Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Genus PLC (GENSF, Financial) achieved considerable progress in structurally strengthening the company despite challenging trading conditions.
- The company saw continued growth in its porcine segment, particularly in Europe, and doubled its royalty customer base in China.
- Significant advancements were made in the commercialization of the PRRS Resistant Pig (PRP), with regulatory progress in the US, Canada, Japan, and China.
- The Value Acceleration Programme (VAP) realized GBP7.3 million of benefit in FY24, with an annualized run rate of GBP10 million, and further benefits expected in FY25.
- Genus PLC (GENSF) maintained a solid financial position with a leverage level within the target range and a comfortable interest cover of 8 times.
Negative Points
- The company faced a challenging environment in the bovine segment, with a 6% decline in volumes and significant impacts in China.
- Adjusted operating profit fell 3% in constant currency and 9% in actual currency, with a noticeable decline in the first half of the year.
- PIC China experienced a GBP5.7 million decrease in profits due to a tough operating environment.
- Exceptional expenses were high at GBP24.6 million, including litigation settlements and restructuring costs.
- FX was a significant headwind, with a GBP6 million impact in FY24 and an expected GBP8 million to GBP9 million headwind in FY25.
Q & A Highlights
Q: Can you provide more details on the progress and timeline for the PRRS Resistant Pig (PRP) commercialization?
A: (Jorgen Kokke, CEO) We are advancing through the regulatory process with the US FDA and other key markets. We expect to submit the environmental safety report and other necessary documents by the end of the calendar year. The FDA site inspections are anticipated in the first half of 2025, with approval expected within the same year. We have also made submissions in Canada and Japan, and our gene-edited animals will soon arrive in China for local testing.
Q: How did the Value Acceleration Programme (VAP) impact ABS' performance, and what are the expectations for Phase 2?
A: (Alison Henriksen, CFO) Phase 1 of VAP realized GBP7.3 million of benefit in FY24 with an annualized run rate of GBP10 million. Phase 2 is underway, and we expect an additional GBP10 million of annualized operating profit benefit. This program aims to improve ABS' margins, returns, and cash generation by embedding commercial and operational excellence.
Q: What are the key drivers behind the financial performance in FY24, particularly in the second half?
A: (Alison Henriksen, CFO) The second half was stronger due to management actions delivering benefits, particularly from the VAP. Adjusted operating profit grew 15% in constant currency in the second half, compared to a 17% decrease in the first half. PIC's performance improved, especially outside China, and ABS saw better results due to VAP benefits.
Q: How is Genus addressing the challenges in the Chinese market, especially for PIC?
A: (Jorgen Kokke, CEO) We are focusing on growing our royalty customer base in China, which doubled in FY24. This strategy aims to improve the predictability of future earnings and decrease volatility. Despite the challenging market, we remain cautiously optimistic as Chinese pork producers have returned to profitability in recent months.
Q: Can you elaborate on the sustainability initiatives and their impact on Genus' operations?
A: (Jorgen Kokke, CEO) We conducted life cycle assessments (LCAs) for PIC in North America and Europe, showing a 7.5% and 7.7% reduction in greenhouse gas emissions, respectively. These LCAs are ISO-conformant and support our customers in achieving their sustainability goals, which align with their economic objectives.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
