Virbac SA (VIRP) Earnings Call Transcript & Summary

Good afternoon. Welcome to the 2019 annual financial results audio slide webcast for Virbac. Hosting the call today is Manuela Rodríguez, Investor Relations for Virbac; and Sandrine Brunel, Head of Corporate Communication. The presentation materials and additional financial tables are currently posted on our website in the section, Investors. The presentation slides will be forwarded automatically. In addition, a replay of this call will be available after the conclusion of the webcast via the Investors section of our website. [Operator Instructions] It is now my pleasure to turn the floor over Sébastien Huron, Chairman of the Executive Board of the Virbac Group; and Habib Ramdani, Chief Financial Officer and Member of the Executive Board. Habib, you may begin.

Good afternoon, and good morning to all of you. I wanted first to thanks all the participants that changed the organization at the last minute under the very special circumstances that we are facing and in order to join through this webcast as well as our internal teams that have organized this webcast also at the very last minute. So it's my pleasure to start with this presentation. So very similar to what we did in the previous financial presentation. We're going to -- I'm going to start with some highlights regarding our 2019 results, and then I will hand over to Sébastien who will go through the more qualitative element of our main 2019 achievements as well as cover our implementation of the strategy, the company priorities and the 2020 situation. I will start with a couple of slides to give you the overall summary of what we have achieved in 2019. So first, we are very happy to have had a extremely solid organic growth and overall performance in 2019 with an organic growth of 6.6% that have been driven by all areas and which translated into a double-digit margin growth at the company level. We had a very strong contribution of the U.S. in 2019 with an increase of our top line of 14% at constant rates. And if you remember, we had, in 2018, observed favorable destocking effect at the level of the distributor. So if we restate our 2018 result for that destocking effect, the evolution of our performance in the U.S. is around 7%, which is very solid, with a different dynamic between Sentinel on the one hand and all the other product on the other hand, and I will let Sébastien cover that in it in the following part of the presentation. We had a very strong increase also of our EBITA. We added more than EUR 30 million between 2018 and 2019 at constant exchange rate, which is a 40% increase, leading to a strong improvement also of our EBITA ratio to net sales, moving from 10% -- around 10% in 2018 to 13% in 2019. We benefited from a strong contribution of all of our areas to this profitability improvement. We also benefited from a significant improvement in the U.S. profitability, including obviously the favorable base effect of the destocking versus 2018. And finally, it is also to be noted that we had some exceptional profits that have been accounted for in 2019 that impacted for around -- a little bit less than EUR 5 million of positive impact, equivalent to 0.5 point of EBITA. So without this exceptional item, the EBITA improvement would have been 2.5 point between 2018 and 2019. Finally, if we look at the ForEx impact, you remember probably that the past 2 years, in 2017 and '18, it has been quite negative. It was positive last year, in 2019, both on the top line and on the bottom line in absolute value, with an impact of EUR 12 million -- an addition of EUR 12 million of sales as well as an addition of around EUR 1 million of EBITA. We had a slight deterioration of our EBITA ratio to net sales linked to the ForEx impact in 2019. If I move to the next slide, just an illustration of our currency bracket with -- basket, sorry, currency basket, with, as you can see, some of the currency in which we are doing business that have appreciated versus the euro, such as the dollar, for example, and some other, which has depreciated versus the euro. So it was a much more mixed evolution versus what we had observed in 2018, which led to the EUR 12 million positive impact on the net sales and the EUR 1 million on the EBITA. If we continue to go through our profit and loss statement and we go to the net profit line, you can see that we had a very significant improvement of our net profit in 2019 moving from a little bit more than EUR 20 million in 2018 to 29 -- to EUR 54.4 million in 2019. So more than EUR 30 million more profit. So again, a very positive year in 2019. It's obviously driven by the operational improvements that I just mentioned on the previous slide. It's also favorably impacted by 2 elements. The first one is a decrease of the cost of our debt in 2019 versus 2018 linked to the decreasing of our net debt situation. We also had an unfavorable exchange rate impact on CLP versus dollar and euro of slightly less than EUR 3 million, so it was negative in 2019, but it was much more negative in 2018 on the same currency, the CLP. So when you compare '18 and '19, although it's negative in '19, it create a favorable improvement versus '18 year again, during which this exchange rate was even more negative. Finally, an element that is going on the other side, impacting negatively our net profit, which is impairment on our CaniLeish assets. It's exactly the same topic than the one that we already covered at the end of June, and it's exactly also the same amount as the one that has been accounted for at the end of June. If we move now to a more balance sheet item and especially the net debt situation of the group. I'm very pleased to report that the net debt has decreased by EUR 88 million at constant exchange rate and scope, which is an extremely important improvement versus 2018. I'm stating at actual -- at constant scope, because as you probably know, we had change in accounting method in 2019, which is linked to the application -- to the first application starting 1st of January 2019 of the IFRS 16 on how we are accounting in our profit and loss as well as balance sheet, all of our leasing contracts. So the application of that new accounting standard has had an impact in 2019, an increase of our net debt of around EUR 34.7 million, and I'm going to cover that in a little bit more details in the following slides. So this improvement of EUR 88 million is due to numerous factors, elements. One of them being obviously the operational improvement that I just covered, which translated nicely into cash improvements, but also due to the fact that in 2019, our CapEx outflow has been below normative level. I'm going also to cover that in a -- later on. And finally, we also had a positive impact on the evolution of our working capital, which has improved, driven especially by better payment terms on receivable and increase on payables. And to conclude on this slide before commenting the net sales evolution, an important element for us, which is the leverage of the company. And as you can see, we have continued to deleverage significantly the company, which is the improvement of our ratio debt net on EBITDA, which is -- which was at the end of 2019 at 2.29, which is significantly below the covenant commitment that we have vis-à-vis our bank, which was set at 3.75 at the end of 2019. So a very positive year as well on the front of the net debt on EBITDA ratio evolution. Very quickly, I'm going to cover the comparison between the last perspectives that we shared with you late in 2019 and what we've actually achieved. And as you can see, all indicators are on green. We said we would be between 6% and 7%, and we've been right at the middle of the bracket, the EBITDA adjustment -- the EBIT adjusted ratio to net sales has improved by 3 points at the level that we communicated. And the evolution of the net debt has been slightly favorable versus what we communicated, EUR 88 million versus around EUR 80 million. So let's move to the evolution of the sales and some comments on that. So first, 8% growth at real rates moving from EUR 868.9 million in 2018 to EUR 938.3 million, which is a 6.6% at constant rate, which is above the evolution of the market. So again, a very positive year for Virbac. If we move now to the illustration of where the sales is coming from between '18 and '19, we've added around EUR 70 million of sales at actual rates. And as you can see, all regions are contributing to that. First, Europe added around EUR 18 million. Yes, if we move. Yes. So Europe, as you can see on the slide, adding -- added EUR 18 million between '19 and '18, which is a 5% improvement. A very solid growth in Europe, driven by growth in nearly all of our countries, including some strong performers, such as Germany, France, U.K., Northern Europe, Spain as well, which had a very nice rebound after a more difficult 2018. The only country that suffered -- that had more difficulties in 2019 was Italy following