Q2 2026 Virbac SA Earnings Call
Speaker #1: Good afternoon, everybody. good morning for those who are further. I'm really happy to welcome you for this affair results 2026. For those who don't know me, I'm Karen Manduchet, I'm the Global Head of Communication for Virvac, and I'm here along Taron Ovanician with the Investor Relations Director, and of course on the floor today we have Paul Martingale, our CEO, and we have Abby Brandani with our CFO and Deputy CEO.
Speaker #1: So I will leave the floor to Paul and Abby to introduce you with our alpha results, and the different perspectives we have, and after that you will be able to ask your questions, but please do not hesitate to use the chat or the questions room to start to ask us your questions so that we're ready to shoot when they're over.
Speaker #1: Thank you so much, Paul. The floor is yours.
Speaker #2: Thank you, Carol. Good afternoon, good morning, everyone. Welcome to this call, and pleasure as always to connect with you. To take you through our half-year 2026 results and to connect that as well back to some of the strategic updates that we shared earlier this year.
Speaker #2: Maybe just to share a few high-level messages myself, and then Habib will go deeper into some of the financials later on. Very, very solid and we're very happy with the first half performance.
Speaker #2: As you've seen, 7.4% growth, really driven by our supercharged platforms that we shared with you in our Growing Together strategy that we announced earlier this year.
Speaker #2: Those platforms growing double digits, and also as you've seen the second point, bringing a nice favorable margin mix to the business as well with operating profit at 18.8% for the first half and up 50 basis points versus prior year.
Speaker #2: At the same time, as we delivered the strong and disciplined financial performance, we continue to invest strongly for our future growth and sustainable development, significant and strong continuing impact in R&D, in our CapEx investments to ensure that we have the capacity for growth, agility, and great customer service going forward, and also increasingly in A&P, advertising and promotional spend, given the ongoing shift towards an omnichannel business model and the amount of our business which starts to become more direct-to-consumer in nature.
Speaker #2: I mentioned earlier the industrial transformation we will enter into a bit more detail there, but 3 or 4 key projects that you are well aware of, happy to share that with the teams we've put in place and some of the capabilities we've been building.
Speaker #2: Those projects are being very well managed and executed, and all on track and as planned. During the first half, we've also as a team seen the ability of Virvac to be very agile in the face of, of course, some quite significant challenges, whether that's the inflationary pressures of oil from the Middle East crisis, and of course the changing nature of tariff discussions in the US, but we've managed to offset that and continue to deliver margin expansion as planned in our Growing Together strategy.
Speaker #2: Finally, in terms of another important piece of our strategy, as you know, external growth remains a top priority for Virvac. Delighted to say that the integration of Tyranon, Felanon brands that we acquired at the end of 2025 is absolutely seamlessly on track, and performing even ahead of our initial expectations at this stage.
Speaker #2: So great mobilization from the team. That again gives us the confidence to continue to search for those bolt-on acquisitions, small, medium-sized, and in fact in the first half of this year we've signed 2 smaller deals, but still interesting to share, 2 licensing deals in areas of innovation in specialty segments that are very, very nice fit with our supercharged and core platforms.
Speaker #2: And in both cases we're not only do we have the initial right for distribution, in the selective geographies, but we also have an option for full acquisition of those brands.
Speaker #2: All that to say that the continued responsibility that you've always had with Virvac continues, and as you know we the strong performance of the first half gives us the confidence to share that we are now targeting the upper end of our sales growth range for 2026, and again a confirmed EBIT margin of around 17%.
Speaker #2: If we move forward, on the external perspective which in fact for us is really the number 1 measure of our performance, and you will have seen externally other competitors perhaps not seeing things quite so positively, we A) see the market continuing to be robust, yes we see a slowdown in companion in the US, but as you know Virvac we have a very broad portfolio across both companion and farm, and internationally, and therefore when we look at our reference market we still see a rather healthy market, yes a slight slowdown, but more importantly we continue to see that the Virvac teams the pipeline and portfolio that we have is able to perform consistently above that market, and again another free continuous quarters where we've been growing and perhaps even accelerating the gap versus the market, showing that real customer closeness that we enjoy and I would say an increasing focus on execution in the market.
