Eco Animal Health Group plc share price, company news, analysis and interviews

ECO Animal Health Group plc (LON:EAH) Chief Executive Officer David Hallas caught up with DirectorsTalk for an exclusive interview to discuss a strong set of results, growth drivers, product markets and optimism for the year ahead.

Q1: David, you’ve announced results for the year ended 31^st March 2023, first off congratulations, they appear to be a strong set of results. Could you talk us through the highlights please?

A1: Yes, they are a strong set of results, I think, what we did was we actually beat the market expectations at revenue and EBITDA.

So, revenue increased around about 4% to £85.3 million, the sales growth dropped down to the bottom line so we were able to report an adjusted EBITDA a growth of £7.2 million and gross margin of 45%, 2% ahead of last year. This was helped by some decrease costs in our active ingredients so the source material and we were able to continue to drive on our new product development and the portfolio is robust and full.

ECO Animal Health is in fact, you might say, pregnant with innovation and we expect that innovation to come to the markets by the end of next year.

Q2:Just looking at it in more detail, could you just run us through what’s behind the growth in revenues, the profitability, and the improved cash position?

A2: Taking the revenue growth, that was supported mainly by two key geographies.

Latin America grew about 15% versus the prior year, that was helped by a great performance in the two largest geographies in Latin America, Brazil, and Mexico. The other very robust growth even well above 15% came from South and South-east Asia, and that was driven by success in the poultry sector in India and great growth in Thailand and some neighbouring markets to Thailand in the swine sector. So, that was the revenue growth.

The business model means that more revenue pulls through to leverage at the bottom line so if you put more revenue through our structure, our structure is a fixed cost so more revenue allows that leverage at the bottom line so that’s why the profitability has been every higher growth. Also supported by favourable gross margins for the reasons I mentioned, mainly that costs were well under contract and we had a decrease in cost of our source ingredient in our blockbuster product, Aivlosin.

The cash position, that was helped by deliberately running down our inventory from deliberating high levels in the last year which were run up because we were producing and building a new production plant, a fill and finish part to produce the end product. In order to produce that factory and that manufacturing plant, we had to build up the inventory beforehand, that came on stream in November 2022, on budget and on time. So, subsequently to November, we were able to run down the inventories and that helped our cash position by a little over £7/£7.5 million. That gave us a better balance sheet position as we brought those inventories down to a more normalised level.

Q3: How would you describe the market for your products and in what way does that impact on ECO Animal Health?

A3: We’re operating mainly in the swine and poultry sector, the market long-term has got some very decent robust intact growth drivers, and those are, simply put, they’re more people in the world wanting to eat higher quality protein. That means it’s mainly chicken and a bit of other white meat, pork, that is in increasing consumption so overall, that’s positive.

Slightly less positive is the gyrations of commodity price, they go up and down and we’ve seen increased costs to our end users in terms of grain price bumped post-Ukraine, it’s normalised a bit now but we did see a bump as grain prices went up which are a major cost driver for our producers. So, that has been sometimes a headwind.

I think the headline of the story is that the ultimate growth drivers long-term are sustainably robust commodity prices sometimes give us headwinds, sometimes give us tailwinds.

Q4: How has the new financial year started and what gives you optimism for the year?

A4: The financial year, meaning this quarter that we just finished in June, for which we have results gives cause for confidence because the momentum we saw in the second half of the financial year ending March continued into the March-June period.

So, we saw continuing good trading in North America, continuing good trading in Latin America, South and South-east Asia but also in China so a good broad based continuation of our operational activity, so that gives me confidence for this financial year.

It’s always good to start well, our second half is always more robust than our first half for seasonality reasons and typical historical demand reasons so the fact that the first quarter of this financial year started well is almost a double benefit.

That’s for this financial year and then slightly further out, not that much further out, we see the fruits of our R&D labour coming to fruition by the end of next calendar year as we see two poultry vaccines we expect to be licenced in the US by the end of next year.

Eco Animal Health plc (LON:EAH) Chief Executive Officer Mark Loomes caught up with DirectorsTalk for an exclusive interview to discuss highlights from their final results, how the business performed during the pandemic, what drove the 44% increase in demand for Aivlosin and the outlook for the company.

Q1: First off, congratulations on your results for the year. Could you just talk us through the highlights?

A1: Eco Animal Health’s key financial performance indicators were all strongly positive, but the two that really stand out for me were the 5% improvement in gross margins, reflecting this year’s geographical mix and underpinned by pricing discipline and cost stabilisation across the business, and the improvement in cash balances whilst the business continued to invest heavily in R&D, which has resulted in the proposed assumption of the dividend payment.

Q2: So, what are your key markets and how have these performed?

A2: Our key markets are the principal food producing markets, and of these China, the USA and Brazil have all performed remarkably strongly.

This growth was driven by African swine fever making structural changes, followed by the very rapidly stocking of pig herd and very high core practices in China and the strong domestic and export demand for pork in the USA and exports from Brazil.