the implementation of the electronic prescription regarding the antibiotics, a move that is very similar to the one that we observed in Spain back in 2018. But overall, a strong performance in most of the segments, and we also benefited in Europe by the contribution of some new product launches, and we're going to say a few words on that later on. The U.S. added also EUR 16 million of sales, which is a 14% increase or 7% if we restate for the destocking observed in 2018, and Sébastien is going to cover that in more details. If we look at the rest of the world, it has also added a very significant improvement, close to 6%, with EUR 23 million more sales in '19 versus '18. If we look at on the next slide, and we do a zoom on the rest of the world, which is the lower part of the slide or the southern hemisphere for us, we can see that all regions, except Pacific, had very significant growth. The 3 regions, Latin America, Africa/Middle East and Asia, had close to 8% or slightly above 8% net sales growth between '19 and '18, which is a very significant growth. So Latin America with a strong performance in Chile after a difficult 2018 year and a continued good performance in the 2 biggest country, Mexico and Brazil, especially on the food producing, but also having a good contribution on the companion animal segment. Africa/Middle East essentially driven by Africa that had a very solid year in 2019. Again, we suffered from some drought in 2018 and had a nice rebound in '19. Asia, 8% growth as well, with very significant contribution from China, and we're going to cover that in much more details. And some other countries, such as Japan, Vietnam, Taiwan as well that had contributed to the growth, including India, although it was slightly lower than what we had in the past before the disruptions that we had linked to the demonetization some years ago as well as the change in the value-added taxes that impacted us last year in 2018. The only region that is negative for us in 2019 is Pacific, as you can see, with minus 3%, essentially driven by Australia that had a difficult end of the year. And you obviously have followed the situation with the fires at the end of 2019 that weighed-in on our performance as well as some competitive situation in Australia. But overall, again, an extremely solid performance. If we move now to the evolution of the sales growth by segment, starting with companion animals, you can see that all segments are increasing except biologicals, which is more or less stable. And this segment, biologicals, is including the CaniLeish product, where we are suffering from competition, as you know, and we've shared that in the past, and it's linked to the impairment that we did. Apart of that, we have some very nice growth in all segments. Parasiticides is growing 4% driven by a good performance of Iverhart in the U.S., good performance of Milpro product in both Asia as well as Europe. And all the other segments are even growing double digits. The other segments growing close to 14% fueled by our dental range that is continue to perform very well, antibiotics/dermatology, 15%; the specialty with Suprelorin, close to 12%; and finally, the petfood segment with a 25% increase, and we reached the EUR 50 million threshold of sales with that product range and which is a very nice achievement for us in 2019. If we move to the food producing animals segment, the situation is a little bit more contrasted here. You can see that all segments are growing, even if the amount of growth is not as strong as what we've seen in the companion animals. And one segment is actually reducing, which is the antibiotics that has suffered more in 2019 versus the other segment that have performed well. So the 2/3 of that decrease in antibiotics is linked to Europe and especially 2 countries in Europe, which is Spain and Italy, following the implementation of the electronic prescription, we had an impact on a couple of our products in those 2 markets. In the rest of the world, including Asia Pacific and Lat Am, the situation in terms of sales for antibiotics is much more stable when compared '19 with '18. The other segments are growing, including the nutritionals, with 4% -- close to 4% increase. Antiparasiticide as well, 2%. And 2 segments are even growing either double-digit or very close to double digits, which is the aquaculture segment growing at 9% in 2019, and our vaccines range for food producing, which is growing at more than 10%, at 13%, including some very good results in Latin America and also Europe, with the launch of one product in these geographies. So overall, when we put all of that together -- let's move to the next slide, thank you. We are representing here the sales breakdown by region and business. And you can see that the -- you can see that it has not materially changed versus what we had last year. So companion animal is representing around 58% of our sales and food producing around 40% of our sales. Let's move now, before going into the details of our profit and loss statement, to the IFRS accounting standard and especially the main evolution that we've experienced in 2019, which is the implementation of IFRS 16 on the recording of future lease payments that are now recorded as a liability and the right-of-use as an asset on the balance sheet. So the impact, as I mentioned, on the balance sheet is around EUR 34 million. So it's an increase of our net debt. And the impact on our income statement is obviously reduction, neutralization of the leasing charge, which is replaced by an increase of our amortization, which is right-of-use of our leasing contract amortization. So you can see that overall -- and as well an increase of our interest on leasing obligation. So overall, it's -- the impact on the P&L statement is around EUR 10 million, which is a switch from one line to the other. It's worth mentioning, though, that among the contracts that are, in 2019, accounted under IFRS 16, we used to have, in 2018, some of them, the minority, but some of them that used to be accounted under IAS 17, which is basically the same accounting treatment. So when we calculate the real impact, the net impact of IFRS 16, not taking into account IAS 17, we are closer to EUR 31 million of balance sheet impact on our net debt and closer to EUR 8.5 million on the P&L statement. So this is the note that you can see on the bottom of this slide. So it's important to have that in mind, when we look at the overall P&L statement because, obviously, it had had some impact as I will comment them. So first, on the top line, the top part of this P&L, you can see that the net sales have gone very well. The gross margin on material cost has grown even higher at a higher pace than our net sales, which generated -- translated into a nice improvement of our ratio of gross margin on material cost on net sales moving from 66.1% to 66.5%. If we look at the cost line, so the net expenses is growing by 1%. But obviously, we have had, on this slide, the benefit of the IFRS 16 and the fact that we are no longer recognizing here the expenses linked to the leasing of our contract that are treated under IFRS 16 now. On the other hand, obviously, you can see on the next line, amortization, depreciation and provision, a significant increase of that, the amortization of the group moving from around EUR 28 million to EUR 38 million. And this increase is essentially linked to the impact of IFRS 16 as I mentioned. So if we take those 2 lines together to no longer have the impact of IFRS 16, the overall improvement, increase of the cost base of the group is around 3%, which is the consequences of significant control that we are doing on our cost line in order to continue to generate profitable growth at the level of the group. And this obviously translated into a nice improvement of our operating profit before depreciation of assets, moving from EUR 88 million in 2018 to EUR 122.4 million in 2019. And I'm going to detail that in the next slide. If we continue to go down the P&L, you can see that the other noncurrent income and expenses, we have an expense of EUR 9.4 million. This is essentially the impairment of the CaniLeish asset for EUR 9.7 million. The net financial expenses is decreasing, which is a consequence of the decrease of our cost of debt as well as the decrease of the exchange rate impact. Again, it's negative in 2019, but it's less negative than what it used to be in 2018. If we continue to go down on the income tax expense, you see that it's increasing, linked to the increase of our profit before tax, obviously. What we can say on that line is that the effective tax rate has actually decreased in 2019. We used to be, over the past few years, at around 33%. We are now at around 29% in terms of effective tax rate. And this is essentially linked to the evolution of the Indian situation on the income tax, which has dropped by around 10%. And as we are generating profit in India, we are really benefiting from that at