Anpario plc
(“Anpario”, “Group” or the “Company”)
Final results
Anpario plc (AIM:ANP), the independent manufacturer of natural sustainable feed additives for animal health, nutrition and biosecurity is pleased to announce its full year results for the twelve months to 31 December 2022.
Financial highlights
– 1% decrease in revenue to £33.1m (2021: £33.4m).
– 25% decrease in adjusted EBITDA1 to £5.2m (2021: £7.0m).
– 35% decrease in profit before tax to £3.7m (2021: £5.7m).
– Basic earnings per share down 30% to 16.13p (2021: 22.92p).
– Diluted adjusted earnings1 per share down 28% to 16.67p (2021: 23.01p).
– Increase of 5% in proposed final dividend of 7.35p (2021: 7.0p) per share, total dividend for the year 10.5p (2021: 10.0p).
– Cash and bank deposit balances2 of £13.6m at the year-end (2021: £15.5m).
Operational highlights
– Sales growth across Asia, Middle East & Africa (MEA) and the Americas, offset by a decrease in Europe.
– Implementation of sales price increases helped partial recovery in gross margins through H2.
– Mastercube™ pellet binder grew by 39%, driven by demand for natural products in aquaculture.
– pHorce® and Orego-Stim® combination presented at the International Poultry Scientific Forum in Georgia, USA for the prevention and control of necrotic enteritis.
ESG highlights
– Awarded ISO 14001 certification for Environmental Management Systems.
– 39% reduction in Carbon Intensity3, a cumulative reduction since 2019 of 62%.
“The Board reports the Group’s operating performance in what has been a difficult year impacted by supply chain disruption and significant and immediate raw material and logistics price inflation. This challenging backdrop has also adversely affected many producers who have experienced input cost pressures, notably feed and energy, hurting their profitability and in some cases viability. Some farmers, particularly across the UK and Europe, decided to forgo unprofitable production which is now leading to specific food shortages in the retail channels. With less animals being reared the demand for animal feed and therefore additives is inevitably lower and partly explains the Group’s disappointing performance across Europe.
I am proud of the contribution and support from all our stakeholders, especially our staff around the world, who have maintained high customer service levels and at the same time been able to implement sensitive sales price increases to partially mitigate what has been unprecedented raw material price inflation. Our margins improved in the second half of the year as a result of our actions. We also experienced lower volumes in China because of covid lockdowns, which was a very testing time for our local staff. So, it is pleasing to see the relaxation of this policy and hopefully a resumption to more normal economic activity.
Trading in the first couple of months of 2023 has been weak and market conditions are expected to continue to be challenging through the first half of the year. Avian influenza which for the first time is evident around the world at the same time will present its challenges to the industry. However, Anpario is well diversified geographically and with a broad range of products also targeting new markets in aquaculture and ruminants we therefore expect the Group’s performance to improve as the year progresses supported by our strong balance sheet and business development initiatives. Looking beyond the current trading environment, the Group continues to see significant growth opportunities for natural and sustainable feed additives.”
Kate Allum, Chairman
1 Adjusted EBITDA is defined in note 6.
2 Cash and bank deposit balances include amounts shown as short-term investments in the statement of financial position, these are deposit accounts with notice periods of more than three but less than six months which can be accessed instantly at the penalty of lost interest, see note 20.
3 Carbon intensity represents tCO2e per £m sales for Scope 1 and 2 emissions, more information available in the Environment and Social Responsibility Report.
Chairman’s statement
Overview
Anpario reports its revenue and profit performance for the period during what has been a very difficult year for the Group. Sales decreased by 1% to £33.1m and the decline in our gross margins due to significant and immediate raw material price inflation led to a decrease of 25% in Adjusted EBITDA to £5.2m. Profit before tax declined 35% to £3.7m (2021: £5.7m). The period has been characterised by a series of global events, not least the invasion of Ukraine by Russia, which has affected energy, agricultural commodities and certain raw materials manufactured in the region. Global supply chains and logistics continued to be disrupted following the pandemic and China’s zero-covid policy for most of the period.
I am proud of the way the Group planned and reacted to these challenges and, in particular, being able to implement sensitive sales price increases to rebuild gross margins, which improved in the second half of the period. We have continued to invest in our sales channels, storage capacity and energy saving initiatives such as the solar panels at our head office and manufacturing site, as well as increase inventory to ensure customer service levels were maintained during this disruption. Our strong balance sheet and control on costs enabled us to make these investments and to return cash to shareholders by way of a 5% increase in the total dividend subject to shareholder approval at the Annual General Meeting (AGM).
