2005 Annual report - Virbac

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Internationally
In Mexico
A reorganisation of the injectables production unit made
it possible to come into line with Mercosur GMP standards
and achieve optimal adjustment for small and medium sized
batches.
A new building was leased and laid out in order to cater
for storerooms and depots, premix production as well as
secondary packaging.
In Brazil
A new workshop was built to cater for tablet production
that was previously carried out in Mexico.
In Australia
The transfer of the production of semi-finished parasiticide
collars to France was completed in December.
Analysis of the 2005
financial statements
Consolidated financial statements
Income trends
Operating profit from ordinary activities rose 29.1% on the
previous financial year as a result of the sharp improvement
in the gross margin and a controlled increase in operating
expenses from ordinary activities.
Sales amounted to €372.4 million, up €21 million (6%) on
2004. With the exception of some European subsidiaries
that declined, including Spain and the Netherlands, all
subsidiaries contributed to the growth of sales in 2005. The
South African and North American subsidiaries performed
very well with a rise in sales of over €2 million followed by
the Mexican, Brazilian and French subsidiaries. The
acquisition by the Group of the Greek subsidiary in June
2005 should also be noted, generating an additional €1.4
million in sales over a six-month period.
Margins on purchase costs rose by 8.6%, namely well ahead
of sales, and is testament to the efforts made over the past
number of year to optimise purchasing, improve productivity
and optimise product mix. The gross margin thus rose by
1.7 points on 2004.
The increase in personnel costs stems from the increase in
profit-sharing expenses and provisions for retirement
indemnities and pensions.
Operating profit not from ordinary activities amounted to
€6.2 million and included the most recent extraordinary
audit and legal charges relating to Virbac Corporation
(€1.8 million), as well as the provisions for the impairment
of two intangible assets following the carrying out of
impairment tests done pursuant to IFRS and which
amounted to €4.4 million.
The first is €1 million for an active ingredient in
development for human pharmaceuticals to which Virbac
obtained the rights for the veterinary market. Ongoing tests
and developments have not enabled any conclusions to be
drawn as to the potential of this molecule.
The second impairment provision relates to Romifidine,
an original anaesthetic to which Virbac acquired the rights
and marketing authorisation for cats and dogs in late 2003.
This anaesthetic was launched in European markets in 2004
but did not meet the targets expected by the Group.
The sales potential for the product was reviewed, resulting
in the partial impairment (€3.5 million) of this asset.
Net finance income rose 41.3% on 2004 and amounted
to €-1.7 million compared to €-3 million the previous year.
This improvement stems from the sharp reduction in the
Group’s net debt and a positive exchange rate impact in
2005.
The amount recognised in “share in earnings of companies
accounted for by the equity method” relates to the earnings
accounted for by the equity method of European companies
in which Virbac has a minority stake.
Corporation tax amounted to €8.5 million, up 11.2%. The
reduction in the apparent rate vis-à-vis the previous financial
year largely stems from the use by Virbac Corporation of tax
losses carried forward which cut the subsidiary’s tax rate
and from the recognition of deferred tax on losses carried
forward by the Brazilian subsidiary, justified by its return to
long-term profitability.
Minority interests rose from €0.9 million in 2004 to
€2.3 million in 2005 as a result of higher profit at Virbac
Corporation where minority interests hold around 39.8%.
Net profit – Group share amounted to €19.8 million,
up 18.4%.
Operating expenses from ordinary activities amounted to
€217.1 million, up 5.6%. The increase in external expenses
largely relates to professional fees, R&D and advertising.