group level. So it translated into a nice 4% improvement of our effective tax rate. So all of that led us to a significant improvement of our net results moving from EUR 20.1 million in 2018 to more than EUR 50 million in 2019 when we are looking at the net result group's share. So again, a very solid performance in 2019. If we are moving now to the breakdown of EBIT adjusted evolution, looking at where it's coming from, we can see first that all regions positively contributing to the evolution are driving the growth of our profit, fueled obviously by the top line. This is the case of Europe, this is the case of rest of the world and obviously, this is the case of the U.S. as well. RDL, the -- we are increasing the amount of RDL, which is research, development and licensing expenses in 2019 versus 2018, and the overall ratio of RDL to net sales that we are spending in 2019 stays around 8% before the benefit of the research tax credit in France. Corporate, you can see that it's decreasing by EUR 1.2 million. It's actually increasing at constant scope, because, as you remember, we had an exceptional profit in 2019 that I mentioned, actually 2 items. So one of them has been recorded here, which is changes in the retirement benefit plan with some changes in the beneficiaries as well as the rates, which translated into an exceptional profit of EUR 3.4 million, which is a noncash profit. So if we don't take that into account, we have a slight increase of our corporate expenses, but in the context of overall containment of cost at group level. If we do a zoom on the contribution of the U.S., so this is the EBIT adjusted of the U.S. prior to before R&D spending. So excluding R&D spending, you see that we are moving from EUR 12 million to EUR 30 million. So it's a very nice improvement, driven essentially by the margin improvement, so linked to the top line and the control of our cost that we can see on the industrial side, but also on the commercial side. On the rest, you see that the OpEx has been more or less stable over the period. And it's worth mentioning that we benefited from the sale, which is a second exceptional item in 2019, which is the sale of our headquarter in the U.S., which was no longer fitting our needs, and we've relocated all of our employees in a leased office close by. So this generated a onetime positive profit of $1.2 million or EUR 1.1 million. So when you add that to the change in retirement benefit plan of EUR 3.4 million, you have the exceptional elements of slightly less than EUR 5 million, which translated into 0.5 point improvement of our EBITA ratio. So let's move now to the evolution of cash flow at group level. You see that the net cash flow has improved nicely, moving from EUR 70 million to EUR 106.4 million in 2019. There is one element that is worth mentioning, which is the implementation, again, of IFRS 16, which had a positive impact on the operating cash flow and net cash flow of around EUR 10 million and EUR 8.5 million, respectively. So obviously, that explained part of the improvement. The rest, which is the most significant part, is explained by the operational improvement that we've discussed and seen in the previous slides. If we look at the evolution of free cash flow, and I suggest we concentrate on the left part of the slide -- sorry, the right part of the slide for you, which is the evolution between EUR 106.4 million, the net cash flow, up to the net free cash flow of EUR 89.2 million. So you see 3 elements that I wanted to comment. First is the CapEx. We had had a low level of CapEx investment in 2019 at EUR 23 million. You may remember that the normative level for the group is closer to 30 -- 40, sorry, 4-0, EUR 40 million, and we had around EUR 34 million in 2018. So a few elements explain this level. One of them is the fact that in the dynamic of our investment in 2019, a portion of that investment has been recorded at the end of the year. So we did not recognize the cash disbursement of those investments, which explain a few million euro versus what we had last year and versus the normative level, but we'll have the cash disbursement at the beginning of '20. The second element is the overall cyclicality of our CapEx spending. We have, on a continuous basis when we are at our normative level, some investments, more structural investment. It's been 2 years that we did not really have those structural investment, but we'll come back to those and Sébastien is going to comment. We will have, especially in 2019, 2 kinds of investment. One of them in R&D. We have started some R&D investment to continue to prepare for the future of the company, in Asia notably. So we'll have, over the next few years, some CapEx investment related to that. And the second one is digital investments, transformation of the company for -- with some digital projects that will -- that we've started as well and will happen in the subsequent years that will also push us to be closer to be at around our normative level of EUR 40 million. And finally, intangible as well. We had expected to have some intangible cash disbursement in 2019, but we had some milestones that have been pushed forward to 2020, which explain also why it's lower than what we expected and the normative level. Working capital, EUR 10 million. We had some plus and minus, and I -- there is one element that explain a good portion of that, which is the increase of the end-of-year rebates. And obviously, the end-of-year rebates that are being paid usually in March, April time frame had a positive impact on our working capital when this amount is growing from 1 year to another, and this is what we observed in 2019. For the rest, the increase of the inventories in line with our activity as compensated some favorability on the account payables that we had observed also in 2019. And finally, dividends to noncontrolling interests that are a similar amount as what we had in the previous year as you can see on the slide. I will cover that very briefly because the last part I already mentioned it in the previous slides. I will only focus on the lease obligation. You can see here on the lease obligation impact of the IFRS 16. You have 2 elements. One of them is the impact of the evolution of our balance sheet for EUR 31 million. And I mentioned as well that the net cash flow is increasing, and you have a decrease that correspond to that increase on the -- on that lease obligation column. What needs to be reminded here is that the overall IFRS impact is around EUR 31 million on our net debt. So we are improving our net debt position between '19 to '18 by EUR 88 million without taking that IFRS 16 impact into consideration. Balance sheet, I will go very brief -- I will be very brief on that slide. I already mentioned the net financial debt evolution. You see the decrease between '18 and '19, including IFRS 16. You can see the working capital that is also evolving nicely from '18 to '19, from EUR 135 million to EUR 125 million, for the reason I mentioned in the previous slide. Overall, a very solid balance sheet, and it has more or less the same structure as the one that we had last year. From a financing situation, we continue to have some significant funds available corresponds to our need. And we are also a good position in respect to the financial covenant, our obligation vis-à-vis our bank. You -- so the -- what we have to respect in terms of financial covenant, net debt on EBITDA, is a ratio of 3.75 now at the end of each year, so including 2019, and it will be the same in 2020, and 4.25 at the end of June. So it's slightly higher at the end of June, and this is due to the seasonality of our activities in terms of cash generation. But as you can see, we ended the year at 2.29, which is a 2.22, even excluding IFRS 16 impact, which has a slight impact on this ratio. And the message here is that we have some very significant room for maneuver. We are significantly below our obligation, which is a very good position to be versus what we experienced and the situation we're in, in the previous year. I can also mention that the 4.25 and the 3.75 is -- are exactly the conditions that we had when we negotiated the revolving credit facility at the time of the acquisition of Sentinel 5 years ago. So we are coming back also in terms of margin to the initial conditions that we had negotiated with our bank, which is also a good thing for us. So balance sheet, the ratios, all of them are evolving in a very good way. The net debt on net cash flow is decreasing significantly. The net debt on operating cash flow is decreasing and the net debt on shareholders' equity is now at around 70%. And to conclude, on this part, a quick word on the shareholding structure to say that it has not materially changed. The Dick family is still having slightly less than 50% in terms of shares and close to 2/3 of the voting rights. Thank you. And I will hand over now to Sébastien, who will cover the remainder of the presentation. Thank you.

