the first half performance. As you've seen, 7.4% growth, really driven by our supercharged platforms that we shared with you in our Growing Together strategy that we announced earlier this year. Those platforms growing double digits. And also, as you've seen in the second point, bringing a nice favorable margin mix to the business as well with operating profit. At the same time as we deliver the strong and disciplined financial performance, we continue to invest strongly for our future growth and sustainable development, significant and strong continuing impact in R&D, in our CapEx investments to ensure that we have the capacity for growth, agility and great customer service going forward and also increasingly in A&P advertising and promotional spend given the ongoing shift towards an omnichannel business model and the amount of our business which starts to become more direct to consumer in nature. I mentioned earlier the industrial transformation We will enter into a bit more detail there, but three or four key projects that you are well aware of. Happy to share that with the teams we've put in place and some of the capabilities we've been building, those projects are being very well managed and executed and all on track and as planned. During the first half, we've also, as a team, seen the ability of Burbank to be very agile in the face, of course, of some quite significant challenges, whether that's the inflationary pressures of oil from the Middle East crisis and, of course, the changing nature of tariff discussions in the US. We've managed to offset that and continue to deliver margin expansion as planned in our growing together strategy. Finally, in terms of another important piece of our strategy, as you know, external growth remains a top priority for Vervac. Delighted to say that the integration of Pyranorm, Felanorm brand that we acquired at the end of 2025 is absolutely seamlessly on track and performing even ahead of our initial expectations at this stage. So great mobilization from the team. That again gives us a comp. But it's the continuous search for those both on acquisition, small, medium size. And in fact, in the first half of this year, we've signed two smaller deals, but still interesting to share, two licensing deals in areas of innovation in specialty segments that are a very, very nice fit with our supercharge and core platforms. And in both cases, where not only do we have the initial rights for distribution in the selected geographies, but we also have an option for full acquisition of those brands. All that to say that the continued responsibility that you've always had with Burbank continues. And as you know, the strong performance of the first half gives us the confidence to share that we are now targeting the upper end of our sales for 2026 and again a confirmed EBIT margin of around 17%. If we move forward on the external perspective which in fact for us is really the number one measure of our performance and you would have seen externally other competitors perhaps not seeing things quite so positively. We, A, see the market continue to be robust. Yes, we see a slowdown in Companion in the U.S. But as you know, Virbac, we have a very broad portfolio across both Companion and farm and internationally. And therefore, when we look at our reference market, we still see a rather healthy market. Yes, a slight slowdown. But more importantly, we continue to see that the Virbac teams, the pipeline and portfolio that we have, is able to perform consistently above that market. And again, another three continuous quarters where we've been growing and perhaps even accelerating the gap versus the market showing that real customer closeness that we enjoy. And I would say an increasing focus on execution in the market. As you know, earlier this year, we did make a change to our executive committee structure to be operating now these three regions, really to ensure, again, closeness to our customers and the voice of the customer as part of our leadership team. Europe, of course, still a very, very strong home and center of the Bovac business, still delivering very positive and strong growth. But clearly the highlights in half one came in both the North America region with double-digit growth in the US, which as you know is an absolute priority for us to really build a significantly stronger position in that market. And it's another strong double-digit growth for the first six months of the year following two or three years before that as well of double-digit growth in the US and in international region. where, again, double-digit growth, particularly in India, very strong growth, as well as in Latin America, more than offsetting some headwinds in the Pacific region where we've made, again, some changes to our commercial organization, set up an approach, and we start to see some more positive signals from that part of the world. But, again, the strong diversity of our business across segments and countries and the agility Delighted that we can have that 7.4% growth for the first half, but well split and well spread across all major geographies. A reminder of our strategy that we shared earlier this year, and of course, it's year one on that journey, so we have lots to do. You do see the very strong positive impact of the focus on those supercharged platforms, both on top line and on gross margin. And on the next chart, I'll come onto that just to, again, put a bit more