Virbac SA (VIRP) Earnings Call Transcript & Summary

Hello, everyone, and welcome in Paris for our webcast and conference for Virbac and presents the 2023 annual results. So hosting the call today, Abderrahman Benouhoud, with Investor Relations. I'm Sandrine Brunel, Head of Corporate Communications. We will be joined by Sebastien Huron, our Chief Executive Officer; and Habib Ramdani, our financial -- our Chief Financial Officer. So before we begin, I would like to remind you that all the materials slides and additional materials are available on our Investor Relations section in our corporate website. And for those who are attending virtually, they will be able to ask questions that will be answered during the Q&A session or afterwards, if we don't have time to address them all immediately. And the last point is that the replay will be available immediately as well at the end of the meeting. Thank you very much, and have a good meeting and a good presentation, Habib.

Thank you, Sandrine. Good morning, good afternoon, good evening to all of you in the room and connected on the webcast. So it's my pleasure to start this presentation, and I will cover the 2023 results. I will then hand over to Sebastien, who will share some elements regarding our perspectives and some elements regarding also the recent acquisitions that we've announced. So I'll start, as usual, with a quick summary of our financial performance, and then I will go into a little bit more details on the net sales and going down the profit and loss and some elements regarding our balance sheet and cash generation. So first, we're very proud with this 2023 results, which showcases our strategic reliance -- resilience, sorry, as well as our capacity to manage difficulties and our operational efficiency. Indeed, it was a very particular year for us with a few headwinds that we had. We already talked about it. The first one being the normalization of the market with a slower growth of the market, even a decrease in volume and 2 other unfavorable one-offs that were more related to us, the limitation of capacity of production on our vaccines that impacted us. I'd come back to that as well as the cyberattack that we suffered. But despite that, we've been able to post a very strong organic growth at 4.9% increase, constant exchange rate and scope, with all of the 6 regions in which we operate that have had positive growth and contributed to that performance with a strong momentum of some of our key brands such as the pet food as well as the contribution of some of our recently launched products. We have also had a price effect of plus 5% during 2023, very much aligned with what we had last year in 2022. From an EBIT-adjusted standpoint, what -- the key element is the profitability improvement by close to 0.5 points in terms of EBIT adjusted before R&D. We've even posted the highest EBIT adjusted before R&D of the history of Virbac at 23.2% as a ratio to revenue. This has been done, thanks to a very strong gross margin contribution in value as well as control of our operating expenses, and I'll come back to that later on in the presentation. Finally, in terms of EBIT adjusted, we're more or less stable when we look at it as a ratio to revenue at around 15.3% at constant exchange rate. And this is, again, the -- resulting from the improvement before R&D as well as the acceleration of our R&D investments, voluntary that we've already shared in the past, which has represented an additional 0.4 points of revenue in 2023. Very quickly, if we look at the ForEx impact, you see that we've had a negative impact overall on the net sales as well as on the EBITDA. We've had several regions, 3 regions that have had a negative impact and one of them that were positive, Latin America. The highest impact has been in Asia Pacific both on the top line and on the EBIT adjusted. If we continue to go down our profit and loss, we've had an operating profit increasing by 2.5% at actual rates, with financial expenses that have increased by EUR 7 million, resulting from 2 effects. The first one is losses linked to the exchange rate evolution, especially CLP that has a negative evolution for us during 2023 versus 2022. And also a higher financial net -- debt net cost, which has increased, especially linked to local debt that has been set up in Chile. So the consequence of that is a stable net profit in 2023 compared to 2022 at EUR 121.1 million. The free cash flow has increased by 28% versus last year, and we've posted close to EUR 59 million free cash flow. We continue to be in a net cash -- positive net cash situation at the end of 2023 at EUR 52.4 million, it's a decrease versus the end of last year by EUR 27 million, essentially linked to 2 elements, acquisitions, with the acquisitions of GS Partners and Globion for EUR 55 million as well as the consequence of the share buyback program. So if we exclude those one-off effects, if we look at it as well at constant exchange rates, the net cash situation have increased by EUR 44 million in 2023, and we continue at the end of 2023 to be fully deleveraged with a net debt on EBITDA ratio negative at 0.25. So very briefly on the comparison with a comparison of our actual 2023 with our guidance. We're more or less in line on all dimension, slightly above our net sales, but as a reminder, we've not restated for the acquisition of Globion and the acquisition of the Czech Republic distributor for materiality reason. And those 2 acquisitions represented 0.3 points of growth in 2023 versus 2022. So let's have a look at our net sales evolution. As I mentioned, 2.5% growth at real rates and 4.9% growth at constant exchange rate, which is an additional EUR 60 million net sales. We've a good contribution of Europe with 5.7% growth, so a very solid growth in Europe in both farm animal and companion animal segment with very nice contribution of countries such as France, Spain, some North Europe countries as well have contributed well to that performance. And we've had also a very good contribution of some of our key products, pet food, obviously, specialty products as well and some of the ruminant product as well have done very well in Europe during the period. North America, 3.5% growth, which is not entirely reflecting the true in-market performance. We've shared that we've observed a decrease of the level of stock at the distributor level throughout 2023. So this has had an impact on our performance. We would have been better without that specific effect, which we think is now behind us and we don't anticipate to suffer from that in 2024. So we've observed and had a nice performance in the U.S. of our specialty brand, dermatology as well and dental product ranges. Rest of the World has had a nice performance as well, 4.6%. For us, Rest of the World is 4 regions: Pacific, Asia, Africa/Middle East and Latin America. You can see on the slide that all of them have been growing throughout 2023 with a very solid performance in the Pacific region, 5.5% driven by Australia and New Zealand with a very strong market demand, especially on the farm animal segment of the market. And we've had a very good performance of our product in those markets. Africa/Middle East, very strong performance as well and close to 9% growth. For us, it's essentially South Africa. Latin America, 4.9% with Brazil and Mexico that have done very well, double-digit growth in those 2 countries. Colombia and some other countries have performed very well. The only country that has decreased in terms of performance is Chile with contrasted performance throughout the year. If you remember, we had a very negative first half, minus around 35% of sales during the first half linked to voluntary decision to limit considerably the sale of antibiotics on the aquaculture segment. We had also parasiticide products that have been terminated. And we've rebounded quite well during the second part of the year with a growth of 20% in the second part of the year, which has not enabled us to entirely catch up with the first semester. And finally, Asia region here as well a more contrasted picture with a very strong performance in India obviously, with the contribution of Globion, but all the other segments have been growing as well in India. We had a top line growth close to 8% in that country. And on the other hand, we had -- it was more difficult in China, Korea and Japan, especially on the companion animal segment with more difficult market conditions, especially in China in those -- in this country. So let's have a look at the sales by segment. So the split remains more or less the same. No material changes in 2023 versus 2022 with 40% of our sales coming from farm animals and 60% from companion animals. So companion animal segment has grown at actual rates, 2.1% and 3.5% at constant exchange rates. You see here the excellent momentum dynamic that we have on the pet food segment first, with a 22% growth, mainly coming from Europe and Latin America with Mexico, for instance, that is doing very well. Specialty segment is doing well as well with 6% growth, adding EUR 8 million turnover with product brands such as Movoflex, Zoletil and Suprelorin, part of our key products that have done very well during the period. Antibiotics and dermatology as well with close to 6% growth and EUR 6 million more. On the other side, obviously, more difficult on the vaccines. We've lost 7.6% net sales versus last year, EUR 6.5 million. We've shared already that we've operated over the past 3 years under production capacity constraints. We've had this year rejected batches, which is not unusual given the nature of the product, biology products. But given the fact that we've no security stock, any issue translates directly into loss of sales for us. And you know that we're working on increasing the production capacity with the addition of a new last-generation filling line that has been -- that started to operate early this year. Finally, parasiticides, we're decreasing by 4%, essentially linked to the market context, where we're suffering from the competition of the new generation products. Farm animal segment, a lot of green, a lot of growth in all of the product category with the exception of Aquaculture. We had a very strong performance on farm animals. As you can see, with 6.7% growth at constant exchange rates with the -- all of the segments, subsegments, antibiotics, parasiticide, nutritionals, vaccines as well and other that have grown at between 7% and 10% growth. So, extremely solid, driven by some of the countries that I mentioned earlier, where we've a strong presence and that have benefited from a very significant market demand, such as Australia, New Zealand as well, Latin America. But we've had a strong performance as well in Europe, for instance, on our vaccines line for ruminant. Aquaculture, more difficult, as I shared already, minus 12%. So we lost EUR 6 million for the reason that I shared earlier. So if we intersect now the performance by region and segment, you see that all of the segment, companion animal and farm animal have been growing in all of the region with the exception of other developed countries, where we've had a slight decrease of 3.3%, essentially linked to the countries that I mentioned earlier, Korea, Japan, New Zealand and Australia on the companion animal segment. And we suffer in those countries as well from the vaccines production limitation that I mentioned earlier. So let's have a look now on our profit and loss statement. So, as I shared, net sales have been growing 2.5%. We've had a strong contribution from our gross margin on purchasing costs that has increased and improved in terms of overall ratio. The net expenses have grown at the level of the top line, which means that we've kept more or less stable ratio as a ratio to net sales in the context that I shared earlier. Because here, we've the consequence of our R&D additional investments. We've had some effect there on salary mass, for instance, in the context of high inflation that we've had in 2022 and 2023, as well as on the other side, we benefited from some improvement on some costs, especially transport which have hiked significantly during the COVID and which came back to a lower level during 2023. So overall, we've been able to control quite well our net expenses growth which enable us, as I shared, to increase our ratio of current operating profit adjusted before R&D by close to 0.5 points. If I move down net financial expenses, I already covered that. We've had an increase linked to exchange rates, an increase of our net cost of debt. Income tax, you see decrease of our income tax expense in 2023 versus 2022, essentially linked to some base effect that we had in 2022 as well as a positive product mix. We've had more profits in lower tax countries such as India, which has had a positive impact on the overall effective tax rate, which has improved by close to 2 points during 2023, which is now at 27%. And finally, net results, as I shared, more or less stable in 2023 versus 2022. So let's have a look at the EBIT adjusted evolution and where it came from. A nice contribution from Europe and North America, where we've improved our margin in the North America region by 5 points in 2023, and we see the benefit of that. Negative contribution from Rest of the World with the impact of our Chilean affiliate. And finally, R&D, obviously, a negative contribution overall because of the voluntary increase of our spending in R&D. So again, more or less stable EBIT adjusted ratio to revenue between 2023 and 2022 and increasing before R&D. Regarding the cash flow, it increased by 2.3%, so more or less in line with the net sales increase and the profit increase and the same with the net cash flow, which is more or less stable and here as well quite aligned with the net result evolution. Let's have a look at the free cash flow now evolution. You see first that the conversion rate of net result to free cash flow has improved when we compare 2023 to 2022 and moving from 38% in 2022 to 48% last year in 2023. It's the combination of more or less stable net cash flow, slightly higher CapEx at EUR 60 million and an improved working capital requirement during the period. If you remember, we had an increase of our stock, significant increase of our stock still in 2022 linked to voluntary decisions that we made in the context of strong disruption of supply chain. So this increase has been stabilized and even improved in terms of stock position in 2023. The ratio to stock has improved during the period. So the working capital requirement has decreased when we compare the 2 periods. So from a net debt evolution, as you can see we're moving from EUR 79.4 million -- minus EUR 79.4 million, so positive cash situation to minus EUR 52.4 million, so a slight decrease, as I mentioned, essentially linked to 2 elements, acquisitions and the share buyback program that you can see here on the other items stack. So all in all, at constant rate, scope and excluding the impact of the one-off share buyback program, we would have improved by EUR 44 million. And finally, I will move quickly on that one on the condensed balance sheet. Just a couple of words on some of the ratio, the net debt on operating cash flow, as I mentioned, still negative, minus 0.25. Obviously, that will change with the acquisition of Sasaeah and Sebastien will share with you later on some pro forma elements for the end of 2024, what we expect. And final slide before handing over to Sebastien on the shareholding structure. Nothing has changed versus the end of last year. Dick family still own slightly less than 50% of the shares and slightly more than 66% of the voting rights. Sebastien, the floor is yours.