Thank you very much, Habib. So let's move to the main 2019 achievement, I understand that you have some seconds of difference between when I press the button and when you got the slide. So I will move slowly. So among the main achievement -- I have the same problem. Okay. Among the main achievements in 2019, we have the strong gain on market share. As most of you may know, you know '19 was a difficult year for animal health market because of the African swine fever impacting China but also all Asia. And so the market or the animal health market growth was estimated below 4%. And we have grown at 6.6% at constant rate and 8% at real rate. And with an emphasis on the fact that we have grown quite quickly, double-digit in the top 3 markets, which are U.S., China and Brazil. EBITA -- EBIT coverage, so I move quickly, but we moved to 13.1% at constant rate. We have reduced the debt by close to EUR 90 million at constant rate, so we are quite happy with that. And we have reached financial covenants, which have been respected, and we reached a ratio, which is not very far away now from what was the level back in 2014 before the acquisition of Sentinel, where we were at a ratio of 1.6. So we are getting closer to this. We are not just looking at the 2019 achievement. We are spending a lot of time in building Virbac for the future. So one of the emphasis we did last year was on the corporate social responsibility. And we have started many initiatives regarding this. We are investing a lot also on what we call a Great Place to Work program that try to create the best possible environment for our employee and get the maximum engagement from our employee in that, and we have made many initiative as well. We have been very active in the launch of new products and on the geo extension programs and on the registration of new products. So on all these dimensions of people and product, we have been really very active. And we have had many success last year in terms of new product launches. And also in terms of new registration, because we got, for instance, the registration of Suprelorin in China that was supposed to be launched at the beginning of this year. I will give you some update just after. We are also investing for the future, and we have invested in Vietnam, in the R&D labs in Taiwan, in Uruguay. We are accelerating the digital transformation of the company. We launched Tmall platform in China back in August last year, which is quite useful today in the current context, by the way. And we have launched many web shop in many country for our petfood business. We are pushing strong in China. I will have a slide updating you on that, trying to make up the second largest market a larger affiliate than what it is today for Virbac. China in Virbac today is small, but we would like it to be much bigger considering the potential of the market. And we have kept doing what we did in the past 2 years, reviewing the competitivity of our main manufacturing site, trying to extract maximum value from these. We have sold, as Habib mentioned, the Fort Worth office real estate to optimize our return on capital employed. And we have had a positive FDA inspection, which we are quite proud of, so that we are now, with the situation of St. Louis back of 15 and everything that happened behind us and with many compliance program being implemented, to again prepare for the future and be in the best position to keep growing sustainably and profitably. In terms of geography, when we look at our business, we look at the 3 dimension: geographies, product ranges and species. When we look at geography, last year, 28 country out of 32 have gone and 11 countries double digit, among which the top 3 market in the world, Chile, where we have the Centrovet rate activity, has been back to growth. And in terms of product ranges, you remember, we have discussed about the willingness to develop buster programs. And within the buster program, we have 2 dimensions. One is commercial busters, a commercial product, which we believe we can develop and grow above EUR 50 million for the pharmaceutical product; above EUR 20 million for the non-pharmaceutical product. And the ambition was to grow these products by geo-extension, globalizing the assets, trying to launch these products all over the world, where historically, in Virbac, these assets may have been localized or regionalized. This has been the case for the petfood which has been, for the first time in the history of Virbac, overpassing the EUR 50 million mark. So we are quite proud of that. It has been many years of double-digit growth. And last year was 25% growth of petfood, adding more than EUR 10 million and bringing us above the EUR 50 million. And here again, still without U.S., without China and without Brazil, which are the main -- top 3 main markets in the world. So just to say that there is probably still a lot to go in petfood. The second commercial buster is dentals, on which we communicate for many years now. We have been growing 28% last year, also launching innovative chews, which we call Flex and Zen. It's a chew that is for the teeth of dog, but it is also adding a component, which provides some benefits either for the articulation or for -- to can the dog and keep it less stress, if you wish. And finally, Suprelorin, which is an implant, which is -- can replace surgical castration. It's a reversible way of sterilizing the male dog. And it's growing 14%, a bit below our expectation, but we had some supply issue last year. So here again, it's a double-digit growth. On the third buster, we have been listed for the few past -- for the past 2 years. Of course, besides this buster commercial programs, we have the buster innovation program. This we'll talk about it probably in the next communication. This, of course, takes much more time, it takes many years to come to market, but we have initiated, as you know, this innovation buster program a few years ago, and we will keep communicating on these in the coming years. In terms of new product launches or geo-extended, we have been quite successful last year. We did many of them. And as I mentioned before, we had many new registration in 2020 -- that will have an impact in 2020. I mentioned Suprelorin in China that was supposed to be launched at the beginning of this year. We had Evicto that was launched very, very last month of last year and then this year. And Stelfonta, which was also supposed to be launched, but I will update you a little bit later, because of the current situation, there is some delay and postponing on many of these launches due to the current situation. In terms of geographies, if we focus on the U.S., we had a 14% growth last year. It was, in fact, 7% growth if we exclude the 2018 base effect. Again, it was not -- there was absolutely no stocking effect in '19. There was just a destocking effect in '18. So the base effect was favorable, and that's why we have a 14% growth. If we retreat from this base effect, we get 7%, which is a more realistic growth figure. And the U.S. turnover came to $160 million versus $140 million the year before. We keep seeing the 2 dynamics we have been communicating. We see -- our Sentinel has been up last year, slightly up last year, ex Virbac sales, again, due to the base effect of 2018, where it has been destocking, and that despite no price increase in '19. But we know that the market has been slightly decreasing in volumes in the market. And then all the other ranges are growing double digits. And as of today -- as of end of '19, Sentinel is more or less 42% of the total U.S. sales, which is around 6% of the group sales. In parallel, we have seen strong growth of our online sales for most of the product categories across the different product line. In term of the second largest market, not the second largest affiliate, it's in term of market, China, it has been growing double-digit for the last 8 years for us. Sorry, I thought you passed. So China has been growing double-digit for the last 8 years. And we have decided 2.5 years ago to push very strong in China, and we build what we call the think very big plan with the ambition to turn of the Chinese market probably one of our top 5 affiliate in the group. It is today just in the top 15. It is a small affiliate for us. But the ambition was to bring it to the top ranking of the Virbac affiliate over the next 5 to 10 years. And so we push a very strong ambitious plan. We have started with our pet care line, companion animal products. We developed digital and online sales for retailer. We have developed a pet care program. I remind you that we were supposed to launch the petfood last year and that was part of the plan. The launch of the petfood was planned in the beginning of '19. It was totally pushed back because of the African swine fever that there has been 1 case in Belgium, and that's where the manufacturing site was implanted. And because of this 1 case of African swine fever in wild boar, Chinese has blocked importation from Belgium. And so we have been forced to stop to push back the launch. And we have been working diligently since early '19 to try to find alternative solution, among which there is a reformulation of the product without pork meat. That was the issue. There was pork meat in the petfood. So we try to do a reformulation with chicken or to move the manufacturing site somewhere else where we could export to China. So that, of course, take around 2 years to be done. So that we are a bit delayed. But that was part of the plan, but we have some headwinds against us in the Chinese market. Last year was African swine fever. This year start the coronavirus issue. So it's true that at the time being, we are not very lucky with our ambitious -- ambition in China. We have also not been able to materialize a local partnership, which we were trying to establish for the other species, because we are very well equipped for companion animal, but we need a partner to develop in swine in particular. And as of today, we have not been able to materialize a final partnership despite having tried and having discussed with a few companies. Brazil, the third largest market in the world is growing double-digit for the last 4 years also. It's been even the top market performer locally. Our team is doing extremely well. And we have significantly improved profitability. Since 2015 to 2019, we have increased very, very significantly, profitability and margin. The currency at the moment is weakening very, very much. So we will see what will happen in 2020. But up to now, it has been a very strong performance. And you see in '19 it has been 18% growth at constant rate. And strongly across main category for ruminants, in particular, parasiticide and vaccines and nutritional, which are 3 key dimension of our product ranges. Most of them around prevention, of course. The free category, vaccines, nutritional and parasiticide being around prevention. So touching all the animals. Last but not least, Chile. We saw that we were in Chile in '19, exactly where we say we will be at the beginning of the year -- sorry, that will be exactly at the beginning of the year. So we have been perfectly in line with our expectation, mainly driven by aqua parasiticides side and injectable vaccines. You remember, I explained that the injectable vaccines were supposed to go up while the oral vaccine was supposed to go down. Also linked to the caligus. The caligus is the sea lice, which make that the producer try to reduce the phase of the salmon in the water, in the sea. And so there is less need for antibiotics and less need for oral vaccines. And -- but at the same time, we have done a good job in getting new contracts for the injectable vaccines with a big group. So last year was a very good performance. It is a cyclical market, aquaculture. And so we will see what will happen this year. But we had a very good performance last year, which has also helped in terms of margin as the vaccines are way more profitable than the antibiotics. For the other