flavor behind what we have in that part of our business. also shared again today two nice examples with the with the poorest one and vet care deals that we've shared in terms of our ability to be a partner of choice in terms of external collaboration and with a very active and ongoing BD organization and the omnichannel transformation that we continue to go through A lot of focus from the team in the first half and as will continue going forward on really executing with excellence, both on the commercial side and as well on the industrial side to make sure that we can offset all those other challenges and be even more efficient and effective. Certainly a lot more to do there, but the team already demonstrating a real passion and improvements in those areas. As well by our investments in data and digital that provide us with a lot more tools and data to drive those decision making. On the next chart, you will see, again, as we shared in the previous strategy update, just a little bit more flavor around those supercharge platforms that are performing so strongly. Here, a really nice example. a surprisingly common and frequent challenge for pet parents and our customers, the vets. In fact, allergy and within that ear is a strong piece of it, an extremely frequent cause of pet clinic visits by pet parents and a space where we have an increasingly strong portfolio and position across a number of very well-trusted brands such as Esotic and Epiotic and increasingly Cortotic, which is a very nice innovation growing very strongly as it is the first antibiotic-free treatment in that space at a time where antibiotic resistance, of course, is a key theme for our customers. In mobility, a very strong platform with Movaflex performing very well as life expectancy and expectancy of pet parents for the quality of life for those animals only increases. Movaflex performing very well and, more recently, Ursolix in the US, a fantastically executed launch and also performing, again, ahead of expectations. So we continue to build our portfolio in expertise in that space. Animal farm animals reacting to, of course, some of the important One Health challenges of zoonotic diseases that we've seen, especially over the last couple of years. And of course, the continuing need for prevention and quality protein sources. The team continues to be very well mobilized, and we have a very strong position there, particularly in injectable trace minerals, an increasingly understood and important area to support livestock health prevention at key moments for the farmers and customers on those journeys. So we'll continue to provide more. Sa Unsp & Adr Sa Unsp Perception of Virbac as a potential partner of choice for companies that are developing such innovations. Two distribution licensing agreements that give us the geographies shared here from 2027, the distribution of these very interesting brands and innovation with a very strong fit in two areas of strength for Virbac. But more importantly as well, in both cases, we have the option under certain conditions to close a full acquisition of those assets and bring them into the Burbank portfolio, something that we've done with a number of our assets in the past and something which is really, again, a core part of our business. These are smaller scale transactions compared to something like Tyronorm that we shared at the end of last year. But that's not to say that our team is not extremely active and continuing to pursue other bolt-on acquisition opportunities. As again, that remains a core and critical part of our growth model, complementing the strong organic growth that we always strive for. With that, I pass over to Habib for a little bit more flavor and detail on some of the financial performance. And of course, we'll be here for the Q&A later.

Thank you, Paul. Good morning, good afternoon, and good evening to all of you. It is my pleasure today to present to you our financial results, half-year financial results at the end of June 26. Let me start with the usual key takeaways from our financials. As Paul shared, we have had a very solid We are reaching 768 million euros at the end of June which is a 7.4% growth at constant exchange rate and scope. I'm particularly pleased to note that it's a qualitative performance with a nice mix between volume and price. It's made of 5% volume increase, very dynamic, and the in 2% price increase. It's also extremely qualitative from a geographical standpoint. I won't repeat what Paul has shared, but you've seen that our three regions have contributed significantly to the development of our sales. Finally, we can note as well the contribution of Tyronorm to that result. At the end of June, Tyronorm has added 1.4 points of growth during the semester. It's also particularly solid in terms of EBIT adjusted. We have ended the semester with 144.2 million euros of EBIT margin, which is 18.8% as a ratio to revenue. And we have had a net result of 87.1 million euros, which is a 6% increase versus the first semester 2025. And I will have the opportunity to go a bit more into the details in the presentation. If we look at the other financial indicators, we have had the net cash flow generation very solid as well at around 130 million euros during the first semester. And Capex spending, which has continued to increase in line with our expectation at 57 million euros. And as you can see, we ended the semester with a net debt reaching 200 million