Welcome to the 2020 half year financial result webcast for Virbac. Hosting the call today, Manuela Rodriguez, Head of Investor Relations for Virbac, and Sandrine Brunel, Head of Corporate Communications. The presentation materials and additional financial tables are currently available on our website at the investor section. A replay will be available after the call, the forum for your questions will be open 15 minutes before the end of the presentation. You will be able to raise your question on the chat box, which will be below the presentation. We ask you, for the interest of time, to ask one question and queue up for other questions. It is now my pleasure to turn the floor over to Sébastien Huron, Chairman of the Executive Board of the Virbac Group, and Habib Ramdani, Chief Financial Officer and member of the executive board. Habib, you may begin.
Thank you, Manuela. Good morning, good afternoon to all of you. I suggest we start, as usual, with a quick executive summary of the main elements of our publication for the first semester financials. Then we will go into more details. First of all, we have generated a very solid organic growth of 5% at the end of the first semester at constant rates. With no surprise, after a very high Q1, we had a weaker second quarter in the context of the COVID. Nevertheless, we have been able to grow at 5% with a growth, as we will see later on, that has been driven by our five geographic areas. In the U.S., we have a sales increase of 3% at constant rate, with a higher Sentinel sales growing at 11% in the context of the price increase and the good performance of the product during that semester.
Whereas the other ranges are decreasing by close to 3%. They have been more affected by the COVID in the geographies. We had a strong increase of our EBIT adjusted during this semester, unusual plus EUR 22 million versus last year, which is a 30% growth year-to-year at constant exchange rate. It's explained by several factors. The first one is a strong gross margin contribution of all of our regions and a positive mix effect, product and country mix effect during this semester, driven, for example, by Sentinel, which is having a high gross margin. We also had a positive short-term impact of expense reduction in the context of the COVID. We had, on several nature of expenses, strong reductions with a travel ban, with postponement of activities.
Some of it has been made voluntarily to be on the cautious side at the beginning of the crisis, and some other we've been affected. This is the case, for instance, on R&D expenses, where we had to postpone or to stop some of our medical studies during the period. We also had a positive one-off favorable accrual reversal on R&D tax credit for EUR 1.7 million, which has a positive impact on this semester. Finally, on the forex impact, it's been a negative impact this year, unfavorable on sales by EUR 8 million, unfavorable as well on EBITDA by EUR 4 million. We expect, given the evolution of the exchange rate, to have an even more unfavorable effect on the remaining of the year on the second semester. We expect overall EUR 25 million-EUR 30 million negative impact for the full year.
Very briefly on the currency, we had some currency that appreciated versus the euro, such as the yen or the USD during the period. The majority of the other currency, especially from our top five countries, have depreciated versus the euro, which explain why we had such a negative impact on the first semester. If we continue to go down the profit and loss statement on the net profit, similarly, we had a strong increase of our net profit, moving from EUR 28 million last year to close to EUR 50 million this semester, obviously driven by the impact, the operational improvement, and the reduction of expenses that I mentioned.
We also had a positive impact of the decrease of the net cost of financing linked to the evolution of some rates, such as the LIBOR, but at the same time, linked to the decrease of our debt. It's more because of the tax impact on the EBITDA, EUR 4.8 million. We made the decision to stop the production and the commercialization of this product. The sales have decreased significantly, as you know, over the recent years, and we had some production difficulties, and it was no longer worth pushing on that product, so we stop entirely. We recorded a depreciation of some of the value that we still had on our balance sheet, including equipment as well as one patent. If we look at now the net debt evolution on this semester, as you know, we have usually a seasonality effect.
We are either stable or we increase our net debt during the first part of the year, and we decrease it usually during the second part of the year. This year, as you can see, we had a decrease, a slight decrease of EUR 20 million versus end of December, which is slightly less at constant rate. It will be closer to EUR 15 million at constant scope. It's explained by several elements. Obviously, the level of net cash flow that we've been able to generate, but at the same time, we had some positive impact linked to the COVID. We were able to benefit from postponements of some payments granted by governments such as social contribution in France, for instance, or some value-added taxes that have been postponed in terms of payment to later on during the year.