Speaker #2: As you know, earlier this year we did make a change to our executive committee structure to be operating now these 3 regions, really to ensure again closeness to our customers and the voice of the customer as part of our leadership team.
Speaker #2: Europe of course still a very, very strong home and center of the Virvac business, still delivering very positive and strong growth, but clearly the highlights in half 1 came in both the North America region with double digit growth in the US which as you know is an absolute priority for us to really build a significantly stronger position in that market, and it's another strong double digit growth for the first 6 months of the year following 2 or 3 years before that as well of double digit growth in the US.
Speaker #2: And in the international region where again double digit growth particularly in India very strong growth as well as in Latin America, more than offsetting some headwinds in the Pacific region where we've made again some changes to our commercial organization setup and approach and we start to see some more positive signals from that part of the world.
Speaker #2: But again the strong diversity of our business across segments and countries and the agility of our teams delighted that we can have that 7.4% growth for the first half, but well split and well spread across all major geographies.
Speaker #2: A reminder of our strategy that we shared earlier this year and of course it's year 1 on that journey, so we have lots to do.
Speaker #2: You do see the very strong positive impact of the focus on those supercharged platforms both on top line and on gross margin and on the next chart I'll come onto that just to again put a bit more flavor behind what we have in that part of our business.
Speaker #2: Also shared again today 2 nice examples with the porous one and vet care deals that we've shared in terms of our ability to be a partner of choice in terms of external collaboration, and with a very active and ongoing BD organization.
Speaker #2: And the omni-channel transformation that we continue to go through. A lot of focus from the team in the first half and as will continue going forward on really executing with excellence both on the commercial side and as well on the industrial side to make sure that we can offset all those other challenges and be even more efficient and effective certainly a lot more to do there, but the team already demonstrating a real passion and improvements in those areas.
Speaker #2: Driven as well by our investments in data and digital that provide us with a lot more tools and data to drive those decision making.
Speaker #2: On the next chart you will see again as we shared in the previous strategy update just a little bit more flavor around those supercharged platforms that are performing so strongly, air a really nice example, a surprisingly common and frequent challenge for pet parents and our customers the vets.
Speaker #2: In fact allergy and within that air is a strong piece of it, an extremely frequent cause of vet clinic visits by pet parents, and a space where we have an increasingly strong portfolio and position across a number of very well trusted brands such as Exotic and Epiotic, and increasingly Cortotic which is a very nice innovation growing very strongly, as it is the first antibiotic free treatment in that space at a time where antibiotic resistance of course is a key theme for our customers.
Speaker #2: In mobility a very strong platform with Moverflex performing very well as life expectancy and expectancy of pet parents for the quality of life for those animals only increases, Moverflex performing very well and more recently Ursolix in the US a fantastically executed launch and also performing again ahead of expectations.
Speaker #2: So we continue to build our portfolio in expertise in that space. And on farm animals reacting to of course some of the important One Health challenges of zoonotic diseases, but we've seen especially over the last couple of years and of course the continuing need for prevention and quality protein sources the team continues to be very well mobilized and we have a very strong position there, particularly in injectable trace minerals an increasingly understood and important area to support livestock health prevention at key moments for the farmers and customers on those journeys.
Speaker #2: So we'll continue to provide more flavor and color on our supercharged platforms, but again growing around 12% in the first half of the year, so a very very solid performance.
Speaker #2: Finally I shared a little bit about that and you will have seen it in our press releases. 2 very nice complementary deals that we've been able to sign in the first half of the year, again showing the agility and the very strong perception of Virvac as a potential partner of choice for companies that are developing such innovations.