species, you see that it is more or less stable. Some growth in companion animals. We had some decline also to antibiotics in pigs and poultry, and it was more or less stable in the ruminants. We keep investing in R&D. We explained to you last year that there was a change in regulation, which, short term, maybe a little bit of a challenge because we need to reregister all our vaccine by 2022 to comply with the new regulation. But it will be a buyer entry, mid-long term. So it's also a good thing from this perspective. I wanted to update you on the product ranges, just because most of the time, we have many questions about antibiotics. So I thought it will be an opportunity for me to share briefly. So the first slide is a bit heavy. It's just on France. It was just to share with you because we talk a lot about antibiotic reduction that you have 2 phases, in fact. If you look over the last 20 years, over the last -- if you look over the last 2 years, let's say, it's more or less starting to become flat. The decrease is much less than it used to be. So there has been a strong decrease, and it started in Northern Europe, Denmark and all these countries in Northern Europe. When you move down to France, then over the last 2 years, it moved to Italy and Spain. So the reduction of antibiotics has not been exactly the same at each point in time depending on the countries. But in France, you see that the decrease has been very strong from 2006 -- let's say, 2006 to 2016. But since 2016, you see that there is a kind of stabilization of the use. And for instance, in 2018, because the data of '19 is not published yet, the index, which is used to measure that by then says, has been stable versus 2017. But to talk, not only about France, but to talk about our portfolio and to give you a better understanding of our exposure, Virbac, global -- I'm talking worldwide now, not France, but worldwide, Virbac global antibiotic sales is more or less stable over the last 2 years, around 17% of our total sales. So that gives you a clue of the proportion of antibiotics in our portfolio, which is among the lowest percentage in the industry, not the lowest, but among the lowest. And a recent publication has been made by the EMA. EMA is a European Medicines Agency, where they try to categorize the different antibiotics in the European Union. And we have decided to move from 3 to 4 antimicrobial classes. And that you find the 4 classes they are proposing. I say proposing because until it is finally decided and voted, there may be arbitration between the different European country and maybe some counterproposal or some evolution. But as of today, the current proposal by the EMA and their categorization, if it was to be applied the same criteria worldwide, you will see that 35% of our antibiotics portfolio will be considered as a first-line antibiotic. So no impact at all in terms of classification. To the opposite, it could be an upside, as the -- probably today, some people are using other antibiotics and they will move to this kind of antibiotics. 55% will be on the second-line drug, which is no impact to low impact, because, in fact, there will be no restriction, just a recommendation to not use it as a first intention, but there will be no restriction in practice. And then the third category is use after stability testing, which is diagnostic, in fact. And that will probably have a huge impact because to use these antibiotics, you will have to test that other antibiotics are not efficient before you can use this one. So you will have to do a diagnostic test, that will make you lose some time. And so we consider that this will have a significant impact on the antibiotic sales. And that is only 10% of our portfolio. And say in other words, it's around 1.7% of our total sales. And we have no antibiotics in the last category, which is antibiotics to be avoided because they are used on the human side, we have none of them. So there is no risk on this category for us. On the other ranges, in food-producing animal, we talk about prevention and the preventative segments. We are growing quite nicely on the vaccines. As you know, the vaccine is one of the pillar of the animal health industry with the parasiticides. So last year, we grew close to 13% in vaccines, food producing. And you see we grew in all category, of course, in aquaculture, I mentioned it before, but also in ruminants, in particular, in Latin America, where we had a very nice growth, but also in Europe, with one strong vaccine. And in pigs and poultry, where we launched PCV2d, which is a new strength of PCV2, porcine circovirus, in Asia. And despite the African swine fever, despite the headwinds and the price market, we had nice sales in the country where we start to launch. We are also expanding this product across the world, especially in Asia, but not only -- across the world, not totally -- we are not targeting Europe and U.S. with this product. We are targeting Asia and Latin America at this stage. But we see that we have growth close to 30%. And then the injectable penetration, which we have been covering over the last 2 years as being strategic segment. It's also growing close to 25%, with growth in more or less all the regions, including Europe. On the companion animal side, I mentioned the buster petfood, so not only it came about EUR 50 million sales in '19 without the key countries, and there are more geography to come and more product to come. But what is also important to understand is that we plan to market the petfood within the pet care program, which will include Egan products such as dentals, shampoo and nutraceutical. So that should boost our market access in many dimension, and we see some synergies between all this line. And all these products, of course, could be sold online, so which gives us also an additional market access. The last element I wanted to share with you on this is the fact that if we benchmark our market penetration on vaccines and petfood in European country. So I just took the 12 current markets where we are currently selling petfood. We see that we are referenced in only 20% of the clinics across Europe where we are present versus 47% for our vaccines. So technically, if we manage to put the petfood where we have the vaccines in the clinics, we should be able to increase the sales significantly. And in fact, we normally used to say that a veterinary clinic is identified by whatever partner they have in vaccines and whatever partner they have in petfood. Of course, it's not the same market, but we can see that there may be some potential if we manage to reference petfood range in all the most loyal customer for vaccine. This was to cover briefly the 2019 achievement. Now I am going to share the company ambition and the 2020 priorities. In terms of company purpose and financial priorities, we have realized that it was more and more important to communicate about our purpose and why do we come and why do the young generation needs to get up in the morning and get really engaged with the company. And so we have started to work on 3 -- around 3 main purposes. At this stage, we are not very feedback specific. We are more animal health specific, but we have a plan to work on this, this year to also try to build it together with the team, not to define it at the top and decline it, but really to build that with the team and to work again what will be the main purpose of the company moving forward. But at this stage, we already have 3 main purposes. The first one is to help better feed the planet. When I say that, it is very sincere. I mean we discussed -- we see sometimes with a lot of talks about the food waste at a supermarket, for instance. All the products, which have expiry date, and we see a bin of a truck, whatever, outloading food, which have expired, and we talk about food waste, and all this food, which is not used because of the expiry date. But in fact, the #1 source of food waste is mortality of animal during the animal health production cycle. There is around 20 -- above 20% of animal mortality during the life cycle of the animal during their production cycle. Of course, it is true for shrimp, for aquaculture, but not only cattle and/or pigs. The African swine fever is a good example of that with half of the swine have died in China last year. So we know that there is a huge food waste in one way. And with vaccines, of course, vaccines, but also antibiotics, antiparasiticides and other products, we are really trying to reduce this food waste and help feed the planet, knowing that for the first time last year -- for the first time in the history last year, the animal protein production has been below the year before, while the population is keep growing and the conception and the demand keeps growing. And we know we are adding around 1 billion people on the planet every 12 years, and we should be around 10 million -- 10 billion by 2050. And so to be able to feed the planet with animal protein is quite important. The second element is to protect the living. Animal health is really at the heart of vegetal, animal and human health, and we call that one health because of the transmission of disease. We know about rabies, and we have with the foundation of Virbac many activities to be planned in India, for instance, to try to fight against the rabies. And we know that the rabies still kill more than 30,000 people every day -- every -- sorry, once a year -- per year, sorry, 30,000 people die per year, and it's mostly children and poor children. And so we know about all these zoonoses and deadly disease. The last one, of course, currently, is a coronavirus, which is also coming from animal. So the importance again of vaccines and the management of zoonoses, which is connecting all the living forms, animal and humans against -- around the concept of one health. Last, but not least is to promote animal welfare. Here, we have Suprelorin, for instance, where we really promote to avoid the castration and to replace it with just an implant that will be avoided surgical castration. It will be reversible, so it's much better in terms of animal welfare. We promote the petfood, which has been specifically designed for carnivorous animal, which is with a high level of protein and a low level of carbohydrates and not a formulation that will not be adapted to the carnivorous diet. So many things we are doing in order to try to support and promote the animal welfare. That was the main purpose. Now I come to the main financial priority. You know we have shared that over the last 2.5 years with you. The #1 priority has been, since 2017 or even before, I should say, since 2016, to accelerate the debt reduction. So to reduce the debt was the #1 ambition of the group. And now we want to keep accelerating it. Because, number one, we choose sustainability, and we are really investing in building the company for the long term, but also to create additional room for maneuver for further development. We really have a long-term vision, and we want to be able to reallocate our capital in a better way to keep growing and developing and optimize our return on capital employed in a better way, but always with a mindset that we remain in charge, we remain in control, and so we need to reduce the debt for that. The second ambition has been to continue the value creation, the return on capital employed. Why do I say that? It's -- number one, because it really has been our motto. It is sustainable and profitable growth. The sustainable growth, it is what I mentioned before, is to try to keep globalizing our assets across the world, keeping the diversification we have. We have a very strong diversification in Virbac. As you have seen before, we are in more than 33 countries -- we are in more than 100 countries for distribution. But we have affiliates in 33 countries. So we are present all across the world. We are in almost all species from aquaculture to swine, to cattle, to equine, to dog, to cats and to even other species, a little bit more opportunistic