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The normalization of growth is happening at a forced march

The veterinary laboratory is suffering from the downturn in the animal health market as evidenced by its quarterly activity, which was in organic decline.

Investors finally welcomed the publication of Vetoquinol’s third quarter sales, with the stock increasing by almost 6% in the session that followed it. The market was clearly anticipating a more marked decline in sales over the period after the sharp decline in half-year accounts which had caused the stock to plummet.

Thus, from July to September, turnover reached 134 million euros, a gross increase of 1.4% but also an organic decrease of 4.5%. A mixed performance which can be explained, according to management, by “the expected landing of the post-Covid market and the negative effects of the geopolitical context”. Particularly affected, Europe saw its billings fall by 8%, while the other regions, Americas and Asia-Pacific, increased by 10% each.

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An unfavorable economic environment

Over the first nine months of the financial year, turnover amounted to 405 million euros, representing growth of 4.5% and a slight decline of 0.3% on a like-for-like basis. A level “in line with the expected outlook for the end of the financial year”, according to management, and which confirms the solidity of the group “in a very atypical market which lands after the strong activity of the two Covid years and which is suffering in the at the same time the unprecedented geopolitical and economic context,” insists Matthieu Frechin, the general director.

Essential Products, the heart of the group’s strategy, managed to gain 3.1% thanks to growth of 5.5% in the United States, the world’s largest market for pets. The group is counting on several launches in this family of products, notably antiparasitics for dogs and cats, to fuel growth in the coming quarters.

A new strategic plan until 2026

To relaunch itself, Vetoquinol announced, during the publication of the half-year accounts, the implementation of a new strategic plan, Ambition 2026. The development of international brands focused on dogs, cats and cattle, and the refocusing of the offering in four strategic segments (antiparasitics, mobility, dermatology and dairy cows) are the priority areas.

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In financial terms, the company aims for average growth in turnover higher than that of the market and a high level of profitability, “within an EBITDA margin corridor of around 20%”. To achieve this, Vetoquinol announced that investments will increase from a historical annual average of 15 to 25 million euros over the next three years.

Our advice on VETOQUINOL: STORE

The disappointment which followed the publication of the half-yearly accounts in mid-September caused the stock to plunge by more than 20%. A severe and clearly exaggerated sanction given the positive market reaction to third quarter sales, although in decline.

Management indicates that the 2022/2023 financial years will be more complicated than the previous ones: in fact, the sector in general and the company in particular have experienced two years of strong activity, an indirect consequence of Covid-19 on the development of the animal segment of company.

The return to normal is therefore rather brutal, with high bases for comparison. Added to this is the increase in the cost of raw materials and energy, resulting from the geopolitical situation in Europe, and which affected the accounts for the first part of the year. However, the group’s strategic refocusing on Essential Products has been a success so far and Vetoquinol still has a solid balance sheet, with net cash of 23.7 million euros at the end of June. We will keep the stock with a target reduced from €150 to €110 to take into account the uncertainties of the moment.

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