Speaker #2: 2 distribution licensing agreements that give us for the geographies shared here from 2027 the distribution of these very interesting brands and innovation with a very strong fit in 2 areas of strength for Virvac, but more importantly as well in both cases we have the option under certain conditions to close a full acquisition of those assets and bring them into the Virvac portfolio, something that we've done with a number of our assets in the past and something which is really again a core part of our business.
Speaker #2: These are smaller scale transactions compared to something like Tyronorm that we shared at the end of last year, but that's not to say that our team is not extremely active and continuing to pursue other bolt-on acquisition opportunities as again that remains a core and critical part of our growth model complementing the strong organic growth that we always strive for.
Speaker #2: With that I pass over to Habib for a little bit more flavor and detail on some of the financial performance and of course we'll be here for the Q&A later.
Speaker #1: Thank you Paul. Good morning. Good afternoon and good evening to all of you. It is my pleasure today to present to you our financial results half year financial results at the end of June 2026.
Speaker #1: Let me start with the usual key takeaways from our financials. As Paul shared we have had a very solid top line development. We are reaching 768 million euro at the end of June which is a 7.4% growth at constant exchange rate and scope.
Speaker #1: Particularly pleased to note that it's a qualitative performance with a nice mix between volume and price. It's made of 5% volume increase very dynamic and a disciplined 2% price increase.
Speaker #1: It's also extremely qualitative from a geographical standpoint. I won't repeat what Paul has shared but you've seen that our 3 region have contributed significantly to the development of our sales.
Speaker #1: Finally we can note as well the contribution of Tyronorm to that results at the end of June Tyronorm has added 1.4 point of growth during the semester.
Speaker #1: It's also particularly solid in terms of EBIT adjusted we have ended the semester with 144.2 million euro of EBIT margin which is a 18.8% as a ratio to revenue.
Speaker #1: And we have had a net result of 87.1 million euro which is a 6% increase versus the first semester 2025. And I will have the opportunity to go a bit more into the details in the presentation.
Speaker #1: If we look at the other financial indicators we have had a net cash flow generation very solid as well at around 130 million euro during the first semester and capex spending which has continued to increase in line with the our expectation at 57 million euro.
Speaker #1: And as you can see we ended the semester with a net debt reaching 200 million euro which is a slight increase versus end of December 2025 mainly due to the usual seasonality that we have every year and as you will see later on we continue to expect cash generation during the semester the year 2026 of around 80 million euro.
Speaker #1: Before we move into the segments let me take a few seconds to cover the exchange rate impact. As you can see we have had some headwinds in terms of currency impact.
Speaker #1: We have had a negative impact on the top line by 25 million euro and a negative impact on our bottom line EBIT adjusted at around 5 million euro.
Speaker #1: However the positive thing is that for this semester the currencies evolution have not triggered a change in our ratio of EBIT adjusted to revenue which has remained stable at 18.8%.
Speaker #1: So no impact from the currency on our EBITDA ratio contrary to last year if you remember we had a dilution of our ratio linked to the currency evolution.
Speaker #1: I can also mention that we are seeing most recently a significantly less impact actually for the months of August we had nearly no impact of currency on our top line.
Speaker #1: So we cannot really we have no crystal ball so it's difficult to anticipate the end of the year but at least in August we had a better situation.
Speaker #1: So let me move now to the evolution of our net revenue by segment and I'll start with the revenue split between companion animals and farm animals that has remained extremely stable and we continue to have a very balanced portfolio with 60% of our revenue from companion animals and around 40% on farm animals.
Speaker #1: If we continue to dive within the companion animals product ranges and we look at where the growth is coming from from a segment standpoint you can see that we have 3 main segments that have had a growth rate close to a double digit or double digit above double digit growth rate.
Speaker #1: The first one is specialty with 23% increase obviously a portion of that is linked to the integration of Tyronorm but we had some other supercharge product or products from our supercharge platform that have contributed quite significantly to that including our mobility ranges with MovoFlex and Ursolix that Paul shared earlier.
Speaker #1: Pet food has had a good semester as well continue to have double digit growth rate at close to 14%. Other segments with our dental supercharge categories that is accounted there as well.