Thank you very much, Habib. Welcome to all of you. So before I start with some figures, I'd like to spend a bit of time on what I believe is more important than the figures here is what set Virbac apart from the others company. It's a company culture. And the reason why I want to spend a bit of time on it is we've seen that in 2023, more than ever before. The company is a pure animal health player since day 1, and that has forced us to send people in countries like when we build the affiliate in China or in other countries, all over the world, with just a small luggage and nothing there to receive them. There was no human health company to support, no infrastructure, no nothing like that. And so this company has been built around value such as trust, freedom. And trust and freedom many times create accountability, responsabilité in French, but accountability. We kept a very strong entrepreneurship mindset because we know the infrastructure of the human side. And this has created a tremendous level of engagement of all the team. And when people ask me many times, why is Virbac working so well? Honestly, I could say, strategy, execution whatever. It's number one, the culture of the company and this level of engagement, which we've seen at play in 2023, more than ever before. So 4.9% does not exist. That's a figure maybe for the financial people. But the 4.9% is 0% on the first half and it's 10% on the second half. So the 4.9% is in average, which hides a lot of things. But in fact, we came back at 10% growth in the second semester, and that was thanks to the team. The second reason is the strategy. Virbac is a veterinary company, not a pure pharmaceutical company as per se. So we're probably among the top 10, the only one with such an importance given to pet food and pet care on top of vaccines. So of course, we do pharmaceutical product like most of the competition. But we do pet food and pet care, which is what you see when you walk in a companion animal clinic. That's mostly what you see stored in the clinics. But what you don't see is vaccines, which they're using at the back of the clinic. And we're really -- with all these segments, all these product offer to the vets, which make us a company a bit apart because our competition is Hill's, Mars, Nestlé Purina on the pet food, when it is Zoetis, Merck, BI, Elanco on the pharmaceutical side. So we also from a strategic standpoint of view have a very unique path, and I will explain that a bit later as well. And then last but not least, it's the execution part. I think and for that, we could get a bit of credit with Habib for the management of that because I think we've a huge level of discipline and execution. And it is important because we're talking about the road map of 2030. We're talking about the ambition to reach 20% EBITDA. But for us, it's more about walking the talk, and making happen what we say. In Virbac, we think that the most important asset are people. And the most important asset of people is the reputation and the reputation is to walk the talk. And so what we've very much at heart with Habib and the team, of course, all over the world is to execute what we say and we put some organs of governance to support the execution of the strategy so that we make sure we deliver on whatever we say we will do. And I will try to outline -- highlight all that during the presentation. So I'm not going too much in detail, Habib has covered the most important element. We've many countries performing very well. We had a very difficult year. Chile is an example of what has not been so good last year, but in fact, it's the same thing as a 4.9%. Chile was minus 32% in the first half, plus 20% in the second half. And the first half was due to the decision to stop antibiotic. We, in fact, were selling a significant amount of antibiotics in Chile. This had no margin or very low level of margin. It was a kind of a trading business where you buy raw material from China and you sell it and we decided to stop that. So of course, we had a huge impact on the S1 in the first semester, but we came back with plus 20% in the second one. And so this is an example of where the average of the year doesn't mean so much. But we've overall very good performance in the buster programs, where we had double-digit growth in many products. Pet food is still above as the 20% for many, many years. We've, in particular, launched many new products. Cortotic is the first treatment for otitis in dogs without any antibiotics. So in terms of ESG and responsibilization versus the rational use of antibiotics, we're really leading the world because nobody else has such a treatment. It's a retreatment used as a first intention product by the registration of the product. And this is to treat otitis in dogs and has no antibiotics, just a very powerful anti-inflammatory. We launched many new products and many more will be coming, of course, because as you saw, we've increased R&D investments. So in 2, 3, 4 years from now, you'll see many new products coming, and I will explain that a bit later. What was very surprising to me was that we've been able to beat the market again. We're growing faster than the market and gaining market share over the last 6, 7 years now. And I really thought that this year it will not happen because of the cyberattack. The manufacturing site was stopped for many, many weeks. We had the issue on the vaccine side. We had so many issues internally that I thought this year, we'll miss it. And so far so good, we've still beaten the market this year despite all the headwinds, which we do not expect to have in 2024. This was a slide I presented to you in March to explain to you that we had a clear road map at 2030 to try to reach the target 20% EBITDA before 2030. And I was explaining that besides many action on employees and processes and optimizing the company, there were 3 main blocks: innovation, which is R&D, acquisition and competitiveness. That will be the way we'll do it. So in terms of strategy, it's how to win and where to play. So at the below part, you've where we want to put part of our investments, where we want to invest our resources. And at the top of it, it was a 3-way to gain market share, develop and improve profitability. And what I decided is, rather than do many more slides, do 1 slide, which is just the same as March, but with what was executed in 2023. And I can share a few elements. I'm not going to read the slide. There are too many elements. But for instance, great place to work, which is very key for the sustainability of the performance, is to make sure that the level of engagement, what I started my presentation with, is preserved, is nurtured, is the fact that the level of engagement of the people is very high. And we had very good results in 2021, so we were not certain to be able to improve because of COVID, because of the war, because of the inflation, because of the cyberattack, where everybody worked too much last year to catch up. So we thought, we'll have probably bad results or difficult results, and we were extremely surprised to have a plus 10-point in France, surprise is not the right word to use here because we work for that. But we were happy to see that whatever we did that produced results. We've 14 certified countries in Great Place to Work with 8 countries 3 years ago. So all that to say that we're going in the right direction and the level of engagement remains totally intact. At the same time, we deploy a lot of compliance, code of conduct and a lot of things all over the world. We've a legal compliance department, which has been increased and where we try to do things very, very well everywhere. The CSR department has been created in 2023 as well with ESG. We did a full carbon footprint evaluation. So we're going now in '24 to try to reduce our footprint carbon impact as much as we can. One example will be the transfer of some products from Australia to Europe, for instance, I'll comment it later. In terms of innovation, you saw that we're investing EUR 40 million more in R&D per year. It's huge. This EUR 40 million more has been increased in 3 years. So that's an annual spending we do on top of what we used to do. We're spending more or less EUR 80 million. We're now spending EUR 120 million in R&D at group level. And the reason we did that is because we saw the opportunity of many, many big products going off patent between '27 and 2030. And we wanted to take advantage of that. So rather than to have R&D driven by ratio or by budget, we decided to have an R&D driven by opportunities and see the opportunity of developing many, many new products. So if you look at the pipeline today versus 2019, we've EUR 130 million more of value in the pipeline. This is a value -- the EUR 500 million is if all the projects were coming to and to launch and that will be [ pixel ]. So that will never happen. That's what we've a kind of probabilization of success depending on the stage of the product in the pipeline. So the figures that is more important to retain is EUR 130 million that we've in the pipeline. EUR 130 million more value than what we had in 2019, thanks to this development. And to give you another example, today, we compete in 3 -- against 3 products of the top 20 animal health product in the world. Tomorrow, we'll be competing in 15 products because 12 of the top 20 animal health products in the world are being developed as an alternative proposal or competitive solution we'll offer in the market. So the pipeline will be very rich. And the reason why we'll be able to reduce it later, I'll come back to you on that later. It's because there is many product going off patent between '27 and 2030, and there will be very few, not to say only one as far as I know, going off patent between 2030 and 2035. So there is no need to have a linear spending. It's much smarter in my opinion to adjust the spending based on the opportunity and the cycle of patents. And that's why we've this kind of bumps in R&D spending that will be reduced in 2 or 3 years from now, I'll explain that later. Acquisition, we were -- said that we were not very active. We were very active. We just didn't manage to materialize any acquisition because we said we'll never pay a price, which was too high to us. So we were patient. We've tried for instance to buy the Elanco business, but that was way too high in terms of pricing. So we'll only make an acquisition when we think it's the right price for us. So we're very happy to have managed to do 3 acquisitions last year, the Czechia distributor, 2 Channelle products before Channelle was sold, we knew it was for sale. We managed to make a carve-out of the 2 products in the U.S. that we wanted to keep in charge. And so we bought just these 2 products. It's not very big. And then Globion. Globion is a very nice acquisition. I'll comment a bit later. And I listed Sasaeah because even if it's a '24 closing, it was a Christmas and New Year workload. And so it's part of the 2023 effort and still very dynamic licensing, business development as well. Competitiveness, I'll come back on it as well, but we're really on the side of accelerating in terms of operational excellence, trying to gain more profitability. In parallel, we're transforming the company. We're rechanging of dimension. We're building a new pet food, pet care production and R&D site in Nimes. We're investing in vaccines in Carros. We're building a new logistic and distribution center in Carros. I mean, we're doing many, many things. We're changing the ERP at the moment. We're changing and doing many things to build a much stronger organization for 2030 and to make sure that we'll have plenty of capacity, but more importantly, productivity and competitiveness to gain in margin and to reach a target 20%. The rest, I'll not comment because you'll see later, and you can read the slide, it's self explanatory, but we've many things to come in the U.S. We've a bit of delay in certain projects that were supposed to come in '24, they'll be registered and come in '25. But we've many new launches expecting now. And so I'm very confident about the U.S. and there is a lot to be done because that will help also in the product mix, in the country mix in terms of margin contribution. China was very deceiving last year. We launched -- we historically had only 1 leg, if I may speak like that. There are 3 type of segments, pharmaceutical, parasiticides and vaccines. And historically, we didn't have any parasiticide and didn't have any vaccines. So we were playing only on one part of the market. 1.5 years ago, we launched the parasiticides product. And so I thought we'll see a huge growth and that growth didn't materialize. So we went there, we analyzed everything, and we decided to restructure the organization. So we changed completely the affiliate now. And I really believe that we've recruited very good people. And I'm confident that with the product we've now, we should see significant growth in China. We've now the pharmaceutical product. We've the parasiticide. We just launched a pet food now, and we've the vaccines that will be registered this year normally. So if the vaccines come, we'll have the 4 legs, so we'll play in all the markets. And so at least the platform to perform is there. So now it is up to us to make it happen, but we've a platform for success in companion animal in China. Pet food is going, the HPM. This is a Virbac strategic formula. It's 25% growth more or less. See on swine vaccines, we're growing fast as well. We're now starting to see a good take of our vaccine swine. I think you remember, we shared that historically, we had 2 kind of venture, Swine vaccine and Aquaculture. So Aquaculture so far, we've not managed to execute it the way we would like, but I could explain why. But in Swine, we start to see some good growth. So now, we'll have a third venture, which will be the poultry vaccine, but all that will give us additional growth potential. And of course, we do cybersecurity and ERP and things like this, you call it. I talked to you about execution, the discipline of execution. So when we said 2 years ago, we'll try to accelerate vaccines and pet food, pet care, it seems difficult to be done because we had a very dynamic growth of all the pharmaceutical product of all the base business. In fact, Virbac has been one of the top 2 fastest animal health company in the last 6 years, and we were #1 until last year. We passed #2 after Zoetis this year because Zoetis had a very good growth this year. But we're still among the top 2 growth companies over the last 6 years. And doing that to improve the percentage of vaccines and pet food, pet care is not easy because it means for this category to grow even faster than that. And we're improving the percentage of each one of them. So the goal is to not -- is not to have 1/3, 1/3, 1/3, but is to probably pet food, pet care will reach 1/3 of the pie soon. And vaccines, the idea is to tend towards 25%, 30% on one stage. It's not a strategy of destination. That's not the percentage, which is important. It's more a strategy of direction. We try to go toward more vaccines because this is what we believe is key for animal health long term. And so you can see that we track the KPI and we measure it. The second element on which I think many of you're willing to understand is whether we'll be able to achieve the 20% EBITDA. So in the 20% EBITDA, we're communicating on the guidance of around 15% EBITDA this year. And so to reach 20%, we need 5 points more basically. Here, we've listed where we believe we can find 6 points of additional EBITDA. 2 will come almost from -- certain from R&D. I say almost for certain because this is easy, this is us deciding to spend, how to spend. And I'd like to clarify one thing, it's not a reduction. It's going back to what was a normal level before and in a ratio. So as the company is growing and through acquisition is growing, we've even more R&D budget to spend year after year. So that should be -- I don't know if it's easy, but should be doable. And the intention is to reach back the 6.5% of net revenue post CIR. CIR is a tax credit, more or less accounting for 1 point of R&D. So the 6.5% post tax credit is more or less 7.5% before and 7.5% when you think that you have 1/3 of our business coming from pet food, pet care category in which you spend normally 2% of R&D, it means that on the classical pharma and biology, we'll remain way above the industry standard. So we'll be above the industry average on the R&D spending, even with 6.5% post credit and 7.5% before in 2030. So that should give us 2 points more EBITDA that should be relatively at hand to go and search for it. The 2 other points will come from the margin expansion. So here, we do a significant increase in CapEx with the purpose to improve productivity, profitability, competitivity. I'll give you one example, the pet food production in Nimes should add 5 points of margin to our pet food because we'll internalize all the projection steps, which are above -- at the early stage of the production process, which today we externalized. So 2 more, they'll be internalized, and that should give us a 5-point margin improvement on pet food. And as pet food becomes important, of course, this will be very impacting for us. We'll also improve in capacity. We've today just launched in Canada, in China, in U.S., recently in India. We've many markets where we're not yet present like Brazil. So there is much more growth to expect from pet food and all that makes a lot of sense for us. We're transferring the Suprelorin, who is an alternative to castration from Australia to Carros that will also help us