This amount for approximately around EUR 10 million, which had a positive impact on the net debt evolution. When we put all that together, we continue to deleverage the company. Our net debt on EBITDA ratio is now at 1.9, so well below our bank covenant commitment of 4.25. Obviously we will move, we'll come back to that, to a negative net debt after the collection of the proceeds from the sale of Sentinel. I suggest we move now to some comments on the sales. As I said, we have posted a 5% increase at constant rate on our sales, which is a 3% in real rates, given, again, the negative impact of the exchange rate.
If we look at where this growth is coming from, comparing again the first semester 2019 and the first semester 2020, we see that out of the EUR 28 million-EUR 23 million additional sales that we have generated, EUR 10 million is coming from Europe, which is having a very solid performance of 5.5%. We have some countries that are suffering, that have suffered during this first semester, even a strong reduction of sales, and those are the countries that have been the most hit by the COVID, including U.K., we are doing around -10%, or Italy, -10% as well. It has been more than compensated by extremely solid performance in other geographies such as Northern Europe, Eastern Europe as well. They have been less impacted by the COVID.
Germany and France as well, especially on certain type of products, including pet food, which has performed very well during this semester in France and elsewhere. I've already commented on the U.S. The remaining growth is coming from rest of the world. I suggest we move to the next slide, where we see the details of rest of the world, which is essentially the southern hemisphere for us. We are growing everywhere. Latin America with a very solid 9% growth, which is a continuation of the very good performance from our teams, from 2019 and going on in 2020, driven by solid performance in Brazil and in Chile as well, as we will see later on. Africa, Middle East, and Pacific have posted a growth around 5%-7%.
Those are geographies that have been less impacted by the COVID, where the lockdown was less severe as for other countries. Finally, the region where it has been more difficult. We are used to having growth in this region, which is the Asian region. As you can see, we are growing very slightly or sort of stable comparing 2020 with 2019 at EUR 75.4 million. But it also, we had some contrasted performance, if we go into more details in the countries. One country has suffered a lot, which is India. For us, it's top of our top five countries. The COVID situation has been quite difficult, with a significant impact on the country's economical situation. We had a decrease of our sales of around 5% in India.
At the same time, in other geographies, countries such as China, we had a good performance with a nice rebound after a difficult first months of the year. We've been able to grow, and Sébastien will comment on that later on. The dynamic in some of our countries, Asia, is still very positive. We've been more severely hit in India. If we look at now the performance by segment, we see first on companion animals, we had three segments that are growing either close to double-digit or double digits. This is a parasiticide segment with, again, a good performance on products such as Sentinel in the U.S. or Milpro elsewhere in the world. Specialties as well, with Suprelorin growing 13% during the period. Pet food activity continuing to have extremely strong growth at close to 27% during the period.
We are reaching EUR 30 million for this semester only. Two other segment have suffered a little bit more from the COVID situation, which is the other segment in antibiotic dermatology, but still growing at 2%-3%. Finally, the only hotspot is our biologicals segment, which is decreasing around EUR 6 million less, which is a combination of the impact of the COVID and also the difficulties that we had in our worldwide production vaccine for dog and cat production facility in Carros in France, which suffer from a rupture of some pipes, and we had to stop, as you know, the site for several weeks. If we move to the food producing segment, it's a little bit more contrasted here.
We had segments that have continued to grow, such as antibiotics and anti-parasiticides, especially for the bovine species, which is a long cycle food producing animal in terms of production. The vaccines as well have done very well, growing around 14%, both in Europe as well as in Southern America. The aquaculture had a solid performance, a 4% growth during the period. More difficult, especially driven by the situation in India, our nutritional and other segments have either been stable or slightly decreased versus last year. I'll move quickly on the sales breakdown by region and business. Nothing has substantially changed. We continue to have 60% of our activity on companion animals, 40% on food producing animals, and a good portion of our sales, around one-third, coming from emerging countries. A quick update on the Sentinel divestment and the accounting impact.