Speaker #1: You can see we are around 9% growth rate. The only segment that is decreasing during that semester is parasiticides which is quite aligned with what we have experienced last year regarding our portfolio of products but as you can see very much compensated by very good dynamic in the other segments.
Speaker #1: Let me move now to farm animals. We've had a 10% growth overall in companion animal we have also a very solid top line development top line growth in farm animals with close to 7% at constant exchange rate and scope so very solid.
Speaker #1: Here as well we have a few segments 3 that are contributing quite nicely to the growth. The first being nutritionals with a 20% increase of our revenue there.
Speaker #1: Paul mentioned as well some of those supercharge category with the ITMS. And obviously this has been driven as well by the very very good performance that we've had in India.
Speaker #1: During that semester. And in line with what we've experienced over the recent years with that country. Vaccine has had a very strong semester as well 8% growth.
Speaker #1: It's a mix of blue tongue vaccine in Europe and reproduction vaccine in other part of the world including Latin America. Other segments as well you can see 17% with reproduction and anti-inflammatory as well products that have contributed quite quite nicely.
Speaker #1: On the flip side parasiticides has decreased essentially linked to the situation in Australia where we are suffering and with experience a decline of ourselves during that semester.
Speaker #1: As you know we've shared that earlier and aquaculture as well. With the 1 million less revenue essentially linked to 1 product for which we lost the distribution.
Speaker #1: But overall again very solid performance on our 2 leg companion animal and farm animal. Let me move now to the P&L statement to commence on our EBIT adjusted and net income.
Speaker #1: You see that our gross margin on material costs has increased as a percentage to revenue so we've moved from 67.4% to 68.4% which is driven by a favorable mixed effect with a contribution of our supercharge product who tends to have a higher margin than the average of the group.
Speaker #1: We have the benefit of Tyronorm as well and also some base effect linked to some one off that we had last year if you if you remember.
Speaker #1: If you look at now the combination of net expenses and depreciation and provision so all the other expenses within our P&L beyond the raw materials and consumables used you will notice that the ratio to revenue of those expenses have increased by half a point and the combination of 1 positive point on gross margin on material cost and half a point decrease enable us on our EBIT adjusted before amortization and acquisition to increase by half a point as well so a very solid performance moving from 18.3% to 18.8%.
Speaker #1: Let me comment a bit this increase of expenses as a ratio to revenue it's made of essentially 2 elements. One of them is a positive impact linked to R&D spending and you can see bit of that in external expenses which have increased by only 2%.
Speaker #1: So it's linked to a limited spending of R&D versus last semester but it's essentially a phasing effect versus 2025 we expect that to normalize during 2026.
Speaker #1: On operating expenses before R&D we have a bit of the same phasing effect as well but the other way around we have had incurred higher expenses in the first semester 2026 versus the first semester of 2025.
Speaker #1: But here as well this will normalize for the full year 2026. And finally I can mention as well some one off expenses that we had during that semester that plays a role as well to explain the 1.3 point increase of our operating expense as a ratio to revenue.
Speaker #1: But this as well obviously will as a ratio to revenue will decrease when we will consider the full year. So all in all we are again reaching 19% and the dynamic of this first semester with what we anticipate for the remainder of the year makes us very comfortable and very positive in our ability to reach the guidance that we have confirmed on EBIT adjusted which is 17% as a ratio to revenue for the entire year.
Speaker #1: Let me move now down to the rest of the P&L you see that the depreciation of intangible assets are rising from acquisitions have increased when comparing first semester last year and first semester 2026.
Speaker #1: It has nearly doubled. And this is essentially linked to the integration of the depreciation of the assets linked to the acquisition of Tyronorm. We have recorded 5 a bit more than 5 million euro of other non-recurring income and expenses in the first semester 2026.
Speaker #1: We had nothing last year so this 5.6 million euro is essentially linked to 2 elements. The first one is a depreciation of stock and equipment linked to the commercialization stop of one of our products.