on chicken. So we are very diversified also in terms of species. And we are across all product ranges. We are probably the most diversified company in terms of product ranges because we have petfood, diagnostic, vaccines, pharmaceuticals, and we even develop services. So we really are present on all of these dimensions. So we want to keep doing that for sustainability. We want to focus in order to optimize the profitable path of the growth, I remember you -- that we shared with you that with debt reduction. The second main ambition was a target of 15% EBITDA ratio on net sales by around 2022, of course, at constant scope and rate because if we were to do some M&A or some acquisition or divestment, that will impact the target, but that is the second ambition we have. And I mentioned that also because we have been always very cautious in our investment. You have seen -- published many acquisitions. You may be surprised to not be -- to not see the name of Virbac on some of them. We have decided to -- we have competed on most of them, but we have always decided to optimize the ROI, the payback, and to be cautious on the multiples. And as the multiples are currently quite high, we have not decided or managed, as you wish, to conclude one of its acquisition, but we have been participating, and we're actively looking at some of it. So I was going to present you the 2020 priority details. I'm not sure it's so relevant now with the current crisis we have with coronavirus. So I just share with you that, of course, the 2 main ambitions, beside the debt reduction, which I already mentioned a couple of times, is the gain of market share, is to beat the competition to grow quicker than the market. That is done for 2 dimensions, the commercial excellence, I'll let you read the slide, and the business development, which is still very active. We had also the target of 15%, of course, again, at constant scope and rate. I want to insist on that because when we mentioned it the first time, we never tied it up to M&A. It's true that if you were to do a divestment, it will take probably longer. If you were to acquire a company, it will be probably quicker. So I just want to be precise that this is, of course, linked also to the debt level. It's not the same thing to do it depending on how we manage the debt. We want to improve profitability. So structurally, we are keeping investing in manufacturing side to try to increase productivity and really have a strict program in competitiveness. We ask all the region to be very strict on their OpEx control and to keep growing the profitably, which means to spend less and when they can grow the top line. We have invested because again, we are there for the long term. So we are investing in the information system. And this year, especially, we have significant CapEx program to simplify and digitalize the company. We have decided to invest in manufacturing system, in HR system. Last year, we did the logistic implementation, and we have many digital initiatives. And again, a follow-up on the -- to create a Great Place to Work, which is the main project at the human resources level that -- which we keep pushing. But all this is a bit -- whole quarter to discuss about that now -- just now because of what is currently happening with the coronavirus situation. So it's difficult to give you an update on the coronavirus because it's so much evolving. And it moves so quickly that whatever I will tell you today -- sorry, I will put the slide. There was -- I don't know what this is -- should be good. Sorry -- okay, it's good. So we see that what you see -- sorry, let me come back. There is a time difference between what I see and what you see. Okay. So the coronavirus. The slide is made on March 7. We did it last week. There are 3 dimensions. The #1 dimension, which is our top priority, is to ensure that all the Virbac teams are safe all over the world. And as of today, we know that all our people are safe. We have no contamination and all our team are safe across the world. Of course, this could be evolving and the situation could change tomorrow. But as of today, this is a situation. We are actively monitoring that. We are actively managing that. We have a crisis group, which meet every 2 days to monitor, to take measure, to make communication. Initially, when the Chinese were missing mask, we managed to supply them mask to protect our teams. We have, of course, stopped all the traveling, all the seminars, all the meetings. Anyway, the first dimension, the most important, is the teams are safe all over the world. The second dimension, we thought will be very impactful, was the supply. Initially, the crisis started in China. And as you know, China is the #1 supplier for API for active ingredient. So we were expecting to see a major disruption in terms of active ingredient. And in fact -- because we have safety stock, because we had only 2 -- first, we have no manufacturing site in China, I should start with that. We have no manufacturing site in China. And in terms of supplier, we had only 2 suppliers in the region that was initially affected by the epidemia. In the Wuhan region, we have only 2 suppliers. And one of them is a very small supplier, so it's not a material impact. There is an impact, but it's not a material one. The second one is a significant supplier, but we have a backup, and we have alternative suppliers. So we are in good shape in terms of supply as of now. And as I mentioned, we have safety stocks. So we don't see the impact anyway immediately. The issue is how quickly China will come back? How quickly China will keep delivering product and active ingredients? We are starting again. We are starting slowly. The logistic is starting slowing again. So it's premature to see whether we'll have an impact or not. But what we can say that if there is any impact, it's not immediate because of the safety stock and the fact that it takes some time before we see the impact. But it is possible that there will be an impact depending on how China will perform in the coming months. But the supply issue that was the first one anticipated doesn't seem to be so impactful at this stage at least. And to the opposite, the third dimension that was not necessarily anticipated so much back in January, it's a business impact. When we see what happened in Italy, what is currently happening in many countries, in all countries, I would say, in Italy, France now, but we know it's the same case in the U.S., it's starting in the U.S. It happened in Brazil as well. It is a business impact where, like in Italy, in France, since yesterday, as you know, you all know the situation, so I'm not going to comment it. But people will probably not go to visit their vets if it is not absolutely necessary. There is a restriction in getting out. It's only when it is absolutely necessary. There is a communication to veterinarians that they have to do only important surgery or a prescription product that require prescription, like an infection, antibiotics, things like that. But they will not do the current business anymore. So we will have an impact. We will see an impact at the client level in the coming weeks and maybe months. It also will probably affect our clients for many year dimension. It's too early to say. The only thing I can tell you is, honestly, the situation is constantly evolving, evolving very quickly, constantly everywhere in the world. And as of today, it's totally impossible to predict what could be the impact on the full year, impact on this year. So I prefer to remain very humble with regards to that. It's very difficult to say what could be the consequences of this crisis. What its share -- its consequence, there will be -- whatever they will be, there will be consequences. And also in the way we work and we practice, what I can tell you is what we can impact and control. So we have put in place many, many measures. All the Virbac teams, for instance, in Carros headquarter, are working from home for all the activity that could be in [indiscernible], which means home office, work from home when it is possible. And we have put a continuity plan in the manufacturing side with divisional teams managing timing, lunch with box -- lunchbox in order for them not to go in the restaurant, not to get post contaminated. We did a lot of measures, a lot of precaution to try to reduce the risk as much as possible. But again, we will be also impacted by the evolution of the business impact of our clients. So we will have to monitor that in the coming weeks and adjust. I think the only thing we'll have -- we'll be able to do is to adjust over time, week after week. I think it's the last slide before the Q&A. We have taken the habit to share with you the pipeline and even a long-term pipeline because last time we have agreed to put 3 years of pipeline. So I put an asteric. It's important for full transparency on 2020, because, in fact, if I would not have put the asteric, the figures in 2020 will be much lower because 2 products, one in companion animals and one in food producing, has been launched at the late '19. So if I was perfectly correct, the number in 2020 should be much lower because the sales, by the methodology, should be accounted in 2019. The reason why I left it like that is because it's exactly the way I presented the slide before. It's exactly the same figures, and I thought it was more easy to understand that there has been no change in the pipeline. Basically, it's the same figure as I explained over the last 2 years. We were on track. We were even on anticipation because we managed to launch in Evicto, which is the first-line companion animal, in November. And so normally, I should have accounted for these sales in 2019, but they were always accounted in 2020. So it's an upside, in fact. So I just kept it like that for making more consistent for you to read. And then we have updated the figures for the other years and have added 2023. And for food-producing animal, in NC. It means not confirm or not calculated, as you wish. It is the possible upside on vaccines with large product or possibly large product. But with so much viability, it's a very early stage, of course, when you are in 2023. And vaccines, it's early stage when you're in 2020. So the probability of success is still quite low. But if the vaccine materialized, it could be a significant potential. But it's way too early to say. But I just wanted to explain why we didn't put the figures because this one is very difficult to quantify or appreciate. For the rest, it's a classical business, and we have updated the slide. Again, for 2020, 2 products have been launched late '19 and are considered in the 2020 figure for consistency with the previous slide of the previous communication. And then for the guidance, again, we decided to not revise it. The reason why we have not revised the guidance is because we are totally incapable to estimate what could be the possible impact of the COVID-19 situation on the group performance this year. So at this stage, it was more reasonable to say that outside the -- this impact, the confidence of the group and the management, it was to confirm what we have said late last year, organic growth between 4% and 6% at constant rate. An improvement of the EBIT ratio of 1 point, excluding 2019 or one-off. Remember, they were 0.5 of exception in '19. So excluding this 0.5, we are on a trend of 1 point improvement of the EBITDA ratio. And the debt reduction despite the CapEx acceleration because we are investing in manufacturing system, HR system, as I mentioned, about simplification and digitalization will be around EUR 60 million, debt reduction at constant rate. Again, all these perspective were made before the COVID-19 situation and before the recent decision, so it is very difficult to take a position with regard to what will happen in 2020 now with the current situation. And we see the agenda for the 2020 communication. I would like to thank you very much, and I guess we can move to the question.