mutualize volumes, absorb our fixed cost and reduce our overall cost, and that will also have a positive impact on the ESG because we'll have less carbon footprint to import back and forth the product from Australia as most of the sales are made in Europe. In vaccines, I mentioned that as well, we'll have -- we had tremendous issue over the last years in vaccines production. We lost many millions of sales last year. We should see a very nice bounce back this year because the new production line is in place. But besides this new production line, we want to increase capacity and productivity on vaccines, and this will also contribute to improve the margin. And last but not least, the warehouse. In fact, we've a lot of expenses because we outsource the logistics and the storage of our product because of our growth over the last few years in third parties. We've not been able to find a space to go with the growth. So now we're building a new warehouse outside at 200 meters from the manufacturing site that will free a lot of space within our own manufacturing site, which will be able to be used to produce, which is what the manufacturing site is made for. So we'll produce in our manufacturing site and externalizing our own logistic platform, the distribution center. That will also reduce our costs and should improve our profitability. And last but not least, we expect that because of the speed of growth and if we remain above 5%, above 4%, 5%, there will be a nice deleverage on our OpEx because historically, we've been growing the sales faster than the OpEx and see if we can keep doing that. And acquisition may help for that, by the way, that should help us bring 2 more points. So we've more or less identified 6 points to go after and that's why we remain confident that we should be able to execute and reach the 20%. And if you look backward, not forward, but backward, you can see that from 2017 to 2023 we have improved from 9 to 15 points and from 17-point before R&D to 23. So you see that there is a slight gap -- wider gap here because of R&D spending, but this gap will be reduced later on. So that will help improve 2 points more. But we have done the job over the last 6 years. And that is despite the divestment of Sentinel, which means that here, you don't see, but we lost more than $70 million of sales when we sold Sentinel. That would have helped furthermore because at that time, we considered that Sentinel was more or less having a 3-point EBITDA on a pro forma basis. So we would have more EBITDA ratio if we would have kept Sentinel as a pro forma but also we have reduced the debt from $400 million at that stage, which you don't see here because the balance sheet changed totally with the divestment. So over the last 6 years, we did the job. We will see how '26 will look like, but we will do our best to keep the trend until '26. This is a classical slide I shared with you, not so much to comment. You see we have a steady pipeline in companion animal, it will probably start to accelerate a bit '28, '29 and '30 because this is where most of the new product will come normally between '27 and 2030. There's a reason why we are accelerating R&D for the last 2 years and will still accelerate next -- this year. It's to come with a product that will expire, many patents and things like that between '27 and 2030. So we should hopefully see additional growth there. Here, a product was expected in '24 and has been pushed to '25. This is a problem with FDA. You always have some delays. So if you are plan to be in Q3 or Q4 '24, and you have 3 month delay, you move to '25, but the product will be normally coming to market in '25. So we have a good experience here. no, that's what I wanted. And so now a quick focus on M&A. So we were very proud because we are working hard for years on M&A. And so far, we never found the right target at the right price to move. And here, we have made 2 moves, Globion in India and Sasaeah in Japan, and we think they are the perfect acquisition for us. So the #1 is India. I think I shared that already, so I'll go quick, but it's very simple. It could not be more strategic. India, most populated country in the world. I think the Indian population, eats something between 2 and 3-kilos of chicken per year. In Europe, I think eats 40-kilos per person per year. I'm not sure of the exact figure. It's more or less a ratio. So the potential of growth is just huge. The country is quite -- there is a lot of protectionism in terms of regulatory standpoint. They don't want to import strains. They have a lot of bio range free regulatory-wise. And that's why you will see in the next slide, the international players do not manage to get in very easily. So the fact to acquire local position and the local manufacturing site is a huge competitive advantage. And we add EUR 20 million of business in poultry that nobody talks and nobody knows but because we didn't have vaccines. So now we have the missing part, the vaccine that should create some synergies and some leverage to perform well. Poultry, low-cost protein, perfectly adapted to Middle East, Africa, India, we have planed to expand in Africa and Middle East. You know that this is the last part of the world where the demography very strong. The dynamics, demographic dynamics in Africa is still quite good. So we expect that this will be a source of growth in the future. So we don't plan to come to Europe and U.S., but we plan to launch this at least in Africa, Middle East, Asia and maybe some country in Latin America at a later stage. In vaccines, in pigs, poultry and aquaculture. 70% of the market is made of vaccines. You have almost no more antibiotics. Pigs and poultry leaves in place where you don't need parasiticide. There is no worms and grass. Parasiticide is okay for cattle or a bit for salmon, but not for pigs and poultry. So it's mostly vaccines. And so this is why we have invested in this category. You see what I just explained, the 4 local players, had 60% market share in India. And despite many, many years of these trying the 7 international player, the big, big top 4 and at other company have not managed to gain more than 41% market share and partly due to regulatory constraints, bio, range free and things like this. So Virbac will be now the only multinational company with a manufacturing site in India and a very, very key position in this market where we expect huge growth in the coming years. And Hyderabad is a beautiful place to be. Plenty of PHD, plenty of ability to create an R&D center or center of excellence. We want to build there an ecosystem for biology and vaccines, a center of research for poultry vaccine as well. 4 out of the 6 Indian manufacturer in human vaccines, 65% of the human vaccines are located there. You have 4 of the manufacturing sites as well. You have many research institutes and colleges. There is an ecosystem there, which is really, really nice for India and to be located. So in terms of integration, we have identified already many opportunities. The company was owning this company was a poultry producer. It was not its core business. The reason why he built this company 15, 20 years ago, it's because he was lacking vaccines for the reason I explained. Lack of being able to introduce strains located in India for governmental reason, regulatory reason. So as his chickens were dying, he wanted to have his proper vaccine. So he built the business like 15, 20 years ago. And because of that, it was not selling to the market. He was selling only to himself. So we have now the full open market for us. We can go to all the competition in terms of chicken producers and not really money. We secured sales for contract that we can now expand to all the other players. So that's a fantastic opportunity. But when he decided to sell, he has, of course, probably for the last 1 or 2 years, given less attention to that. So we have identified many opportunities to increase capacity without additional CapEx. For instance, we had a 35% of turnover of the people who comes 1 day to work in the plant and in the day after they find a better job or a better salary, they move somewhere else. And so now we are securing them through contract. We have employment contract. We pay them a little bit more, but then they are secured with us. And then, of course, they will learn because in vaccines is not like a simple pharmaceutical product or a tablet. It requires some expertise. So if you keep them on board, you can gain a lot in competency and you have less mistakes you have less write-off, you have more productivity. And so we saw a huge opportunity to double the capacity just by doing this, plus our expertise in vaccines. We are increasing the yield. So we see, in fact, the capacity to increase production by 3 or 4 without additional CapEx. And that is nice because if we are able