As you know, we have closed the deal as of 1st of July 2020, which means that the financial impact on our financial accounts will appear during the second part of the year. At the end of June, the only impact is in accordance with the IFRS 5, we have reclassified as asset held for sale. The asset that have been sold which represents a total of EUR 289.5 million, sorry. This obviously has an impact on our balance sheet as we will see. The final consideration for the sale is at EUR 410 million, as such, we expect a capital gain that will be booked in H2 2020, at around EUR 84 million. This consideration for the sale, this positive cash impact for us, obviously enabled us to reimburse or to stop the drawing on some of our credit line, especially the revolving credit facility.
We are, as of early July, we are in a negative net debt position or positive cash position for the group, linked to this sale. If we look at now the full profit and loss statement, I've already commented on the sales. We can see that the gross margin on material cost is evolving favorably for us with a ratio that is improving versus last year. A comment on the net expenses that are reducing, which is unusual, as I mentioned, and we don't expect that as a lasting effect. It will reverse gradually second part of the year and obviously next year. This semester, we are moving from EUR 224 million of expenses to EUR 218 million on expenses.
We had an exchange rate impact there as well. I've already commented on the improvement of the operating profit and the link to the scissor effect, a good dynamic on the sales and the reduction of costs, again, unusual. We've been able to post close to 18% EBITDA ratio to sales. We had non-current expenses of EUR 5.4 million, which is essentially the impairment of Canigen that has been recorded and posted in that line. The net financial expenses are stable from one period to the other, but we have two effects. A positive effect on the net cost of financing that is decreasing by EUR 3 million, and a negative effect of the same magnitude linked to the CLP evolution. This is a negative exchange rate effect of around EUR 3 million as well. Finally, a quick comment on the income tax expense.
If we do the division, you'll see that the apparent tax rate is evolving, moving from around 31% to around 24%. It's a significant decrease, and there are several elements which explain that. The main one being first the U.S. As you know, we have deferred tax assets in the U.S. that have not been recognized in our balance sheet but are still there, and we'll be able to use them to offset part or a good portion of the capital gain from the Sentinel sales. Also last year, we had a negative contribution, profit contribution from the U.S. with no tax impact. This year, it's the other way around. We had a positive profit contribution from the U.S., and no tax impact because of the deferred tax losses that we had. So this had a positive impact on our apparent income tax ratio.
Second element, which explain a good part of the evolution, is the change in tax regulation in India. India is contributing significantly to the profit of the group, is part of the top five countries. It used to have around 35% income tax ratio. It has moved, following the tax reform of last year, to 25%. Obviously, this has a positive impact, which explain why our effective tax rate has decreased during the period. The effective tax rate is around 28% for this semester, and we expect it to remain at this order of magnitude for the coming semesters. Finally, a very positive evolution of our net result when we put all that together. Again, moving from around EUR 30 million to around EUR 50 million at the end of June 2020.
The improvement of our EBIT adjusted, as you can see on this graph, is coming generated by all region and many functions. Europe, U.S., and the rest of the world are contributing favorably to the evolution. At the same time, we see the impact on the cost reduction, both at R&D and corporate level. From an R&D standpoint, we are affected by that. We would have preferred, obviously, to invest, but due to the COVID situation, we had some negative impact and we had to either stop or postpone some of our clinical studies, and we will come back to that later on. Very briefly, a good illustration of the different effect that I mentioned. If we do a zoom on the U.S. contribution, it has still grown between 2019 and 2020, moving from around EUR 17 million-EUR 21 million.