Yes. We can move to the questions. The chatbox is now open. So you can ask your questions. We have 2 first questions, one from Laurent Gelebart, which wants to know the following. The euro is appreciating against some currencies materially. If it stays there for the full year, what would be the impact in your reported EBITDA margin in percentage versus 15 bps constant ForEx mention?

Yes. We have not simulated all the possibilities in terms of the evolution of the euro to USD overall for the group. What I can say is that if the evolution remains in a bracket that is not too extreme, we have sort of P&L protection against the evolution of the USD overall with cost and revenue that are more or less at the same level, so -- which have not been too much impacted in absolute value on that evolution. Obviously, as you remember, in terms of net debt, we have part of our net debt that is in dollar. So any evolution, appreciation of the USD will have an impact on our net debt that we recognized at the end of each quarter and twice a year for the figures that we published.

Thank you, Habib. Another question from [ Sophie Bodoh ]. You posted a 2% growth on Sentinel revenues, I guess, a sharp increase in H1 and a decline in H2. What are you expecting for 2020 and taking into account a fierce competition in this segment?

The difficulty to answer to this question is into the coronavirus situation, to be honest. It's multifactorial. So if I was to comment without the coronavirus, what we could say is that the 2 -- the 3 elements of the competitive environment are just different by name, but they are not very different by nature. What I mean by that is when we launched Sentinel, we came back on the market, it was Novartis at the stage and then us, we were alone. And for 4 years, we were attacked directly by Interceptor and Elanco. They were very aggressive with the same compound, the same molecule and the same almost sales force because it was an ex-Novartis sales force. So for 4 years, we have to fight against Interceptor on the one-to-one competition. And we have an advantage. They moved after us. So they move with a 30%, 40% price difference, which were very significant and helping them. Since then, things were starting to stabilize between Interceptor and us. I think the market share was starting to stabilize. When we started to compete Zoetis with Plot 6, Plot 12, which was a strong competition as well. It's an injectable product. And when the people are using this product, they don't need to use Sentinel. Then last year, we had a generic of Interceptor with a French company launching a generic at a very, very aggressive price. And this year, we expect Simparica Trio from Zoetis that was planned to be launched mid-April. So what I'm trying to explain is, in fact, it's probably the most competitive market in the world. The nature of competition evolves, change. The intensity could increase and probably will increase this year, considering that all the player will be there because Interceptor is there. So generics are coming since 1 year; Simparica Trio, so it is a combination, will come in mid-April. So we can say that now this year will probably be much, much more intense than before. But to say what the impact will be, it's difficult. I will just say that with the coronavirus, everything has changed because there is less visits to the veterinarians. And of course, that could also change the dynamic. In one way, it will be even favorable to Sentinel, short term, at least, because the launch of Simparica by Zoetis maybe either postponed like us or protracted at least. So it's difficult to give any precise forecast or precision on that. It is really multifactorial.

Thank you, Sebastien. You want to add something, Habib?

Yes, just to confirm. So we had a slight increase ex-Virbac. However, we had a decrease in 2019 when we adjust for what Sébastien described and what I described, which was the destocking that we observed at the distribution in 2018.

So we have another question, which is about our split of activity. So the question is from [ Sophie Bodoh ]. She is asking what is the part of the Virbac activities that are made through the vet clinics, the vet network.

In terms of distribution -- if we take this in terms of distribution, it's probably close to 90%. The reason why I ask the question is because, by nature, some product will be sold on other channels. So they are not veterinary product per definition. But for us, they are veterinary products because we exclusively or mostly sell through veterinary channel. As an example, petfood. Petfood is sold through veterinarians. We are not targeting the mass market. We are not in supermarket. We are not in retailers. We are really trying to sell our petfood through veterinarians. So for us, it's veterinary sales. It's a $3 billion market, not a $36 billion market. It's a $3 billion market for us. But we are targeting only these segments. So if we think like that, we have more or less close to 10% sales online and the rest is veterinarians.

Okay. Great. Thank you, Sebastien. We have another question from [ Orlando Varela ] from BBVA. The question is, due to the current situation, does the group have an action plan for eventual currencies devaluation Lat Am in terms of export and import?

Well, I can start, and I pass it you for Lat Am. What I can say because I personally manage that quite closely. It is a difficult situation. Of course, we discussed price increase, and we discussed that, again, last week. I'll take just Brazil, for instance, where the devaluation has been very strong, going from 4.6% to 5.6% in less than 3 or 4 months. So it's a huge devaluation. And we, of course, discussed price increase. We are used to that. We just need to be careful also with the current environment because of, again, the coronavirus affecting and the perception that veterinarians are smaller clients. They have less muscles. They have less capacity to resist financially to these crises. So we need to be careful that the short-term decision on profit will not be putting in danger long-term growth and performance. So it's a balance between these 2 dimensions. We are monitoring this quickly. There is no response black and white. It's case by case, product by product, country by country. But the #1 answer is price increase, and we are, of course, using that as much as we can. I don't know if you want to complete.

Maybe just to add that on the overall cash transaction of the group, we are hedging. We are hedging program on the currency, not on the balance sheet, not on the profit understatement, but on the cash transaction overall. It's obviously not covering 100% of our cash transaction because for some currency, it's very costly to put that in place. I can take a concrete example that we already discussed in the past, and you've seen the impact on our P&L for this year, which is a CLP. So we are hedging part of our CLP exposure, but not all of them, again, it's a balance in terms of the cost of the hedging versus the risk that we take regarding devaluation of those currencies.

Thank you, Habib. Thank you, Sebastian. A question regarding China. Could you please let us know what have been the evolution of sales in China in Q1? What part of your active ingredients are sourced from China?

We don't communicate on Q1. That will be for the next communication. Yes. Habib, you agree? Okay. So...

April 15.

April 15, Manuela agrees as well. So we will keep the surprise for April 15. The part of API is quite important. But again, as I mentioned, there are only 2 API producer in the Wuhan region for us. One is a small API producer. So it will be -- I think it will have an impact, but it's not material. And the second one is, we have a backup, and we have alternative suppliers. So it should not be an issue neither. So I don't know, top of mind, I will say 80%. But I will have to check exactly, but it's close to 80%, I will say. Because it's not only active ingredient of product, it's a component. It could be a packaging element. It could be an intermediary product of synthesis. Sometimes the synthesis is done somewhere else, but there is an intermediate component in China. There is some plastic component coming from -- packaging coming from China -- some excipients. So when you look at all that, I think the dependency of China is probably at least 80%. But again, we have a policy of safety stock because we are in an industry of high-margin overall, so we normally have quite stocks. So as of today, the impact from the supply chain is not material as of today. That's the only thing we can say. For the sales, we will meet on April 15.

So we have a question coming. So let's wait. So the question is -- thank you for the question. A few, please. Do you have any significant refinancing events for your debt in 2020? This is the first one. And can you remind us your available liquidity facilities?

So no, we don't have any refinancing or any milestone -- significant milestone in 2020. The majority of our debt is in 2 elements: the revolving credit facility that we have with the maturity by 2022, as you remember, April 2022; and the second one is the loan that we have with the European Investment Bank for around EUR 90 million, and this one is even beyond 2022. So we don't have anything close. And secondly, regarding the question of liquidity, we have our revolving credit facility that is in place, that is confirmed. And the -- if you look at our financial statement, you will see that at the end of the year, we have a significant room for maneuver in terms of our capacity to draw on that line. So for the time being, we're all good.

Thank you, Habib. On the business side, for Sebastian, what are your plans for petfood launch in U.S. and Brazil?