euros. which is a slight increase versus end of December 2025, mainly due to the usual seasonality that we have every year. And as you will see later on, we continue to expect cash generation during the year 2026 of around 80 million euros. Before we move into the segments, let me take a few seconds to cover the exchange rate impact. As you can see, we have had some headwinds in terms of currency impact. We have had a negative impact of the top line by 25 million euro. and the negative impact on our bottom line, EBIT adjusted at around 5 million euros. However, the positive thing is that for this semester, the currency evolution have not triggered a change in our ratio of EBIT adjusted to revenue, which has remained stable at 18.8%. So, no impact from the currency on our EBITDA ratio, contrary to last year. If you remember, we had a dilution of our ratio linked to the currency evolution. I can also mention that we are seeing most recently a significantly less impact. Actually, for the month of August, we had nearly no impact of currency on our top line. So we cannot really, we have no crystal balls, so it's difficult to anticipate the end of the year, but at least in August we had a better situation. So let me move now to the evolution of our net revenue by segments. and I'll start with the revenue split between companion animals and farm animals that has remained extremely stable and we continue to have a very balanced portfolio with 60% of our revenue from companion animals and around 40% on farm animals. If we continue to dive within the companion animals product ranges, And we look at where the growth is coming from, from a segment standpoint. You can see that we have three main segments that have had a growth rate close to a double digit or double digit, both double digits growth rate. The first one is specialty with 23% increase. Obviously, a portion of that is linked to the integration of Tyronor, but we have some other supercharged products or products from our supercharged platform that have contributed quite significantly to that, including our mobility ranges with MoboFlex and your colleagues that Paul shared earlier. Petfood has had a good semester as well, continued to have double digit growth rate of close to 14%. Other segments with our dental supercharge category that is accounted there as well. You can see we are around the 9% growth rate. The only segment that is decreasing during that semester is parasitic size, which is quite aligned with what we have experienced last year regarding our portfolio of products, but as you can see, very much compensated by very good dynamics in the other segments. Let me move now to farm animals. We've had a 10% growth overall in companion animal. We have also a very solid top line, development top line growth in farm animals with close to 7% at constant exchange rate and scope, so very solid. Here as well, we have a few segments, three that are contributing quite nicely to the growth. being nutritionals with a 20% increase of our revenue there. Paul mentioned as well some of those supercharged category with the ITMS. And obviously, this has been driven as well by the very, very good performance that we've had in India during that semester and in line with what we've experienced over the recent years with that country. Vaccine has had a very strong semester as well, 8% growth. It's a mix of the Bluetongue vaccine in Europe and reproduction vaccine in other parts of the world, including Latin America. Other segments as well, you can see 17% with reproduction and anti-inflammatory as well products that have contributed quite nicely. On the flip side, parasiticides, has decreased, essentially linked to the situation in Australia, where we are suffering and we've experienced a decline of ourselves during that semester. As you know, we shared that earlier. And aquaculture as well, with the one million less revenue, essentially linked to one product for which we lost the distribution. But overall, again, very solid performance on our two leg companion animal and farm animal. Let me move now to the P&L statement to commence on our EBIT adjusted and net income. You see that our gross margin and material costs has increased as a percentage to revenue. So we've moved from 67.4% to 68.4%, which is driven by a favorable mixed effect with the contribution of our supercharged product who tends to have a higher margin than the average of the group. We have the benefit of Tyronorm as well, and also some base effect linked to one of that we had last year, if you remember. If you look at now the combination of net expenses and depreciation and provisions, so all the other expenses within our P&L beyond the raw materials and consumables used, You will notice that the ratio to revenue of those expenses have increased by half a point and the combination of one positive point on gross margin on material cost and half a point decrease enable us on our EBIT adjusted before amortization and acquisition. to increase by half a point as well, so a very solid performance, moving from 18.3% to 18.8%. Let me comment a bit this increase of expenses as a ratio to revenue. It's made of essentially two elements. One of them is a positive impact linked to R&D spending, and you can see bid of that in external expenses, which have increased by only 2%. So it's linked to a limited spending of R&D versus last semester, but it's essentially a phasing effect versus 2025. We