A good part of it is linked to the margin improvement, linked to the good performance of our sales, also the price increase on Sentinel that had a favorable effect, and a good absorption of our fixed cost in St. Louis. We see also the significant OpEx decrease for the U.S. in the context of the COVID linked to travel, meetings that have been postponed, advertising and promotional expenses that have been reduced as well during the period. If we look at now the evolution of the cash flow between the two period, we see a good growth, more than 20%. The operating cash flow is moving from EUR 82 and reaching more than EUR 100 million at the end of this semester. Parallel to that, the net cash flow is also moving from, growing 23%, moving from EUR 61 million -EUR 75 million.
If we look at now the evolution of the free cash flow, we see a comparing 2019 and 2020, we see a very similar pattern, except that the net cash flow is obviously higher compared to last year. We end the semester with a positive net free cash flow where it was close to zero last year. A comment on the CapEx. We are expecting to have a higher level of CapEx investment for 2020. Unfortunately, in the context of the, again, of the COVID, we had to stop or to postpone similarly, some of our initiatives project during the period. We have spent a limited EUR 12.5 billion amount during the period. The working capital requirements is consuming around EUR 40 million for the period. This is very usual. I must say, every first semester, we have the same evolution. It was very similar last year as well.
It's due to the seasonality that I mentioned earlier, and also the evolution of our inventory position in line with our sales that is growing. Two additional comments. We had this year positive impact linked to the postponement of some payments, social and tax contribution, in the context of the COVID, which had a positive EUR 10 million impact. On the negative side, we had a reduction of our factoring program during the period, which moved from around slightly more than EUR 42 million at the end of December, that has been factored, to around EUR 35 million at the end of June. Obviously, this reduction has an impact on our working capital requirements. If we do now the reconciliation of all of that with our balance sheet position, in terms of net debt at the end of June.
You see the first part of the graph, which is similar to what we've just seen. All of that enable us again, to decrease by around EUR 20 million, our net debt position during the period. As of 30th of June, again, with the proceed from the sale of Sentinel, we have collected EUR 410 million, which enable us as of early July, to have a negative net debt position. It was around EUR 350 million at the end of June. Balance sheet analysis. The only material impact comparing 2019 to 2020 is obviously the assets held for sale, in the context of the divestment of Sentinel. We have isolated EUR 289.5 million of assets that have disappeared from our balance sheet as of 1st of July 2020, and have been classified as asset held for sale at the end of June.
This also obviously explain the decrease of our fixed asset from EUR 860 -EUR 550. If we look at the balance sheet and the financial ratios, very briefly, just here your attention on the net debt on operating cash flow that continues to decrease significantly semester after semester. You remember that was one of our objective to improve on the operating cash flow and to decrease our net debt. We continue to implement that. This will change drastically again with the sale of Sentinel during the second semester. Shareholding structure have not changed. It's still the same. The Dick family has close to 50% of shares and 63% of the voting rights, so no material changes there. This is it for the 2020 half year results. I'm going to hand over to Sébastien, and I will let him clean before he's using the remote control. Thank you.
Thank you, Habib. Good morning. Good morning to and good afternoon to all of you. Let's briefly discuss about, as usual, the strategic execution and the perspective. Among the main values of Virbac, we always put choosing sustainability, and that is important to us because we really are in the mindset, in the DNA of building for the long term and building on strong foundation. We are prepared to make trade-offs when it is a short term gain versus a long-term investment to really choose for the long term and the sustainability. What we have done over the last two years, in 2018 and 2019, it was proving that we were capable of coming back, and we had for two years focused very much on organic growth, trying to beat the market and gain market share. We have proven to be able to do that. We have launched many new products.
We have done product margin improvement, and we have tried to optimize our cost structure, and we have improved the profitability and reduced the debt quite nicely. Now, looking ahead, we would like to not pause necessarily, but try to make a transition with some investment. First, we have decided to divest Sentinel. This is in order to diversify more our portfolio that was highly concentrated. We had, in fact, many product in one segment, in one country, the heartworm market in the U.S. We thought that looking, and I will comment that later, looking at the arrival of the combination and the dynamic of the segment, it was much better for us to divest the product and invest differently in the portfolio to diversify and grow in the coming years. That will impact our profitability very significantly.