Despite the difficult backdrop, there were positive sales performances in Asia Pacific, Latin America, United States (US), the Middle East & Africa (MEA) and North-West Europe. Key products which performed well in these regions included Mastercube™, pHorce® and our mycotoxin binder range Anpro®. Sales in the UK declined by 36% primarily due to a large customer reducing their use of our feed hygiene product following significant increases in the price of organic acids. The other territories in Europe experiencing declines included Belarus and Russia, following our decision to suspend trading in these territories, with sales were down by over £0.2m, and Spain and Italy where high input costs are making business very difficult for producers.
We set up a wholly owned subsidiary in Vietnam in the prior period and I am pleased the team delivered a strong sales performance which affirms our strategy to supply direct to end customers by employing local sales personnel in key markets. We have developed valuable skills in setting up subsidiaries around the world which can take longer to implement but prove to be more durable. During the period we also recruited additional sales resource in Brazil, Europe, Mexico, the Middle East and the US.
China had a difficult period where sales declined by 6% due to disruption caused by intermittent covid lockdown periods followed by the rapid spread of covid after the relaxation of these restrictions at the end of the year. The opening up of China will bolster its economy and with it, meat protein consumption, in addition to supporting the wider Asia Pacific economy.
Given the challenges of our global supply chain we increased our stockholding of both raw materials and finished goods in our subsidiaries by approximately £2 million during the period, but as supply chains improve our inventory levels are expected to return to more normal levels.
Our research and development activities continue with several scientific trials and new product development initiatives. The scientific paper presented at the 2023 International Poultry Forum in Georgia, USA showed that using a cost-effective combination of our leading products, pHorce® and Orego-Stim®, can prevent and control necrotic enteritis in poultry whilst at the same time maintaining bird performance. In addition, our recently launched 100% natural omega 3 supplement, branded Optomega® Algae, is now being used in poultry feed to enrich both eggs and meat to support improved human health.
Dividend
The Board is recommending a final dividend of 7.35 pence per share (2021: 7.0 pence) making a total of 10.5 pence per share for the year (2021: 10.0 pence), an increase of 5%. This dividend, payable on 28 July to shareholders on the register on 14 July, reflects the Board’s continued confidence in the Group and its ability to generate cash.
AGM
The Board plans to hold the AGM on Thursday 29 June 2023, at 11.00am. We recognise that the AGM is a good opportunity for shareholders to meet and ask questions of the Board. We will let shareholders know nearer the time the arrangements for the AGM.
Environmental, Social and Governance (ESG)
Anpario’s philosophy is to provide innovative solutions for animal health challenges by working in synergy with the animal’s natural biological processes to support natural immunity through improved gut health. This is complemented by our culture and ethics which we have encapsulated in our 3 Pillars framework: People, Planet and Promise to communicate our sustainable behaviours and objectives including achievement of net zero carbon emissions by 2030. We have attained ISO 14001 accredition for our robust Environmental Management System and are committed to strong governance and stakeholder accountability which is central to our values More information can be found in the Environment and Social Responsibility Report and the Corporate Governance section of this Report.
People
This period has been one of the toughest to navigate for our staff across the globe. There has been no respite since the pandemic to challenge our staff who have stepped up ensuring our customers have been supported with products and services with minimal disruption. I thank them for their unstinting support and commitment to Anpario. The team has also embraced our environmental, social and governance strategy, some of whom are members of our internal ‘Green Team’. Our operations department is also continually looking at efficiency initiatives to reduce energy usage and wastage, including being able to provide carbon footprint data for our packaging.
Outlook
The year has started weaker than anticipated, at similar levels to the final quarter of 2022, which reflects the current challenges facing the global agricultural industry. The high input costs, notably feed and energy, affecting farmers in many parts of the world has impacted their profitability leading both to a reduction in animals being reared and a focus on reducing animal production costs. In addition, the strength of the US dollar and a tightening in liquidity has led some developing countries to implement currency controls restricting the level of trade we can prudently do with our customers in these regions. Avian influenza which for the first time is evident all around the world will inevitably affect feed volumes for a period.
We expect the Group’s performance to improve as the year progresses as some of the challenges dissipate and inflationary pressures alleviate. We have several business development initiatives including growing our sales in both the aquaculture and ruminant markets and as recently recruited sales personnel start to deliver new business. In addition, the investment in production automation in recent years enables the Group to keep tight cost control when volumes are subdued.
Anpario’s products improve animal feed conversion rates through both natural gut health improvement making the animal more efficient in nutrient utilisation and by improving feed quality. We will continue to run our ‘Produce More for Less’ campaign to remind customers of the efficiency benefits delivered by our products which are even greater when their input costs are high.
Our geographic diversity and strong balance sheet afford us to invest in developing the Group even during challenging periods. We therefore remain confident in the future profitable development of the Group with the industry growth drivers still intact and look forward to supplementing our organic growth initiatives with suitable acquisition opportunities which may arise.
Kate Allum
Chairman
22 March 2023