The veterinary laboratory published an annual turnover below expectations, due to a difficult time in Europe.
The stock had benefited from the return to favor of growth stocks at the start of the year, but the publication of its fourth quarter sales brought it back to its level at the end of last year. The price has fallen by more than 10% over the last 3 sessions, with investors fearing annual accounts affected by the slowdown in activity recorded in the second half.
Thus, turnover for the last quarter of 2022 amounted to 134 million euros, a gross increase of 0.9% but a decline of 2.4% like-for-like. The company says the Americas and Asia-Pacific regions remained buoyant, with gains of 9.7% and 9.5%, respectively, while Europe saw a decline of 8.2%.
Pets Always Dynamic
Over the entire financial year, billings reached 521 million euros, representing a gross increase of 3.6% and a decline of 0.8% organically. A performance gap due to positive exchange rate effects, particularly across the Atlantic. The heart of the group’s growth strategy, Essential products gained 4.5% and now represent 56.3% of overall activity.
It is the companion animals segment which is driving this increase, with progress of 9.1%, including 4.8% at constant exchange rates, while sales to farm animals stand at 174 million euros, down 6.4% based on published data and 10.9% at constant currencies.
A balance sheet that remains healthy
Management does not give a quantified objective for the annual accounts which will be published on March 23, but Matthieu Frechin, the general director of the laboratory, believes that Vetoquinol’s strategy, “centered on targeted segments of the market will allow us to pursue a profitable growth driven by our Essential products.
Finally, the group indicates that at the end of 2022, the net cash position is positive thanks to an improvement in working capital requirements in the second half.
Our advice on VETOQUINOL: LIGHTEN
Investors hoped for better from Vetoquinol for the end of the year, but the consequences of the war in Ukraine on the European market, the group’s largest with 47% of billings, weighed more than expected. Likewise, the inflationary situation does not allow us to envisage an improvement in profitability in this complicated market context, and the decline in the livestock segment seems structural. The acceleration of the strategy of ramping up Essential products is running out of steam, and the objectives set for 2026, in particular that of an EBITDA margin of around 20%, seem distant at this time.
The laboratory certainly suffered from an unfavorable basis of comparison in 2022, the rebound in the sector during the Covid crisis having boosted sales. But it is unable to keep up with the pace of the market as a whole, the comparison with Virbac, in particular, being unfavorable for the moment: out of prudence, we will reduce the position with a target reduced from €110 to €95.
Course on advice date: €87
Price target: €95, i.e. a potential of +9.2%
Investor profile: informed public
Investment horizon: 12 months.