Plant Health Care (LON: PHC), a leading provider of novel patent-protected biological products to global agriculture markets, issued today the following post year-end trading update ahead of the announcement of the Company’s audited full year financial results for the year ended 31st December 2018, which are expected to be announced in April. All results provided are preliminary and subject to completion of the 2018 audit.
Financial and Commercial Highlights
– Revenue increased to $8.0 million (2017: $7.7 million); in constant currency, sales increased by 7%.
– Gross Margin improved to 65% (2017: 62%).
– Strong sales growth in the US (up 32% to $2.1 million), Brazil ($1.1 million from zero in 2017), Spain (up 16%) and Mexico (up 10%) was offset by reduced sales in Europe/Africa (down 62%), due to slower draw-down of in-market inventory in South Africa.
– US sales were driven largely by the launch of a new product into corn ($1.6 million). The launch of a new product into US soy, expected in December, is now moving to initial market entry; sales began in January 2019.
– Sales in Brazil were mainly in sugar cane ($1.0 million), with additional volumes for the launch into soy through a new partner ($0.1 million).
– Sales of core Harpin αβ products increased by 10% (14% in constant currency). Harpin αβ and Myconate® products represented 67% of sales in 2018 (2017: 69%). Harpin αβ sales have now grown at 20% CAGR since 2013.
– Cash and cash equivalents at 31 December 2018 were $4.3 million; the delayed US product launch increased inventory by approximately $0.5 million. The Company’s year end cash reserves remain sufficient to take us to cash positive in 2020, as Commercial income grows.
New Technology Highlights
– In 2018, three new partners joined the group of companies already evaluating the Company’s PREtec (Plant Response Elicitor technology).
– Field trials results of seed treatments based on the three PREtec platforms, Innatus™ 3G, T-Rex 3G, and Y-Max 3G in corn and soy in North America continue to be promising; several partners will continue testing in 2019.
– While results of Innatus 3G for the control of Asian Soybean Rust (ASR) were not sufficient to reach a licence agreement, field trials continue in the current season, focused on the yield benefit.
– Excellent progress has been made in production methodology, with PHC’s lead peptide (PHC279) showing potential for cost-effective production; other peptides are following on a similar track.
– Submission has been made to the EPA in the US for registration of PREtec peptides. The Company expects regulatory approval in the US in 2020. Submission in Brazil is expected in early 2019.
– Discussions on technology licences continue with several partners. However, given the uncertain timing of concluding the licences, the Company is evaluating additional routes to market, with a view to launching product soon after first registrations are granted.
– The Company is moving lead peptides forward into eight target markets for fast track product development.
Chris Richards, Plant Health Care Interim CEO, commented:
“Plant Health Care continued to make exciting progress in 2018, in spite of recently announced set-backs.
The launch of our new corn product in the US holds great promise for future sales growth. Independent field trials in 2018 reported an average yield increase of 6.2 bushels (3%), which represents an illustrative 7x ROI for growers. This has encouraged our very strong channel partner to make significant purchases and recommend the product widely for use in the 2019 crop. With the expected level of grower sales in 2019, we anticipate strong sales growth thereafter.
Sales of our new soy product, which we had expected our channel partner to launch before the end of 2018, have now started on a modest scale, as our partner introduces the product to the market. We expect sales to be comparable to the corn product, over time.
Our Commercial team in Brazil has got off to an impressive start. The launch of H2Copla into sugar cane with our partner Coplacana has gone well, with over 20,000Ha treated to date. With growers reporting yield increases of up to 20% and an ROI of up to 20x, we have strong expectations for growth in 2019 and progress towards our target of 500,000 Ha treated in four to five years’ time. The launch of Harpin αβ as a soy seed treatment in Brazil holds out the prospect of sales comparable to those in sugar cane.
Elsewhere, Mexico bounced back in 2018 and sales growth continues in Spain. In South Africa, however, sales were held back by drought and we are still working through inventory.
While 2018 trials of Innatus 3G in Brazil did not show commercially useful levels of disease control, they did show significant improvement in yield. Trials continue in the current crop. Elsewhere, field trials with Innatus 3G, T-Rex 3G and Y-Max 3G continue to expand, with an increasing number of partners, as we target eight large markets for our lead peptides.
Within the Company, we have made strong progress in production methods, which gives us great confidence in our ability to produce PREtec peptides at low cost. At the same time, the submission for registration by the EPA in the US holds out the prospect of fast track registration as early as 2020, with registration in Brazil following later.
As previously stated, the Company’s cash reserves remain sufficient to take us to cash positive in 2020.”