On a pro forma basis, on a full year basis, we have more or less EUR 55 million impact. Why 55? You will see it's because it's more or less EUR 70 million product, but we keep the manufacturing for Sentinel Spectrum, so we'll keep the value of the manufacturing for Merck. That's one subject. The second subject is we realized that we need to make significant investment, both in manufacturing and some information system. We are prepared over the next three years to heavily invest in ERP, MES, LIMS. This is the definition below for the one who don't know it. We are prepared to really invest in information system, because over the last five years, since 2015, we have not been able to do everything we would have liked to do, we think now it's a time to invest there.
Last but not least, we have explained two years ago, three years ago, that we wanted to geo-extend and have a global coverage for our different product line, including pet food, including food-producing animals. We have many geographical gaps that we would like to close, and that means entry, for instance, in the U.S. with food-producing animal, launching pet food in the main market. We are still not in China, still not in the U.S., not in Brazil, not in Canada. That, of course, in the first two years or three years, will mean significant investment because there will be a cost of entry. You don't go into this huge market without initially a cost of entry. There would be significant investment in order to be able to, just sometime later, be able to run, as I put here.
We believe we will, after two or three years of investment, once we get the sales force, get the organization, get the initial market share, we'll be again able to focus on organic growth to gain market share. We will boost the U.S. performance, because once we will be installed, it will be much easier to grow, and we believe we'll be able to leverage the different commercial investment we will be making. During this time, over the coming two to three years, we will try to look at programmatic M&A. Not transformational M&A, but programmatic M&A. It means small company that we may be able to buy and digest. To be honest, there are none on the radar today, and there are not so many things available in animal health, so we should not expect something short-term or transformational.
We will be searching, very alert and prepared in case we can find nice opportunity. As soon as we feel confident enough, we will set the timing for going back to 15% EBITDA. That was our ambition, our target before the divestment of Sentinel. As I mentioned before, this will impact us on a pro forma basis of three points, so we need to adjust the timing. Just an update at September. Three major elements have affected us or impacted us in the first nine months. The Sentinel divestment, so why it was done? I already explained it. It was to capture maximum financial value because we were expecting the trend of the product to go down. We have been communicated extensively on that. It was dilutive in term of growth for us.
Sentinel was slowing us down. We thought it would be in better hands with Merck, who could combine it with their ectoparasicide product, and they could extract more value than us from this product. It was a way to capture maximum financial value before the mega combination or the triple combination arrive. Zoetis launch their Simparica Trio. Many other combination will come over the next two to three years. We thought that at three, four, five years horizon, it would have been very difficult for us to keep the product. That was a financial reason. Strategically, it was also the ambition to diversify the product portfolio. We were highly focused, highly concentrated in parasiticide, which in the U.S. is the number one segment, make it also the most competitive segment.
What we wanted with our size and our capability is to diversify more and enter other segments that will be more accretive in terms of growth. Then we, of course, have reduced the debt, but we will also gain flexibility in trying to acquire either company or product line if we can find a nice opportunity. Last but not least, is what I mentioned just before, we will enter the pet food market in the U.S. Again, the veterinary pet food market. That is a long-term gain. It's not a short-term sale. You see, when you sell a generic, you can capture 10%, 15%, 20% market share in one or two years. With pet food, you only get the puppies.
If you think that the puppies will renew in one way, every 8% of the population every year, because the dog will live 12 years, it takes a lot of time before you can have significant market share. It's a long sell, it's a difficult sell. That is not a short-term impact to be expected, but once you get there and once you have established market share, you keep it normally. Same thing, we will have a food-producing animal entry in the U.S., a very progressive one. Again, it will not be a huge impact. It will be progressive and slow, but we have a plan to enter this market. That was one of the main elements of this year. The second one was a COVID crisis, but we talked about it quite nicely before.