to enter the African market or other market or inclusive in India, we should be able, without additional CapEx, to be able to support a nice level of growth. So I don't have results to share with you because 2 months is too short, and I don't want for you to look at the figures too much, but at least to say the integration is going very well. And after 2 months, we are growing 50% in India and 75% outside of India. The Japanese acquisition never happens, top 4 in the top 10 countries. So very simple, the top 4, you know them. Large Zoetis, Merck, BI, all the top 4 are very well known. So as they are top 4, they are often the 4 in many markets. But in Japan, it's not the case. And Japan is the 9th largest market in animal health in the world. So to be able to acquire top a 4 in the top 10 market was really a rare opportunity we want to seize. On top of it, it was vaccines for 50% is vaccine. So it's really very, very attractive for us, for all the reasons I explained just before. On top of it, it's a captive market because it's a vaccine for cattle with local disease. Same story as India, you cannot import the strains easily. There is a huge barrier of entry, it's a very captive market. And on top of it, these local diseases are only specific to Japan. So nobody will develop a product globally for one market on the other side of the world, especially not the American company, I would say. So we see that as a very low risk very diversified portfolio, a very robust portfolio, a very nice network in the manufacturing side. We saw the opportunity of doubling the size in companion animal. You will see in the next slide that they are leading on the food producing animal sector, but not on the companion. We were only in the companion animal side in Japan. So there are absolutely a total complementarity, total synergies, and we see many opportunities, in particular in pet food. The pet food market is more or less EUR 400 million in Japan. We sell EUR 1 million or EUR 1.5 million. So we are too small. But with the size that we become, with the sales force we will gain, with a critical mass, we'll have the image, we expect to do much better in all these segments. So there are opportunities. We need to go and materialize them, but there are many opportunities on the commercial side. On the manufacturing side -- sorry, and one more is, for instance, on the swine side, they have many vaccines or very high level of interest, but they are missing the 2 biggest vaccines, the 2 biggest segment, PCV and PCV-2 and this is the 2 vaccines we have. So here again, there is a perfect complementarity. We don't have them in Japan. To be clear, we need to register them in Japan, but we have them out of Taiwan. We sold them in many years. And you saw the sales going up 100%. This is PCV2 vaccine mostly. So this vaccine will now be registered in Japan to try to complement and make a global range where we will have all vaccines. And something in poultry because these people have poultry vaccine. We expect to have some synergies at least we will look at how we can complement each other between Globion in India and Japan and see whether we could find some opportunity. It's a bit too early. We are closing only on April 1, so we are not yet the official owner. It will be April 1. So it's very early stage, what I'm sharing with you, but mid/long term, it's clear that there will be many things to be done. And the last but not least, is the long-term potential synergy in manufacturing. We have 4 sites of which 2 sites in biology in vaccines and one is totally new, totally brand new with a lot of technology. So we know that we can decide to close some sites move some technology there. We can save a lot of money and have some synergy at the manufacturing site. This is something pharmaceutical and biology in terms of manufacturing takes time. So you need to transfer, you need to register. It takes time. It's not to more money but there will be synergies. And there will be a very nice footprint that will allow us to leverage our overall network of manufacturing site in a way we have never been able to do before. And the top 4 players have normally done that frequently. They produce a bulk of antigen somewhere, they ship the product and fill and finish a while. We were not so much able to do that. We will be able to do that now. So this company is top 4 in Japan. But you see it's top 4, but it's top 2 in food producing. It's top 1 in food producing vaccines. So this is the most important slide. This is top 1 in food producing animal vaccines, of course, #1 in cattle vaccines with a huge level of market share. But what we are missing is dog and cat basically. And dog and cats is what we have. So together, I think we could do great things, and we will help them complete in this top 2, top 3, adding the company Virbac. So it was making a lot of sense for us to acquire this company. It's the illustration of what it is, so I will not comment it, there are too many details but I just explained the opportunity for us in terms of networking and manufacturing site. We will, of course, optimize all that. We will see how to optimize all our footprint and see what will be the synergies, but there are many things to be done, but this will open a field of opportunity for us. In terms of people, we go close to 500 people. It's a very nice site where many things could be done. In terms of EBITDA, we are at 35%. So we have a quite high level of EBITDA. It's 35% EBITDA. And you see that it's almost 50% vaccines. And they are very detail outside of Japan so maybe there are things to be done as well. All that will take time, all that will be analyzed in time, and we will see. For 2024, the impact would be only on 9 months. So you need to understand that has been a 9-month impact because it would be closed as of April 1. So it's 9 months only. And so we expect 4 to 5 points of revenue growth on top of the guidance we gave because the guidance we gave is at constant rate and scope. So the 4% to 6% is constant rate and scope. So that's on top of it. We don't expect material change to EBIT ratio, ratio to net revenue. We don't expect that this will be materially changed. It's only a small percentage of the total sales, so it should not change the ratio. And we don't have any debt issues. So we expect to keep going on with acquisition and we are looking at a probably smaller acquisition, but we keep looking at many dossiers and many opportunities that could make sense for us. And that could be very accretive in the coming months and years. So the guidance for 2024 has remained the same as we published last time, we didn't change it for the moment. It's 4% to 6%. It's EBITDA ratio around 15% and the net debt is more or less around EUR 30 million. I explained that -- or maybe one thing I did not explain very much, we have identified kind of 3 bumps in the road map to 2030. The first one was on stock because in March '20, I asked to increase the stock very, very much because of the COVID situation, the disruption. So we have increased the stock very much in ratio deteriorating the working capital, but on purpose because losing market share and having back order is much more costly than the cost of capital back in 2020, 2021. We have now, in 2023, slightly decreased the level of stock very little, but slightly decreased, and we will keep decreasing it significantly over the next 2 to 3 years. That's the ambition. So we have started to reduce the bump on the stock. We are in the phase of reducing it over time. And we have many plans to keep doing that. And so we are on the execution phase of reducing stocks. That's one bump. The second bump is R&D. So here, we are a plateau, at the plateau this year because we moved from 6.5% of revenue to 8.5%. So we'll be now at a plateau. We will not increase more from now on. It will be plateau for 1 to 2 years probably. And then it will start to decrease back to the 6.5%. So this is the second bump. And the third bump would be the CapEx I mentioned because as you understood, we are doing some CapEx to be able to gain profitability and productivity and capacity, and that will start to increase because we said last year, we'll do more CapEx than we did. We are expecting to do them this year. So for 2, 3 years or few years, we may have additional CapEx versus a normalized level. But we expect as well that by 2030, we will be back at a level of EUR 70 million CapEx, EUR 70 million CapEx which is a level we consider as a normative or normalized level for Virbac with our size and complexity today. EUR 70 million seems to be the right level. So we will be back at EUR 70 million by 2030, but we will have a few years with additional CapEx. I wanted to cover these 3 bumps. Well, the calendar, you have it in the presentation, and now we can start the Q&A if you wish. Thank you.