We don't give too much information, not to inform the competition. But what I can say is, Brazil will take longer because for Brazil, we need a local manufacturing, but we also need a local manufacturer for the U.S. But in Brazil, it's highly competitive market, and we need to make a transfer of the production locally into a local producer. And it's a smaller market than the U.S. Of course, the U.S. is probably 50% of the worldwide petfood market for veterinarian channels. So it's clearly a priority with China, way above Brazil. So I mentioned the 3 markets, but Brazil is low on priority. The top 2 priorities are China and the U.S., but we have not communicated on the launch date not to let our competition know. And when we'll come even if -- we will not be scaring our competition at all. I just want to precise that. Petfood is not a generic. In a generic market, you can take 10%, 12%, 15%, sometimes more percent market share in 1 year. In petfood, you take almost nothing in year 1, almost nothing by 2 -- year 2. And it takes around 4, 5 or 6 years before you really reach a significant level of sales. So of course, you have some tactics to try to overcome that. But structurally, it's a very long sale. For the simple reason is normally you get the puppies, the new young dogs on board. It's difficult to switch an adult dog. If there is a pathology, if there is a clinical sign, if there is any issue, then yes, you move them to the diet. And then from the diet, you move them to the maintenance range. But if the dog is very happy with his food, there is little incentive for the pet owner and for the veterinarian to switch the dogs. So normally, you only get -- if your dog live 15 years or 10 years, you only have 6% or 10% of the dogs, which are renewed every year. And that's the percentage of dogs that you can normally get on your new petfood. So it's mostly puppies. And so it takes time. It takes probably 3 to 5 years before you see some significant sales. So please do not expect a quick ramp-up of sales just because we say we launched in China or in the U.S. China, maybe slightly different because of the way the market is structured, and there are a lot of new dogs. Many young generation takes new dogs and there is a lot of proportion of much, much younger dogs. So it's maybe much quicker in China than U.S. But U.S. is a very, again, competitive market, and it will take time. The good thing about petfood is how difficult it is to get in. It is difficult to get out. So once you get your dog on board, you normally get them and get them for long term. So it will take probably 4 to 5 years to get there. But then we will be established, we will be established for long, I guess.

So we have a question about the stock from [ Louise Boyer ], MFE. You are mentioning safety stocks, how many months of sales do they represent?

The industry on average -- so it's not something very particular for us. The industry on average is around 3 months, depends how you count. It's between 3 months if we term and finished product and then you have a raw material equipment, things like that. So depending on the calculation, you move between 3 to 5 months. But if you miss one small component, you cannot do your product. So communicating on 4 to 5 months may be misleading because normally, when you have the finished product, you know you have the product, when you don't have the finished product, you may miss one small element and not be able to complete it. So it's normally around 3 months safety stock policy for finished product.

And what is the share of sales done online? Does it mean direct contact with vets bypassing distributors?

It depends on country. Here again, we have a policy, which is really adapting to the local markets. Overall, I will say, in certain market, it's close to 10%. The U.S. is a good example. Then there are also different models. The web shop we mentioned for petfood, for instance, we sell directly to pet owner, but we have a relationship with the veterinarians. The veterinarians are the one that put them -- register them on the website. And so there is a profit-sharing mechanism with the veterinarians. So it's a win-win relationship. That's for petfood in the web shop. Then we have some sales in China, done directly on the e-retailer, and then the vets is not really involved. That's a passive market. That's the same thing on Amazon in the U.S. When you see some product on Amazon, it's a passive status where the vets are not involved. So it's a mix of everything. But again, our strategy is really the vets. We push for the vets. And so most of our sales are coming from the vets. And it is mostly marginal, I would say, except for certain category of product. Egan product, where you may have a much larger proportion of sales in the online, like the dentals. Dentals, for instance, a large proportion is online. But for most of the products, Sentinel, prescription, even petfood, it's mostly veterinarians, very, very little portion on online.

Thank you, Sebastian. One question regarding the guidance. You are expecting 4% to 6% sales growth in 2020. What are your underlying assumptions of sales growth in China and Europe?

To be quick, no, we don't provide that specific level of details. But we expect -- obviously, I mean, Sebastian has shown, in China, that we had 8 consecutive years of double-digit growth. Obviously, we don't expect this trend to change. And all what -- everything that we are saying, obviously, regarding the perspective, is outside of the coronavirus. Again, we cannot assess at this specific moment the impact of the coronavirus.

Thank you, Habib. Returning to China, you say you had some backups for your 2 suppliers in China, where are they located?

No, we don't have 2 suppliers in China. We have many suppliers in China. We have 2 in the Wuhan region, which was Hubei region that was affected by the epidemia initially, the start of the coronavirus issue. And I said that we had a backup only for 1 of the 2. And this is the second one, we don't have a backup, it is small. It's only supplying us one product, and it's not a large turnover. So it will have no material impact. And again, Wuhan maybe starting again in the coming weeks to operate normally. So the impact will not be material on one. And on the other one, I say we have a backup. If that was the question.

[indiscernible]

In Wuhan? I'm not sure anymore. We have so many suppliers. No, it's outside of China. It's outside of China. If that's the question. Sorry. It's outside of China.

So another question regarding EBIT. You are expecting an EBIT margin of 15% by '22. Are you expecting those to end with bps improvement to be more back-end loaded? What are the drivers of this improvement?

We have communicated around 15% around 2022 since the last 2 years. And as I mentioned before, we have not so correlated that to our debt level, and we should have done it because, in fact, if we make an acquisition, and we looked at it with the current M&A activity, this could be speeded up. Of course, if we had a huge significant amount of top line, it will help a lot the bottom line level. At the reverse, if we were to divest something, if you'll, of course, remove some top line, it will probably slow us down significantly to reach the 15% target by around 2022. So we have to understand that it is a balance between the balance and the P&L. If we have more debt, it's difficult to get there. If we have less debt, it will be less quicker. It is mostly driven by operational performance. It's growth of the top line. And containing -- we have the 3 dimensions that we have executed very well in '19, growth of the top line, improved margin, which means increasing price above cost of goods, and managing the product mix and the country mix, so that we improve the margin ratio at group level and then containing the OpEx, containing the spending and operational expenses below the margin and the sales growth. That's the 3 things we try to do year after year with a caveat of what I just explained about acquisition or divestment.

Yes. And we regularly mentioned as well to complete, what Sebastien said, that it would not necessarily be something linear we've seen in the past. We had some very good years, especially 2019, some years where the improvement is slightly below. So we don't necessarily expect to have something very linear. It could be -- it could accelerate and then potentially slow down a little bit regarding the EBITDA improvement over the next years.

All right. You mentioned certain product launches have been postponed due to COVID-19. In what scenario would you be comfortable to launch them? Does some region -- do some region need to recover? Or what was the things behind?

No, the #1 reason is the launches we are talking about are technical launch. One was Suprelorin in China. So I can mention it because we have no competition on this one. It's a unique product. And there, we were planning a huge launch and -- to try to build on the buster program, which mean to try to transform the market. That requires to train many, many people -- to train the people you need to make many, many meetings. You need to get the people together. You need to get them in the room. You need to educate them on the mode of action of the product. You need to do a lot of things. Of course, part of that could be done virtually and digitally, and that's what we try to do. But it's not the same. If you want to really have a huge impact, you have the key opinion leader or you have a -- many launch program, launch and learn in the clinics to explain not only to vets, but also to staff, the nurses, everyone, the technicians, everyone. So that could not be done properly. And if we were to speed it up too quickly for short term, we will damage the possibility to go very high and very long with this product, knowing that the likelihood of success is still very remote because the ambition we have in China is big. But the risk to succeed, to manage, is not so big because the cost of the surgery in China is low, and it's change of mindsets and change of habit. So it's really changing the habits of the vets, which was the intention we had, and we really wanted to try to do something exceptional, but the circumstances does not allow to do it. So we will postpone it. The second one is Stelfonta. We have tried to keep that low profile, but some of you have seen it and have published a lot about it. So Stelfonta is a product about cancer. It's to replace, again, surgery, but to remove skin cancer, tumors with an injection. And here again, we had, in fact, 3 weeks from now, planned a huge meeting with 150 key opinion leaders from all over the world, from the U.S., from Europe, from many countries. Everybody was meeting with 150 people for huge launch, and all this has been canceled and postponed, and we have no dates at this stage to do that. So we are discussing internally what we'll do. But most of the team think that the same thing to launch it not properly would be a mistake because here, again, it's a change of habits. It will be a generic. It will be a classical product. It will not be a big issue. We could do it virtually, whatever. But in this case, we are -- the transformation of product is requiring education, training, meeting, engagement of people and that is requiring to do it properly. So as we are there for the long time, the long run, and these products are very technical with no direct competition. There is no pressure on the quarter, so we will delay it until we have visibility on what we can do.

So this was the last question. Thank you, Sebastien. Thank you, Habib, for the meeting. So this is the end of today's session. On behalf of all the Virbac team, I wanted to thank you for -- very much for your time and interest. And I wanted to say take care to all of you. Thank you.

Thank you.

Thank you to all of you.

Thank you.