We believe we have been very privileged to be in the industry we are, because we know what the coronavirus is. We have vaccines against coronavirus, so it's not something strange to us. We have been able to put together a fast collective and adaptive answer. We have been able to preserve the team and to operate almost normally, except in the main site, because at the worst time of the crisis, we had some case in the main manufacturing site. Of course, with the rules of contacts, we had to have some absenteeism and have to slow down the production speed and the quality control department. Besides that, we had, I believe, emerged from this first wave, at least, in good shape. What we have seen from the COVID is a strong reduction of OpEx. The operating expense has been really really very low, very depressed.
We don't have any merit for that. It was not something we drive. It's not something we pilot. In one part, maybe initially, because we have been very cautious when we enter the crisis. Later on, we saw that because of no events, no travel, no seminars, no congress, we had a huge reduction of OpEx, and that is, of course, responsible for around 1.5 point of OpEx on net revenue, of EBITDA, sorry, on net revenue. That is something to see as being a one-off, and we should expect a rebound. Maybe not in H2, it's difficult to say, at least next year and onwards. Then the COVID had some negative midterm or long-term impact on the food-producing animal side, like the salmons, for instance. Just I give this as an example. They are what we call long cycle production.
A poultry, a chicken, it's a very short cycle. When you have a crisis, you can kill the animal and sell the meat. It's very quick. For salmon, it's three-year cycle. When you have a crisis like that, you normally keep the salmon in the water. Instead of selling them at four or five kilo, you will keep them until six or seven kilo. During this time, you have many fishes, they get bigger. They consume more antibiotics or more products. You have a positive effect. The year after, we realize that they are putting less salmon in the water. Already we know that for next year, we will have 20% less salmon in the water. This is a kind of small salmon that they put now.
We see that there is 20% less smolt, and that will have a 2021 impact. Then we had, as we mentioned before, some delay in R&D program that will probably affect us also in 2021. The vaccine manufacturing disruption and backorder, we would have really liked not to have it now in the middle of the COVID crisis, that's what happened. We had a candidate that was broken, and that has stopped the manufacturing for two months. That is, of course, inducing a significant backorder that will have impact in Q3 and in the coming months because we are operating close to full capacity. We will need many months before we can resolve them. We should expect impact until 2021. This slide is more to be read than to be completely commented because there are a lot of information.
Basically, the key point is that we have a very strong hands-on management. We are very much involved in the operation to ensure results orientation and to deliver on our commitment. We had a very nice EBITDA increase. Again, I explained that there is a three-third, if we make it simple. One part is coming from the sales growth and the product mix, helped by Sentinel price increase and the product mix of Sentinel. We have sold the most profitable version of the two with the price increase. The second one was what I just explained, no traveling, no event, no congress, no meeting, much less marketing expenses. A strong reduction of operating expense that has also helped for one-third of the profit increase. All this is one-off. The R&D delayed, which has also helped for almost one-third. This also is one-off.
In terms of the main element of focus, we have, well, I let you read it, but we have keep going on everything we have said, particularly an acceleration of the digital transformation. We see, and I will comment it in the last slide, that we see more sales online and home delivery and auto ship programs. We are trying to convert some of our web shops with this ability to do these things in certain countries in order to benefit from that. We are keeping with really the initial strategy to deliver on what we said. Among other things, we keep reviewing our competitivity from a manufacturing point of view, and we keep looking at all the sites to see if it makes sense in terms of manufacturing strategy to be where we are with the capacity we have.
In term of geography, 26 out of 34 geography have grown in the first half of the year. As Habib mentioned, the country that has been the most affected by the COVID pandemic has been the one who have suffered the most in term of sales. The U.K. was down 10%, Italy was down 11%, India 5%. We saw that there was a direct correlation between the really strict rules of confinement and the impact on sales. Spain is not there because we had a good year, but if we were looking at Spain versus what it could have been without the COVID, it will be on the chart because we are close to flat and we should have been much, much higher with the execution of the plan we're in Spain. Already the country affected by COVID were clearly on the chart of the bottom performers.