However, these outstanding performances were tempered somewhat by disappointing results in South and South-East Asia, related to both African swine fever and COVID-19 in these markets.

Q3: Now, the company appears to have performed resiliently during the pandemic. Can you just provide some colour on how it’s impacted the business?

A3: We have performed resiliently during the pandemic. We transitioned very quickly and very smoothly to remote working, we’ve retained all of our staff and we’ve not had to require any assistance from any government financial support scheme.

As the company has an outsourced manufacturing model, our supply chain market assets have functioned robustly in most locations during this challenging period.

Q4: You mentioned Aivlosin demand increased by 44%, what do you think that’s down to?

A4: Aivlosin is increasingly recognized as a highly effective treatment for respiratory disease control. This position has been reinforced by Aivlosin approvals granted by the USA, Canada, and the European regulatory authorities for the treatment of enzootic pneumonia in pigs in the year just ended.

Q5: Now, just looking forward, how would you describe the outlook for Eco Animal Health?

A5: The business is well positioned to face the challenges of the future, despite the current lower pork prices and softer demand in China. Our staff really have demonstrated remarkable fortitude through very difficult times.

Aivlosin is a proven treatment which continues to grow and the company is invested in a very exciting product development pipeline, focusing on vaccines for our future growth.

ECO Animal Health Group Plc (LON:EAH) Chief Executive Officer Marc Loomes caught up with DirectorsTalk for an exclusive interview to discuss the what the company does, Aivlosin regulatory approvals, new developments in upcoming vaccinations and their plans for the near future.

Q1: So, I believe this is your first appearance on DirectorsTalk Mark, so welcome. Could you please give a brief background on the company?

A1: ECO Animal Health Group was established in 1993 and was amongst the very first companies to join AIM 2 years later. Today, the company sells its products which are for the treatment of economically important diseases of livestock, principally pigs and poultry, in over 70 countries and employs more 200 staff in 14 regional offices.

We develop new products making extensive use of universities and contract research organisations, obtain marketing authorisations or licenses enabling these products to be sold through the most appropriate channels to market and we utilise third party contract manufacturers to produce our portfolio of products.

Q2: You recently announced the receipt of a marketing authorisation in India for the use of Aivlosin in chicken laying eggs for human consumption, could you provide an update on this?

A2: Aivlosin is ECO’s flagship patented product and is used to treat economically important gastrointestinal/gut and respiratory disease in both pigs and poultry.

This new marketing authorisation for chickens producing eggs for human consumption has a 0-day drug withdrawal period for eggs, the only drug in the Indian market with this claim. This allows egg producers to treat mycoplasma infections in laying birds, reducing mortality and egg loss in the laying period without having to discard any eggs.

The first batch of Aivlosin with this new claim on the label are currently en-route to our newly-formed subsidiary, ECO India. We expect to start selling it into the laying market very soon and with 300 million laying birds, India is the third largest market globally.

Q3: As well at that Mark, you also recently received European marketing authorisation for Aivlosin in the breeding of chickens, what is the significance of this?

A3: The European Medicines Agency is one of the most stringent regulatory authorities in the world, they have licenses Aivlosin for the use in high value breeding birds which produce eggs for hatching replacement stock. This approval goes straight to both the efficacy and safety of Aivlosin in the most valuable of birds.

We will now rollout this approval beyond the EU into the multi-million dollar large international poultry markets enabling us to capitalise on the considerable global potential of Aivlosin.

Q4: Could you explain a bit more about any new developments in upcoming vaccinations and what are ECO’s plans for the near future?

A4: Our vaccine development portfolio is also focussed on swine and poultry and we are targeting both viral and bacterial diseases of economic importance in both species. Amongst our vaccine target, mycoplasma pathogens are a key focus as they will compliment our excellence therapeutic offering against mycoplasma with our Aivlosin range.

Our current priorities are to add to our existing development portfolio by working closely with universities, public research institutions such as The Pirbright Institute, and start-ups where we have a number of exciting potential opportunities undergoing due diligence and contract review at this time. An important aspect of our due diligence is to ensure we have freedom to operate and we’re confident that we can secure exclusivity in key markets.

As a way of de-risking our investment, we plan to take these opportunities through a rigorous proof of concept evaluation in well-designed studies before committing to further development funding. Our pipeline has a mix of well-established concepts as well as novel, potential disruptive technologies and approaches.

Q5: So, looking at your chosen sectors, there appears to be a lot of opportunity, could you describe the key drivers behind this and the potential for ECO Animal Health Group?

A5: Food production and animal health are growth markets, the Food and Agriculture Organisation of the United Nations predicts that world meat consumption will double by 2050 with pigs and poultry amongst the fastest growing sectors.

ECO has a global presence with well-established routes to market, we have a strong and developing R&D pipeline which will enable us to expand both geographically and across indications. We are profitable, we are cash generative and I believe that the company has enormous potential.