Genus Reports Five Per Cent Revenue Growth16 November 2013
GLOBAL - Global animal genetics company, Genus, has published its interim management statement for the period from 1 July 2013 to 14 November 2013. The Genus group includes PIC and Génétiporc.
Market conditions for Genus' bovine and porcine customers have improved with rising output prices in most markets and falling input costs following good harvests in the Northern Hemisphere. As expected, these improved conditions are leading customers to begin evaluating their expansion plans and the company expects the initiation of projects to start in early 2014. In the period under review, overall demand for Genus' products and services showed five per cent growth in both porcine and bovine volumes compared with the prior year.
Genus' adjusted profit before tax for the first four months is in line with last year's performance, with improvements in PIC and ABS offset by costs and investments associated with our growth strategy in China. Overall revenue grew five per cent in constant currency in line with volume growth. Results in actual currency were slightly lower in the period than the constant currency results. Based on current spot rates, actual currencies would be a headwind during the second half.
Genus PIC's, profits improved with a continued strong performance in Latin America. The acquisition of Génétiporc's business in North America and Mexico was completed on 17 October 2013 and Genus is pleased with the initial customer reactions to the transaction and the execution of its integration activities. There is continuing progress towards completion of the acquisition of Génétiporc do Brazil by Agroceres PIC, Genus' porcine joint venture in Brazil.
Volumes at Genus ABS grew in double digits, largely driven by a rebound in Latin America following the difficult market conditions in the prior year. All ABS regions grew both revenues and profits. In aggregate, ABS achieved high single-digit revenue growth, which combined with good cost control resulted in strong double-digit year-on-year profit growth.
In Genus Asia, volumes grew strongly in Porcine across all markets and revenues increased in high single digits. However, due to the expected start up losses associated with the PIC China Chun Hua nucleus farm and the Besun joint venture, profits reduced in Porcine compared with favourable results in the prior year which had benefitted from the initial stocking of the Besun farm. Volumes, revenues and profits in bovine were lower than the prior period primarily due to the timing of shipments in some markets compared with the prior period. Overall profits in Genus Asia for the first four months were lower than the previous year, largely due to the impact of the planned porcine investment cycle in China.
Research and Development spending was lower for the first four months benefitting from lower feed costs in the porcine genetic nucleus farms.
Net debt at the end of October 2013 was £83 million, an increase of £20 million on October 2012, following the acquisition of Génétiporc and the completion of our investment in the Besun joint venture. Operational cash flow followed normal seasonal patterns but improved on the prior year.
Genus is trading in line with its expectations for the full year of mid to high single-digit growth in adjusted profit before tax in constant currency, with the growth in profit being delivered in the second half of the year as expected.
In the period under review, Genus has continued to implement actively its strategy. The completion of the Génétiporc acquisition strengthens our leadership in the important North and South American porcine markets and brings complementary germplasm which will be leveraged globally. Execution of the integration is proceeding as planned and we are on track to deliver the synergy target of $11 million (£6.9 million) per annum at full run rate after two years.
In China, the company continues to have active discussions with a number of potential new joint-venture partners in line with its strategy of executing two to three porcine joint-ventures per annum to build capacity and customer base in the market.
In the large Indian dairy market, Genus has formed a production joint venture with B G Chitale, the largest dairy processor in Maharashtra. This will enable us to increase significantly capacity of locally produced genomic semen as Genus builds a pipeline of differentiated dairy genetics in India. During the period, the company made the first sales of high quality genomic semen from the bulls that originated from North America as embryos imported into India.
Head of Research and Development
Dr Denny Funk, who has served Genus with distinction for 19 years, most recently as Chief Scientific Officer and Head of Research and Development has decided to retire from the company during November. Genus thanks him for all his good work and wishes him well in his retirement.
Dr Jonathan Lightner has joined Genus from DuPont Pioneer, where he was Vice President of Agricultural Biotechnology, to replace Dr Funk. Dr Lightner is a distinguished quantitative and molecular geneticist with over 40 patents to his name and a strong record of leading scientists to commercialise innovative agricultural biotechnology products. He will be a strong addition to the Genus Executive Leadership Team.
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