We have been able to grow quite nicely in China, in Brazil, who has been entering the crisis later. In the first half of the year, you don't see so much impact in Brazil and in Northern Europe, Benelux, Scandinavia, Poland has been less impacted and we have been able to perform quite nicely. Here it's a bit of stocks because we talk about distributors and in this part of the world, the distributors were purchasing, also worried about supply issue. There is a bit of effect of that in this part of the geographies. In term of product ranges, we are systematically presenting the three busters and you see that the three busters, the commercial busters are keeping performing well. Pet food is growing close to 30% again, it will deliver close to EUR 60 million this year.
Dentals have suffered much more, in the U.S., with COVID and the distribution, it's a nice to have product, so the sales have been affected and Suprelorin is up 14%, which in the current first half of the year was quite a nice performance. Inventable part launches were delayed because of COVID. I will come back to that when I will talk about China. In the U.S., we have performed, in fact 3% at constant rate, but mostly thanks to Sentinel. Sentinel was a focus for the first half. Of course, none of the commercial organization was aware of the divestment, so they were keeping performing as usual and they were focusing on Sentinel until the moment of the divestment. Because of the COVID and the confinement and the closure of the vet clinic, we had on the rest of the line, a decline of 3%.
We relaunched EASOTIC, which has helped the rest of the range, by the way. Dental antibiotic, as I mentioned before, were affected by the COVID. The sales of Sentinel, it's important to note that, despite trying to decline over the last four or five years, have increased in the first half of 2020. Mostly probably also because of the confinement. What happen is, when the confinement was, the lockdown, sorry. The lockdown was declared, some website have also purchased products to stock because they were thinking to sell online for the people that were not going anymore to the vet clinic. We saw a little bit of different pattern of sales, but we had a very good year to be compared to last year, EUR 4 million more, 11% growth.
Also with a favorable product mix because we sold more of the flavored tabs, which had a higher margin than the Spectrum. Next year, once we will not have any more of this, close to EUR 40 million, we will have an impact on a pro forma basis of EUR 55 million sales less and a decrease of three points on the EBITDA. This year, because of what I just explained, very good sales in the first half, even more than the year before, we expect only one point decrease this year. The impact has been really much limited this year. China, I mentioned before. We explained that back in 2019, we were planning to launch a pet food. The pet food was delayed due to the African swine fever and the fact that the pet food were containing pork meat.
That has slowed down a little bit our China growth plan. The second launch, which has been postponed and delayed, has been Suprelorin. We were planning to launch Suprelorin at the very, very beginning of this year, and we have a really good plan. I don't give much more detail, but with a local partner and we were planning a very aggressive launch and because of the COVID, everything was stopped. The product is now being launched now, but we lost six months and of course with the COVID situation that has affected the clinic and everything, it has not become any more the top priority that it was supposed to be back in January. We are, of course deceived, but that's something we'll keep working on, and push stronger.
The boost effect we were expecting at the beginning of the year has not happened, has not materialized and now it will be taking a bit more time before we manage to do from this product what we would like to do. Despite that, we still has grown 21%, so we should not totally complain. We had a 20% growth in China first half and the digital part you see has grown 42% at the end of June. We see that there is more and more importance of the digital in China including for sales of veterinary product. Chile. In Chile we had a quite good growth, 7.6% at constant rate. It is a bit linked to what I just explained. The salmon were kept in the water. They are growing and they are using product and consuming product.
The second reason why we had a good growth was the launch of a new product. We launched a more concentrated version of Vetericyn, which is the antibiotic and that has many advantage. You have less stock, less product to carry on, you have less cost so you can sell it a bit cheaper versus the other version which was at 50%. That makes that this product has replaced the other one with a better margin. That has helped quite significantly the first half of this year. Vaccines have suffered because, of course, vaccines you use when the salmon goes into the water, in the seawater, and you don't vaccinate them anymore later on. The fact that they stay later or longer is not helping for the vaccines. We are continuing to invest in R&D.