expect that to normalize during 2026. On operating expenses, before R&D, we have a bit of the same phasing effect as well. But the other way around, we have had incurred higher expenses in the first semester of 2026 versus the first semester of 2025. But here as well, this will normalize for the full year 2026. And finally, I can mention as well some one-off expenses that we had during that semester that played a role as well to explain the 1.3 points increase of our operating expense as a ratio to revenue. But this as well, obviously, as a ratio to revenue will decrease when we reconsider the full year. So all in all, we are again reaching 19% and the dynamic of this first semester with what we anticipate for the remainder of the year makes us very comfortable and very positive in our ability to reach the guidance that we have confirmed on EBIT adjusted which is 17% as a ratio to revenue for the entire year. Let me move now down to the rest of the P&L. You see that the depreciation of intangible assets arising from acquisitions have increased when comparing first semester last year and first semester 2026. It has nearly doubled, and this is essentially linked to the integration of the depreciation of the assets linked to the acquisition of Tyronor. We have recorded a bit more than 5 million euros of other non-recurring income and expenses in the first semester of 2026. We had nothing last year. So this 5.6 million euros is essentially linked to two elements. The first one is depreciation of stock and equipment linked to the commercialization stop of one of our products. And the second is linked to damages that we have suffered within one of our wholesalers. So we have recorded the damages, but we are working with our insurance to get it covered. Two final comments on the rest of the P&L. The first one on financial income and expenses. You see that we've improved there, moving from €8.5 million expenses to €3.2 million. This is essentially linked to the impact of exchange rates. We had last year some negative impact linked to the evolution of the CLP. CLP, which is the Chilean currency, which impacted our semester, whereas this year we have had a more stable CLP when comparing the end of year, end of December 2025 versus end of June 2026 situation. Income tax has remained quite stable versus last year. The evolution is aligned with the activity of the group. And all of that, when combined, enables us to record an increasing net income moving from €82 million to €87 million. Let me move now to the free cash flow. You see that it stands at minus 7 million euros in H1 2026. It's an improved situation versus last year and it's also very much aligned with what we expected for that first semester. The two main elements explaining the Our net free cash flow is obviously the CAPEX spending. You see we have spent 57 million euros during the first semester. It's slightly above what we spent last year. And it's linked to the industrial, most of it is linked to the industrial project transformation ongoing with the three to four key projects that Paul mentioned earlier. The working capital, we have had a requirement of €80 million. Here you probably remember that we have usually a seasonality effect with requirements during the first part of the year on working capital, especially linked to our commercial model and the end of year rebates that are being paid during the first part of the year. and the combination of capex and working capital requirement more or less equal our generation of net cash flow, which has increased, by the way, by around 30% versus last year. So when you put all of that together, it explains the evolution of our net debt situation. You see that we ended the year last year, 2025, at around 173 million euro. We have slightly increased our net debt at the end of June at 196 million euros. Two comments there. The first one, again, it's very much aligned with what we expected and the seasonality effect that we usually see during our first semester. And second comment, as you can see on the bottom text, We continue to have a very favorable balance sheet situation and leverage with the net debt on EBITDA ratio, which stands at 0.6 at the end of June 2026. I'll move very briefly on the consolidated balance sheet. You see the evolution of our working capital between December and June, but again linked to the seasonality. And you see the nice ratio that we have, net debt on net cash flow and net debt on operating cash flow slightly increasing, but again essentially linked to the seasonality. Let me say a few words on our shareholding structure. It's going to be very brief. We continue to have our majority ownership, the Dick family, having slightly more than 50% of the shares and 66% of the voting rights, so very much stable versus last year's situation, no changes there. And before moving to the Q&A session, I'd like to wrap up sharing with you our full year guidance 2026, which has remained the same versus what has been shared in July. We continue to target the upper end. of the net revenue growth original target that we shared at the beginning of the year, 5.5% to 7.5% at constant rates and scope. Our EBITDA margin, EBITDA adjusted margin is expected still around 17% for the full year 2026. We'll spend 125 million, around 125 million euros of capex for the year and all of that will enable us to generate around 80 million euros of cash at constant rate and scope again for 2026.