So please feel free to ask your question. We'll yes. We know most of you in the room, but please just reintroduce yourself with your name.

Christophe-Raphael Ganet from ODDO. Actually, 2. One would be on what you call the market normalization. Is it possible to have your view on the market, probably by segments first and by geographies. If you can go into details with your views on volumes, price and what will be Virbac's policy for prices for '24. And the second point relates to the 2 nonrecurring impact you had, so cyber attack and difficulties around vaccines for pets. Is it possible to quantify and help us to see what would be the factor of rebound for '24.

Yes, we can try to do that. So on the second point, and Habib will complete probably. But on the second point, I think you have EUR 7 million vaccines reduction this year. So in 2023 we lost EUR 7 million sales of vaccine versus 2022. When normally the group growing 5%, you could expect growth in vaccines, especially because we have backorder for the last 2 years, and we mentioned that we have a huge level of backorder. So said in other word based on a very strong upside on vaccines and because we have started the new line -- the new production line this year, we expect to see a quite nice improvement in vaccine this year. We should be able to do much better than last year. I am almost convinced of that. Of course, in vaccines you always have the risk of an industrial pickup or problem. But assuming it was a bit exceptional last year, we should have a very nice rebound on vaccine this year. So vaccines, the only data I can share is the market is growing. We are not able to supply it. So we have a limitation in terms of supply. As soon as we can supply with no limit, we should be able to grow quite significantly and at least recover more than what we lost last year in 2022. That's for vaccine. You wanted to comment something? For the market, if we go geography, product, it will take 2 days. So it's difficult to say. What I can tell you is the market is 3.6% growth at the end of Q3 on a yearly basis. So you see there is 4% price, it's a negative volume, probably. We don't have data -- precise data at the end of December. We don't have data for Q1, of course, and we don't have crystal ball. But me, I believe that when we say the market will normalize, I expect it to be back to 3%, 4%, maybe 4%, 5%, I don't know. But still with a bit of price. So today, price is -- used to be most of it last year, it will probably be 1/3 now. So I think we'll get back to -- for the market, I'm talking. I see more 2% on average for the price and maybe 1% or 2% on volume but I don't have a crystal ball. But that's what we make in our assumption when we build our budget and things that you saw mostly. And we normally tend to increase price a bit above what the competition does.