Speaker #1: And the second is linked to damages that we have suffered in one of our within one of our wholesaler so we have recorded the damages but we are working with our insurance to get it covered.
Speaker #1: 2 final comments on the rest of the P&L. The first one on financial income and expenses you see that we've improved there moving from 8.5 million euro expenses to 3.2 million euro.
Speaker #1: This is essentially linked to the impact of exchange rate we had last year some negative impact linked to the evolution of the CLP CLP which is the Chilean currency which impacted our semester whereas this year we have had a more stable CLP when comparing the end of year end of December 2025 versus end of June 2026 situation.
Speaker #1: Income tax has remained quite stable versus last year the evolution is aligned with the activity of the of the group. And all of that when combined enable us to record an increasing net income moving from 82 million euro to 87 million euro.
Speaker #1: Let me move now to the free cash flow. You see that it stand at minus 7 million euro in H1 2026. It's an improved situation versus last year.
Speaker #1: And it's also very much aligned with what we expected for that first semester. The 2 main elements explaining the our free our net free cash flow is obviously the capex spending you see we have spent 57 million euro during the first semester.
Speaker #1: It's a slightly above what we expect last year and it's linked to the industrial most of it is linked to the industrial project transformation ongoing with a 3 to 4 key project that Paul mentioned earlier.
Speaker #1: The working capital we have had a requirement of 80 million euro here you probably remember that we have usually a seasonality effect with a requirements during the first part of the year on working capital especially linked to our commercial model and the end of year rebate that are being paid during the first part of the of the year.
Speaker #1: And the combination of capex and working capital requirement more or less equal our generation of net cash flow which has increased by the way by around 30% versus last year.
Speaker #1: So when you put all of that together it explains the evolution of our net debt situation. You see that we ended the year last year 2025 at around 173 million euro we have slightly increased our net debt at the end of June at 196 million euro 2 comments there the first one again it's very much aligned with what we expected and the seasonality effects that we usually see during our first semester.
Speaker #1: And second comment as you can see on the bottom text we continue to have a very favorable balance sheet situation and. Average with a net debt on EBITDA ratio which stand at 0.6 at the end of June 2026.
Speaker #1: I'll move very briefly on the consolidated balance sheet. You see the evolution of our working capital. Between December and June but again linked to the seasonality and you see the nice ratio that we have net debt on on net cash flow and net debt on operating cash flow slightly increasing but again essentially linked to the to the seasonality.
Speaker #1: Let me say a few word on our shareholding structure. It's going to be very brief. We continue to have our major majority ownership the Dick family having slightly.
Speaker #1: More than 50% of the of the shares and 66% slightly more than 66% of the voting rights. So very much stable versus last year situation no no changes there.
Speaker #1: And before moving to the Q&A session I'd like to wrap up sharing with you our full year guidance 2026 which has remained the same versus what has been shared in July.
Speaker #1: We continue to target the upper end of the net revenue growth original target that we shared at the beginning of the year 5.5% to 7.5% at constant rates and and scope.
Speaker #1: Our EBITDA margin EBITDA adjusted margin is expected still around 17% for the full year 2026. Will spend 125 million around 125 million euro of capex for the year and all of that will enable us to generate around 80 million euro of cash at constant rates and and scope again for 2026.
Speaker #2: Thank you. Very much Paul and Habib. I suggest we move to the question and Taron you will lead the way through the different question.
Speaker #1: Yes. Actually we can directly start with continue with the guidance. One of the question is could you please explain why you expecting EBITDA margin of 70% versus 18.8% in the S first half year.
Speaker #3: Yes. So I'm I'm commenting very often on on that and we we have every year a bit of the same seasonality. We tend to have a higher EBIT adjusted margin during the first part of the year compared to the to the full year.
Speaker #3: So it has been the same if you look at our historical publication for the past 5 years. It's between 2 to 4 points different depending on the year and the phasing of some investment where more on the lower side of it.
