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Public company info - China Animal Healthcare Ltd. , 00940.HK
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China Animal Healthcare Ltd., 00940.HK - Company Profile
Chairman Wang Yongwei
Share Issued (share) 1,966,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Medicine
Corporate Profile Business Summary: The Group is principally engaged in the manufacture, sale and distribution of animal drugs for poultry and livestock in PRC. Performance for the year: The Group has recorded revenue of RMB517.1 million in the second half of FY2013, bringing an aggregate revenue of RMB914.6 million for FY2013. As a result of the foregoing, net profit for the yearattributable to owners of the Company increased by RMB80.4million or 75.9% from RMB105.9 million in FY2012 to RMB186.3 million in FY2013. Net profit attributable to non controlling interests amounted to RMB25.2 million in FY2013. Business Review: Powdered form drug sales amounted to RMB292.9millionin 2HY2013, representing an increase of RMB18.7 million or 6.8% over 2HY2012,while injection form drugs contributed RMB17.6million in revenue over the same period, a decrease of 6.6% over 2HY2012. Total turnover for powdered form drugsand injection form drugsamounted to RMB504.0 millionand RMB33.9 million respectively.The lacklustre performance of formulateddrugs segment can be attributed to China’s poultry industry beingseverely hit by reports on H7N9 human infectionsduring 1Q2013.This hasentailedin the closure of many poultry markets in eastern China by the authorities to curb the spread of the H7N9 virus. Consumers have stayed away from poultry products due to fears of being infected by the deadly virus, resulting in lowerpoultry prices which in turn led to breeders reducing their breeding stocks to cut losses. 1HY2013results has been adversely impacted, which corresponds with the peak of the H7N9 outbreakduring the first quarter of FY2013. Sales for powdered drugssubsequentlypicked up in 2HY2013, achievingsales of RMB292.9 million, a 38.7% increase from the preceding periodof RMB211.2 million in 1HY2013. Biological drugs contributed RMB206.7million and RMB 376.7 million in 2HY2013 and FY2013to turnoverrespectively.Sales of mandatoryvaccines to provincial veterinary stations accounted for RMB187.3 million in 2HY2013, bringing the aggregate mandatory vaccine sales in FY2013 to RMB338.5 million (FY2012: RMB 290.3million). In comparison withFY2012, this segment has achieved a 16.6% growth in the current year. Surgein the biological drugs segment is mainly contributed bythestrongperformances ofanimal foot and mouth disease (“FMD”) vaccinessales and common vaccinessales. FMD vaccines saleshas posted stronger sales ofRMB95.4 million in 2HY2013, representing an increase of RMB25.2 million or 35.8% from 1HY2013, bringing total sales to RMB165.6 millionin FY2013. In comparison with prior year, sales of FMD vaccines has increased by RMB53.0million or 47.0% from RMB112.7 million in FY2012.Common vaccinesrecorded sales of RMB38.2 million in FY2013, an increase of RMB4.8 million or 14.4% as compared to sales of RMB33.4 million in FY2012.Swine fever vaccines accounted for RMB17.2 millionin revenue in second half of 2013, RMB2.4 million higherthan the RMB14.9million sales recordedin 1HY2013. Total revenue of RMB32.1 million for swine fever vaccines in FY2013 has remained relatively constant in comparison to prior year sales of RMB31.9 million.A slight dip in sales of PRRS vaccinesby 3.4% was observedin FY2013due mainly to lower average price per dosage sold. PRRS vaccine sales amounted to RMB74.6million in 2HY2013, bringing thetotal PRRS vaccines sales in FY2013 to RMB140.9million, compared to PRRS sales of RMB145.8million in HY2012. Cost of sales of the Group constituted approximately 35.1% and 35.9% of its revenue in FY2013 and FY2012respectively. Cost of sales increased by RMB11.1 million or 3.6% from RMB309.8 million in FY2012 to RMB320.9 million in FY2013. Overall gross profit margin remained relatively constant at 64.9% in FY2013 (FY2012: 64.1%). Excluding the effects of amortisation, gross profit margins remained relatively stable across all business segments in the current year. Gross profit margins for powdered form drugs and injection form drugs in FY2013 were 76.4% and 66.7% respectively, compared to 76.5% and 62.0% respectively in FY2012. The gross profit margin for injection form drugs is lower as the costs of raw materials and packaging materials required in the manufacture of the injection form drugs are comparatively higher compared to those for powdered form drugs. The increase in gross profit margin of injection form drugs are mainly due to a variation of product mix sold in the