Thank you, Sebastien. On the cyber attack, I can mention that was your question as well, Christophe-Raphael. There are 2 dimensions on the cyber attack. First one is remediation costs was not that material, below EUR 2 million, just to give an order of magnitude, and it has been sort of compensated by some provision reversal. So it's not that visible at the end of the day on our overall profit and loss. The second dimension, which is much more impacting and much more important is on the vaccine, as you mentioned Sebastien because at the very same time, we're ready to come back with a vaccine, we've been hit by the cyber attack and were obliged to close the site and we are not in a position to realize that come back. So we've been impacted by that with a much more material impact on the top line.

Yes. And not only vaccine, by the way, for me, the manufacturing site have been stopped for many, many weeks. So we suffered very much even on injectable products, for instance, when you have an issue or a problem of production, normally you don't see it because you will have a safety stock, but here we lost the safety stock. So when we have a problem for even 1 week to 3 months later, you pay the bill of the cyber attack and we have many other small things that has been triggered by the cyber attack. We cannot go in details. But yes, so it has a significant impact, which we cannot quantify precisely, but clearly.

Gentlemen, Arnaud Cadart from CIC. Two questions, please. One on the growth for '24. You are mentioning plus 4%, plus 6% on an organic basis. Do you see basis effects that would be more favorable in H1 than in H2 for sure? And the second question would be on the corporate culture with this Japanese acquisition, Sasaeah. Do you see some risk over there on a company that is Japanese and maybe a bit different from the European culture you have?

On the first on the base effect. Over the last 2 years, there have been so many analysis done like that. And each time we're wrong. So when we thought there was a negative base effect, it would be very tough from comparable, so we did much better and reversed, I guess. So I don't know. What I know is we did a 10% in H2 in the second semester with 10% growth. The dynamic is very strong, very good. And so we'll see what happens in the coming months, but that's the only fact we have. The base effect, it's difficult to -- over the last few years, it has not been proven to be so mechanically correct. If you want to add you add. The second question was about the Japanese culture. I think one of the reasons why we probably passed in front of the top 4 or some of the large companies looking at the Japanese is because of the culture, the ability to share the same kind of values and formalities. We know the ex-President of Fujita, for instance, because we met him like in 2018 and '19 before ORIX acquired the company. So we were in touch, in contact with them. We have a good relationship. We know the company. In Chinese they say that in risk, there are always opportunities. So we like to look at the opportunities. For sure, the execution would be a nightmare. I'm going there for 2 weeks. We'll have a translator next to me 24/7. So now it's a nightmare, but I guess that Virbac likes that. We like when it's complicated and difficult. We like to put more efforts to manage, but that's probably why we did it also. Many would have given up on the deal because it was really complex to go up to the end. So yes, there will be risks, but I see more opportunities than risk, and I'm confident we will execute well when we put the energy for that.

Any other questions in the room? Any questions in the chat.

I have no question in the chat. You may have been very clear.

Laurent Gelebart, BNP Paribas. One question regarding your project on the pet food. So when do you expect to get the building permit, clean building permit for your factory in Nîmes?

So we submitted the ICP dossier on Monday. Then there will be an objection phase, then there will be a public consultation. So all that takes some time. I am not mastering all the delay, but what we have decided -- what we have said is that by the end of this year, we should have visibility as whether it's okay and everything moves forward or whether there could be some delays. But we are quite positive. We have done a tremendous job, an ICP dossier is normally probably 20 page. We have, I think, 800 pages. We have analyzed everything. We were doing expertise with many experts on all the dimensions linked to the quality of the site. We will do it an example in terms of ESG. For instance, we will recapture many of the energy, the gas and the vapor to keep heating the system. So we will save some energy doing that. And at the same time, we will avoid to have any smell or things going outside the manufacturing site. So we did a really huge job over the last 3 months. Here again, during Christmas, New Year and things like this many people have been truly engaged when I mentioned the word on the culture of the company. It's really what happened. And so we are very proud to have submitted a state-of-the-art ICP on Monday, and we expect that this will be good enough to go up to the end, but the final answer will be probably at the end of this year.

Do we have any questions online?

Yes. Someone is typing in the chat, but the question may be long because nobody -- nothing is appearing. So I'm waiting for the group at finalizing the sending, but I see he's typing. Regarding distributor stocks in the U.S. What do you expect for 2024 after the special situation in 2023?

I think maybe the reason is it's behind us. There would be no more destocking in the U.S.

We don't expect any further impact on that.

What are your expectations for China this year? And you said that you will launch a lot of new products, what will be their contribution this year and next year?

The second question is globally?

Yes.

China is difficult because it depends on the market dynamics. It depends on many things. Today, if you're asking me, I think we should have a very nice year in China. But to quantify it precisely, I don't have a crystal ball, but I expect it to do very well in China to do well. We don't know yet when we will get the vaccines approved. We expect it to be approved in the coming months. So I don't know if it's now or whether it will be delayed. Pet food is too early to say how quickly we'll ramp up, but we know Pet food takes a lot of time. So I don't expect to have a very significant impact on Pet food immediately. But little by little, it will make its mark. So if it's not immediately this year, you will see it a bit more next year and even more the year after. But now with a new team, and we have a fantastic marketing person on board and maybe, I hope that the new parasiticide that we launched recently will do well. But it's a very competitive market. So all the ingredients are here for us to perform reasonably well. More product will come, more launch will happen. We have a new area director for the region, which is also -- speak fluently Chinese. So that will help us as well because he speaks French, of course, and is also speaking Chinese, which is not always easy when we go in this country. So all the ingredients are here for us to perform. But if you ask me, I don't know. I can't tell you really what will happen. I don't know how to quantify it at the moment. Of course, we have a budget, but we expect to do more. So about the new products, sorry. We have many new products very interesting. Some I don't want to reveal because they will come in 2025, they will be maybe surprising for many of you, will be very, very interesting. Will be quite unique, it we'll create new markets. That is for 2025. But we see some very interesting products. Cortotic is one of them. Movoflex is another one, which is doing extremely well. For [indiscernible] , we mentioned a few of them. We are also -- in Virbac, the reason why we perform also quite well is we have 2 types of launch. We have the launch, we considered a new launch, it's the first time we launched a new product somewhere, but it takes a bit of time to launch it everywhere. So this product, what we call the program, the geo-extension program. So they may have been launched in Europe, but they are not yet in Japan. they are not in China, they are not in Brazil. So it takes time. So that's what also we have a kind of third booster for growth, it's launch of new product, acquisition, but also geo extension, which is to take the product that exists somewhere and bringing them somewhere else. And so that makes us 3 layers of growth or 3 element of growth. And so that's why, for example, Movoflex we launched in the U.S., it was extremely successful, and we just launched it in Europe. So it's not a launch for Virbac, but it's a launch in Europe, which is our main market. So of this, we have many coming. And '25, you will see many, many significant products. You should see 1 very innovative, 1 in the FPA in the U.S. and 1 which could be a big product.

Yes. One follow-up question, please. On R&D, you were mentioning that there was 1 or 2 years of exceptional R&D investments and then a normalization. It seems to me that the R&D intensity in the vaccine business is a bit more intense than the other businesses and the company should do well in the vaccine business in the coming years. So don't you expect any R&D increase at the group level following this ramp-up in the vaccine business?