Speaker #3: So we have a more balanced situation this year versus some of the earlier year. But it's a it's a a classical seasonality that that we see and a part of it is linked to the budget cycle and the fact that we have a bit of a some delays at the very beginning of the of the year.
Speaker #1: Next question is on the depreciations and provisions. The person has seen that our depreciations and provisions have decreased in the first half compared to the last last year.
Speaker #1: And the question is also when are the capex that we are investing in will hit the DAP. In the coming years or after.
Speaker #3: Yeah. So it's it's true that we have had a a slight decrease but it's it's an artifact actually. We've had some product that have been provisioned in the past that we have scrapped so when you do that we have taken back the provision so that's why you see the decrease but at the same time the line just above which is other expenses you'll see that you have the the the reverse effect there.
Speaker #3: So it's the net effect of that is zero but you have a plus in one line and a minus in the other line which gives the impression that the depreciation is is is decreasing.
Speaker #3: Without that element which account for around 3.5 million euro you'll see that the depreciation is increasing actually slightly increasing the majority of the big project transformation project that we have shared have not already kicked in because we had no go-live for them so we will see the impact of those project in the depreciation in the later years when we will have the go-live for those for those project but obviously we also expect some positive impact that will compensate in terms of productivity that will compensate part of those amortization.
Speaker #1: Next question is on pause one and pet care. Could you please quantify the revenues that we expect from these two products.
Speaker #4: Yes. I saw the question and and we don't disclose all the all the details but just just to say these are are are clean not the same scale as as Tyronorm where we would give more give more flavor.
Speaker #4: These are are really typical bolt-on commercial deals. But I think we could say in in the range of low double digit million just to add a little bit of flavor.
Speaker #4: More importantly they are growth and margin accretive from from year one and in fact once or if the acquisition would be triggered would be even further margin enhancing because we would of course cut out the the the royalties at that point.
Speaker #4: But yes from from 27 growth and margin enhancing for for that group.
Speaker #1: Staying into the M&A at the next question is about North America this is a focus area for us and the person wants to know if this is still we are still looking there are there targets there and what kind of targets are we looking in products technology industrial capacity.
Speaker #4: I I can say we we as we said we continue to be extremely active on on the M&A side. I think important to share that we don't see any slowdown in in terms of opportunities being on the table.
Speaker #4: Our team is consistently mobilized and and and very active we've built a very strong capability in M&A and licensing as as a core part of our strategy over the last years.
Speaker #4: So you can trust us that we continue to to look and and be of course both on one side strategic and looking to the right deals including US as a focus and yes of course we would like to add significantly more scale in the US so that's absolutely priority number one in terms of of of focus for the M&A team.
Speaker #4: But of course we also remain agile to be able to be ready for what's available and and of course you know that we have to to adapt to both.
Speaker #4: So we are both very active we'll continue to be disciplined but plenty of ongoing conversations happening.
Speaker #1: Great. Next question is about energy prices. In the context of the international crisis can you please elaborate on this topic.
Speaker #3: Yeah. It's a it's obviously a a a topic the evolution more generally of the inflation on on on on some of the components raw materials and and and product that we are buying including energy obviously.
Speaker #3: We don't we are managing that very actively we have edge in some of our countries including France where we have a good portion of our energy consumption so we are not really exposed for the next two year two years neither on on electricity nor nor on gas with a fixed price.
Speaker #3: That have been that have been set up. And and we are actively managing through negotiation and and we've shared that we don't expect any material impact in 2026 for the from the inflation including inflation in on on on energy.
Speaker #1: Another question a little more financial question is about inventory and working cap. Do we expect to go in the next years to go back to the normal levels of inventory and working capital.
Speaker #3: Yeah. So on on inventory what what we've shared is that after the COVID and the start of the Ukrainian war we had an increase of our inventory.
Speaker #3: We wanted to make sure that we would have everything required to serve our the demand and our customers. So we have increased where it was necessary and required our inventory.
Speaker #3: Since then we've worked to optimize and we've seen a decrease of our inventory as a ratio to to to revenue. We reach a very high points towards two years and a and a half ago and since then it has decreased.
