ECO Animal Health Group PLC on Wednesday reported a dramatic fall in annual profit and a double-digit drop in revenue due to weaker sales in China, as it eyed the future with ‘cautious optimism’.
Shares were down 8.6% at 85.50 pence each on Wednesday morning in London.
For the year that ended on March 31, the Surrey-based pet and livestock pharmaceuticals company said sales fell 22% to £82.2 million from £105.6 million the year before. Pretax profit plunged to £1.4 million from £19.3 million.
Sales in China and Japan declined dramatically by 52% to £28.4 million from £58.9 million the year before, due to a ‘very rapid and steep down cycle in the overall pig market’, the company explained.
Gross margins dropped to 43% from to 50%. This decline stemmed from the ‘combined effects of less volume through our key China market as well as less revenue from a high margin market’, ECO noted. China and Japan represented 35% of the group’s revenue, compared to 56% the year before.
It added: ‘As anticipated, the first three months of the new financial year has seen Chinese revenue at a subdued level when compared with the record sales of the equivalent prior year period. This quarter coincided with a policy of extended urban lock-down within China in an attempt to control the spread of Covid-19.’
However, ECO said the Chinese pork to feed price ratio has increased to greater than 5, which indicates improved profitability within the ECO customer base and an improved trading environment.
Chief Executive Officer David Hallas said: ‘Whilst the well documented China revenue performance has disappointed due to the extensively depressed pork prices, the underlying growth and continuing gains in other markets is impressive. We expect that China will remain subdued for another quarter or two but the recent improvement in pork to feed price ratio provides the foundation for a stronger end to the financial year.’
Net cash stood at £14.3 million at period-end compared to £19.5 million the year before.
Looking ahead, ECO said it looks forward to the rest of this financial year with ‘cautious optimism and confidence’.
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