No, no. Not in percentage because the very, very closely development program at the moment are more on the parasiticide side. The parasiticide are costing us a huge amount of money. If you look at companion animal, it's not rocket science, companion animal, 50% of the market worldwide is parasiticide. You hear about that every day tick, fleas, heartworm. So that's 50% of companion animal. So if you don't play in parasiticide, you don't play very much in companion animal like if you don't play in vaccines, you don't play in food producing. So that's why we want vaccines for food producing, and we want parasiticide for companion. When the parasiticide will be behind us, the budget of R&D will strongly decrease. And that's why I say we will not lose any opportunity. R&D budgets are driven by opportunities. So all the patents and opportunities are between '27 and 2030, with one '25, let's say. All the rest we will capture most of that. And then there is no many opportunities to grab from 2030 to 2035. So that's why we will decrease. And the percentage of vaccine is small. You saw we are 15% of sales is vaccine. So even if you spend more in ratio of sales, it remains small. And as we plan to do a part of R&D for poultry in India, the cost of R&D will not be high there. It's not high. It's much lower than Europe. And so that will be an advantage as well. So the quick answer is I don't expect R&D to increase because of vaccines.

We do have an additional question online from [indiscernible]. We discussed months ago about any potential partnership or joint venture with a Chinese player to develop the business. Is this still on the table?

The global geopolitical context is slowing us down. The one we had in mind like a few years ago didn't materialize because our Chinese colleague when they have the option to make an IPO, they try to do the IPO. Now most of the time, they don't manage, but that's another story. We have met a partner not long ago, we discussed, but I am against it. I don't think we need a JV. We can partner without making a JV. So the short answer is no, we don't have a plan to make a JV and we're reluctant to do it at the moment. Ten years ago, we were very much criticized to have manufacturing site in France when everybody was at a manufacturing site in China. Now we are kind of the opposite. We are in a country where we have a low carbon footprint because of the nuclear power and electricity power. We have 50% of our global production in-house done in Carros in France. So we are quite proud of that. And with the geopolitical environment we see. It's much better to not be in China, in my opinion. And number two, there is a change in regulation in China that make that they will become CMO. So now you can find easily partners with Chinese that will produce for you. So you don't need to make the CapEx. You don't need to take the risk. You don't need to have a plant there. You can let them produce for you and make partnership, which didn't exist a few years ago. So that's a huge opportunity. And so the only site we do ourselves is pet care. On pet care, we have built a very small, tiny R&D/manufacturing site just to produce pet care to gain more margin and more flexibility and be faster in the market with innovation. But for pet food, we have a partner and for the pharmaceutical and the vaccines, we will see if we do something, we'll probably do it with CMO and partners to avoid the CapEx, avoid the risk and still benefit from the sales and the revenues.

No further question online? Yes.

Turns out, we have not been that clear.

To a complementary question is one on ForEx. Is it possible to have a little update on the different currencies where you're sensitive, and the way you do hedge them and so on. And the second one is a little update as well on U.S. and pet food, where is the ramp-up, the contribution, distribution network, so on.

So I'll take the first one, and I'll let you take the second one, Sebastien. So on the exchange rate, so there is one slide where you see the impact on the P&L. So that's a translation impact that we have. There is not that much that we can do, but we have a sort of a natural coverage for the currency. You can see that very well in the USD impact because we isolate North America. So because we have a good portion of our costs that are in those countries, we have same sort of impact on the top line and on the cost basis, so that the impact on the bottom line is sort of mitigated. Nevertheless, it impacted us and the currency that were much impactful for this year, for instance, are the Indian rupee, Australian dollar as well. It was very much located in the Asia Pacific region, as you've seen on the slide. What we are covering, nevertheless, is the flow of cash in between affiliates. So that's very classical, I would say. So that is covered on a yearly basis with a covering strategy that we manage at a headquarter level here in Carros. And then we do a special coverage as well anytime there is a big operation, such as the acquisition in Japan, for instance. So obviously, between the date of the signing and the closing, we have covered the acquisition price so that we are not exposed to any devaluation.

For the U.S. and pet food, we launched a very nice challenge between the 5 affiliates this year. India, U.S., Japan, China and Canada. Those 5 countries are starting with pet food in one way. In Japan, they have not started that we have now a new challenge to grow to the much higher level. So we will see how they compete between them, but we launched a very nice internal challenge. We are growing double digit, but we are far away from where we want to be. So it will take time. But we have just recruited there as well very new people, good people, skilled people with the background coming from [ Hiltz ] and from good competition. So we need more time. We know it takes a lot of time. And we look at because we compare all the countries. So we see exactly what happened. It's very funny, for 4 or 5 years, you don't see anything and suddenly it goes up like that, and it's really exponential. And it's type of -- the type for it to really convince word of mouth, is the fact that you only get 10% of the 8% of puppies that you get in the clinic because you don't change another dog. When another dog is on pet food. You don't change it so you don't change the puppies. So when you change 10% of the market, you changed 10% of the 8% puppies, so it's 0.8% of the market. So it takes 4 or 5 years, you see nothing. And suddenly, the stuff ramp up. And when the vets decide to take it on board, they don't have the space to take 4, 5 or 6 pet food, they take only 2 pet food. So normally, once it starts, it goes very quickly and you see an exponential growth. So we are far away. We are not where we want to be. We grow double digit. We put all we need to do it successfully. And I think we see some light now with the people, with the product and something that will come. The reason why it's not quick, you need also to understand that, it's on purpose. When we launch pet food in every country, we go by the north face of the [indiscernible] Everest, the north face there, I'll explain that why because the vets want the diets. They want medical pet food, okay? And we give them physiological pet food. With even on the diets, you will have them in 2 years. Now you need to sell physiological pet food because what is sold in supermarkets is not good for the health of the animal. We have a very high hyper-premium product we want you to recommend, but they have to spend time to explain that. And it's not -- they are not nutritionist. They are veterinarians, it's more doctors. So it takes time, and it's not all of them that accept to do that, and they are confident in once we do that, the product goes on the Internet, and they lost it later on. So we are not very much willing to do it. And so it takes a huge amount of time to convince them that we sell only U.S., that we are a vet company, not a pet food company. We have no interest in going in Walmart or Carrefour, whatever to make volumes. We want to sell hyper-premium to them. So we manage but it takes a lot of time. And once we have convinced why they need to buy the pet food from Virbac, then we launch the diets. And normally, these accelerate. And that will happen in '25 in the U.S., I think. So you will see probably a huge acceleration once we will launch the diet because that will be unlocking the door. But we, on purpose, don't want to give it too quickly, too easily. Otherwise, they go for the quick sales and not build on something that makes sense. And the same thing in China. So we ask you the date, no, you not get the date until '25 at best. You need for 1.5 years to sell the physiological range on what it is, which is hypo-protein, hypo-carbohydrates, which have many, many health benefits for the dogs. And we want them to explain that. Once they explain that, you can put additional products for joints, for cardiac disease, for renal disease, for whatever. So we don't go by the easy way, but we think it's the only way to make it sustainable long term to make sure people understand what we try to do.

So we are almost reaching the end of the event. Do we have still any questions online?

No, there are no more questions. It's Almost yes, we are on time. Thank you very much, gentlemen. Thank for your attendance and your loyalty to Virbac. And we wish you a good afternoon, good end of day. Thank you, goodbye.