current year. Gross profit margin for biological drug sales has increased by 2.1percentage points to 69.4% in FY2013 compared to the 67.3% gross profit margin achieved in FY2012. The improvement is mainly attributed to a higher gross profit margin achieved for the mandatory vaccines. Gross profit margins of animal FMD vaccine, swine fever vaccines and PRRS vaccines are 65.6%, 66.8% and 75.3% respectively in FY2013 (FY2012: 61.0%, 66.8% and 72.4% respectively). Other expenses and losses of RMB37.8 million comprisesmainly research and development expenses of RMB9.8million, net foreign exchange losses of RMB7.1 million and delisting expenses of RMB20.8 million, of which RMB11.7million pertained to arrangement fee for the bridging financing facility.In connection with the Company’s proposed voluntary delisting from SGX, the Group has entered into a SGD60.0 million facility agreement with Macquarie Capital (Singapore) Pte Limited (“Macquarie”). The total arrangement fee for the standby facility amounted to SGD2.4 million of which SGD1.96 million was borne and paid by The Group’s two shareholders, Lilly Nederland Holding B.V. (Lilly”) and Themes Dragon International Limited (“Themes”). The portion borne by the shareholders is deemed as contribution to equity. The foreign exchange loss is mainly due an increase of Singapore Dollar deposits from the issuance of shares and warrants and the appreciation of Renminbi against Singapore Dollar during the year. Distribution and selling expenses remained relatively constant at RMB212.8 million (FY2012: RMB203.2million) and these mainly relates to payroll expenses, travelling and transport expenses and marketing and promotion expenses. Administrative expenses remained relatively constant at RMB55.7million(FY2012: RMB53.6 million)and these mainly pertained to payroll expenses, depreciation expenses and other office expenses Finance costs amounted to RMB7.6 million in FY2013, a decrease of RMB25.7million from prior year. It comprises interest on Redemption Amount of the convertible bond of RMB2.6 million and loan interest expense of RMB5.0million.The decrease is mainly due to the redemption of convertible bond in prior year, and as such no interest expense on convertible bonds at amortised costs were recognised in current year.Loan interest expense relates mainly to working capital loans from HSBC Bank (China) Company Limited amounting to RMB87.3million as at 31December2013. The increase in interest income of RMB0.1million was due mainly to the increase of average deposits with the banks of various subsidiaries. Tax expense increased by RMB21.1million to RMB73.2 million in FY2013. Excluding expenses incurred for the delisting exercise and foreign exchange loss, the Group’s effective tax rate is 23.4%. The Group’s PRC subsidiaries are subject to tax at rates of 25%, except for certain subsidiaries which were awarded the high-tech enterprise status during the period and are therefore entitled to the preferential enterprise tax rate of 15% for 2 years commencing from FY2012. In addition, the Group has also provided for withholding tax of 10% on the portion of distributable profits derived by the PRC subsidiaries in FY2013 that is expected to be distributed out as dividend. Prospects: (i) Operations Agreements with Eli Lilly The Company has on 8 May 2013 entered into various operations agreements with Eli Lilly Export: (a) a distribution agreement pursuant to which Eli Lilly Export will grant to the Company a non-exclusive right to distribute certain of its products in the PRC; (b) a promotion agreement pursuant to which Eli Lilly Export will introduce and promote two of the Company’s vaccine products (and other products the parties may jointly identify in future) to certain large producers in the PRC; and (c) a license agreement pursuant to which the Company will grant licenses to Eli Lilly in relation to developing, researching and selling (under Eli Lilly’s brand) certain products utilising certain of the Company’s patent rights and know-how globally except for the PRC. The arrangements for the above agreements and other associated work streams are ongoing as at the date of this announcement. (ii) Patents and Production Rights for Animal FMD Trivalent Vaccine As announced during FY2013, the Group has obtained the production rights for Animal FMD Trivalent Vaccine, patent for Invention for M2 Protein Preparation of influenza A virus, Full Suspension MDCK Serum-Free Cell Line patent and Vaccines Produced from Hepatitis A Virus Strain HAV-ZL 2012 patent. The receipt of the abovementioned will provide the Group with the opportunity to expand its range of vaccine products and increase its market competitiveness.

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