Speaker #3: We will continue to optimize wherever we we can you we we can have on specific moments some one-off increase for instance we in one of our projects we are transferring the production from one site to to the other when you are doing that obviously you want to make sure that you won't run into a shortage.
Speaker #3: So you can increase temporarily your your inventory so we can have site up and down linked to to that. But the trajectory shall continue to to decrease.
Speaker #3: It will not be a material decrease over the coming coming years but more of an optimization wherever we can.
Speaker #1: Coming back to more M&A related questions about Tyronorm can you give us a little bit more flavor on the market shares that we have for this product and what would be the future catalyst or anything on sale commercial on marketing that we can we can use on supply.
Speaker #4: Well yeah first of all first of all happy to say that integration has gone extremely smoothly both from from a from a brand business team point of view and and as you you as you have seen from a few of the numbers shared today running a little bit ahead of of our our earlier expectations.
Speaker #4: If you remember something quite unique about the Tyronorm deal is that it's actually a a a phased deal to a certain extent. So we will have more geographies entering into the direct verbac ownership and management over the years to come including the majority of Europe happening now in in in 2027.
Speaker #4: So the the the let's say the rollout and the the impact of Tyronorm is not a one-off it's something that will happen over over some years.
Speaker #4: And and yes in 2027 the the big piece to come is is is Europe. At the same time now given that asset is in our hands we continue to invest of course in the science in the post-launch studies and and and the brand building necessary to to continue to develop that asset.
Speaker #4: As a as a core part of our of our portfolio. So that's definitely an asset that we believe has further runway for growth and also again the complementarity with with other parts of our portfolio.
Speaker #4: Giving also also further benefits there.
Speaker #1: So please staying with M&A the question would be around what metrics are we looking at when we are evaluating an M&A deal. And what what we are using for the valuation EBITDA multiple EBITDA adjusted multiples for larger deals and what else we use for smaller deals.
Speaker #3: Yeah. So it's a it's a combination of of different elements. We are doing the classical NPV obviously analysis. We are looking at the return on on investment.
Speaker #3: And very important for us is the impact on on the rest of the group. You see from a qualitative standpoint making sure that it contributes nicely to product country.
Speaker #3: But also that it has a a positive dilutive relutive impact on the bottom line and the and the top line. Those are the preferred deal and and and synergies creation as well.
Speaker #3: On the on the top line rest of the portfolio when you have positive synergies on product ranges and also on on cost synergies which are included in in in our model.
Speaker #1: Next question is around CAPEX. Can you come back to to our industrial roadmap of CAPEX use.
Speaker #3: Yeah. So we stated that we have a very intense industrial transformation ongoing with a a few significant CAPEX investment projects to prepare the future to create more capacity to renovate some of the sites that we have as well.
Speaker #3: To internalize some production that are on on strategic products for us ranges such as the the the pet food. So this is what is driving our industrial transformation.
Speaker #3: It will enable us also to increase our productivity while we are doing that. Obviously we've stated that we expect to be above 100 million for a few years and and going further than that obviously it's quite quite difficult.
Speaker #3: We don't necessarily have all the the the visibility. But it's a it's a very significant transformation that is ongoing.
Speaker #1: So again on CAPEX what would be ongoing after the ongoing acceleration what we are good ratio of CAPEX to revenues in the two or three years after this acceleration.
Speaker #3: Yeah. I just mentioned that it's quite difficult to to anticipate. We we we shall see a decrease as a ratio to to revenue as the top line is going to to increase and we'll have some of those big projects that will be behind us.
Speaker #3: But again what we know is that we'll have a few years above 100 million euro for the rest it's it's too early to to mention.
Speaker #3: I can though say that cash generation is very important for us. We are very very focused on on generating cash. We want to continue to be able to activate external growth.
Speaker #3: And we know that it goes through a very healthy and solid cash generation.
Speaker #1: Question on one of cost could you explain what is what is composed of in the H1 the one of cost that we have. And is it related to litigation settlements product discontinuation etc.
Speaker #3: Yeah. So it's essentially product discontinuation you know when you streamline your your portfolio for for for some product we had a few small product discontinuation which triggers some some expenses one-off.
Speaker #3: And also some litigation settlements. So when you have a few million euros like like that in a given semester it it it's a bit visible.
Speaker #3: It's 0.3 0.4 point of profitability impact for for this semester of those one-off expenses.
Speaker #1: Question on the supercharge. Portfolio is does does do the supercharge portfolio follow the same seasonality as other products at your back.
Speaker #4: I mean overall we can say it's a it's still a relatively broad piece of our business right. It's it's eight supercharge platforms which go across both companion and farm.
Speaker #4: Some very non-seasonal such as mobility dental. Some of course with with farm animals that can be a little bit more seasonal but no. Overall no major seasonal impact on on supercharge platforms.
Speaker #4: It's something that should be relatively relatively constant.
Speaker #1: Great. Two questions that good that go together. What would be major product launches next year and what can you speak about tell about more about R&D pipeline.
Speaker #3: Product launches we cannot really comment. It's it's too early. We'll do that when we'll comment about 2027.
Speaker #1: Next question is about the potential fertility campaign in Australia. Maybe we need some more.
Speaker #3: Sorry.
Speaker #1: Yeah. I think it was Delphine. Maybe Delphine you can give more feedback or having more details to this question. I'll go to the next question.
Speaker #1: To reach full year margin guidance you need to improve H1 margins by 150 basis points. Versus 50 basis points in H1. Please explain the building blocks behind it.
Speaker #3: Yeah. It's essentially phasing of of of spending. That that will enable us to to reach the 17% for the for the full year. As I mentioned the first semester has been impacted by some one-off.
Speaker #3: We don't expect that during the the second second semester. So if you compare light for like we are above 0.5. But it's essentially a a phasing of our spending between H1 and H2.
Speaker #1: I think I believe that was the last question that we had. Another one just came in. Is share buyback something you are considering right now given the valuation of the stock.
Speaker #3: No. We really consider that the priority for for us is making sure that we have the means to continue to consider external growth. So we are really favoring external growth to other type of capital allocation such as share buyback.
Speaker #1: Laurent is asking the turn on impact on H1 a bit. Margin.
Speaker #3: Yeah. We have not gone into that that detail. We expect half a point for the for the full year. It's probably around that. Maybe yeah probably around that for the for the first semester.
Speaker #3: But we have not gone into that detail.
Speaker #1: While the phasing of OPEX different this year.
Speaker #3: I mean it's it's it's different every year. It's linked to the the type of projects that we are considering implementing. The time at at when you implement them.
Speaker #3: On R&D it depends on the the phasing of your clinical studies and when you recruit some of the some of the animals and so it's it's quite natural to to to have that.
Speaker #3: And and we are seeing that every every year.
Speaker #1: I see Frederick is typing. Maybe I did just I take advantage
Speaker #4: of the the comment on the phasing of the OPEX just to to again remind as well we we are thinking you know mid long term instead of sustainable growth we could hold things back in the second half.
Speaker #4: If we wanted to keep the the profit number where it is but we want to continue to invest in the second half of the year to make sure we as well go into 27 and beyond of course with with strong momentum.
Speaker #4: So it's also a about our approach to consistently investing for the long term.
Speaker #1: Maybe last question depending how many deals are available and their size. Where would you be comfortable having leverage.
Speaker #3: Yes. We've stated in the past up to two absolutely no problem. We would definitely go there. We can even go above that. 2.5. Going above three will require the very solid we cannot exclude it obviously.
Speaker #3: If we have a very strategic deal that makes a lot of sense and where we are confident that we can deleverage then with the the the right pace.
Speaker #3: We we could consider. But definitely around two would be very very comfortable.
Speaker #1: Great. That was the last question. Please feel free to reach out if you have any further questions. I think that's it.
Speaker #4: Thank you everyone.