As we mentioned in a previous presentation, we have a primary focus is to manage to pass the registration of the vaccines in 2022. You know there is a new regulation that has been established two years ago, changing completely the rules of the registration of vaccines in Chile and asking for additional studies. It's not for us. It's for all the industry. To comply with the new regulation, we are spending a lot of resources to conduct the studies to comply with the new regulation. This is expected to be done by 2022, in order to maintain the sales of the vaccines. Then, we wanted to share with you that we have a significant distribution of third-party product, 25% of our sales. This is something ongoing, but this year, over the last two years, we have been quite successful.
The sales have grown quite nicely. There is a product, for instance, around EUR 6 million, which, we were distributing for a company, and the company was sold to another company, and the other company has an organization in the country. We are discussing whether this agreement will be renewed, and that's a risk at the moment, not knowing exactly if it will be renewed or not. There is a new regulation also, not from the Ministry of Health, but for the Ministry of Environment, which take care of the impact, environmental impact in the water. This direct regulation has been recently published. Some of the product we have, not too many, but some of them may be at risk because of this new regulation, of product in the water.
All to say that we have, of course, a huge interest in Centrovet because its strategic aquaculture is very strategic to us. It's one of the segment poised to have the most growth in the coming years. That's clear. Centrovet is a strategic position because it's number two in the second-largest market in the world for salmon in Chile, just after Norway. It is a strong basis for R&D and manufacturing capability. It has very much a strong strategic value. It should also help us to, because we are very attractive to partners, biotech, startup, who have technology. For all these reason, we would like to keep invested, but because of all this risk, we will decide what we do in 2021 about the share acquisition. Then we propose to quickly cover to explain to you what are the main impact of COVID on the current situation.
It's a bit of a requirement to give the maximum transparency and clarity on where do we stand. There are still many unknowns regarding the outlook. I just explained it when we talk about the species, salmon and cattle for next year. It is also true when we talk about the country, because we have a different position than most of our competitors. They are very strong in China, in U.S., in China and Brazil. We are very strong in India and Chile, so we have a different geographic position, and India and Chile are being quite affected by COVID. It's still a bit of unknown as far as the outlook. Some of the country have also entered very late in the crisis or in the confinement, like Brazil, Mexico and India. It is a bit too early also to see the real impact there.
We will see this in the Q3 and Q4. Far, we have limited the impact on the supply side. We have been able to manage all the supply, but we see that there are some pressure. I'll just comment an example. If tomorrow there will be a vaccine for COVID-19 for the human, there may be a lot of shortage on flask, and all the vials, for instance, for vaccine. Of course, this everybody knows and is anticipated, but that's just an example that we may see some disruption in supply in certain situation, and we see some difficulty sometimes in India, for instance. In term of production, all the site are now operating close to normal levels, except, with the exception of Chile, which is still operating at around 80%, because of absenteeism and the crisis locally.
With regard to production, we have not been able to maintain the safety stock in the Q2 because of the reduction of production during the crisis. We have been using the safety inventories, and so for some of them, we may, we will have, it's not may, we will have, back orders, significant back orders in the coming months. We try to come back as quickly as we can, but it takes also time in the quality control department to liberate all the products. We should see a higher than usual level of back order in H2 2020. That's for all the product in general, but more precisely for vaccines. The stoppage of the site, the worldwide production site of our vaccines for dog and cat for more than two months, has induced very significant shortage on vaccine.
You saw a little bit of the impact in the H1 on the chart of EBIT. That was the only part that was in red. All the rest was growing nicely, but vaccines were decreasing, and that will affect us very much in the H2 as well. I mentioned before the delay in the R&D program and the launch postponement. This is for the impact of COVID in the short term, let's say short or mid-term. In term of structural changes, we don't see any structural change linked to COVID. We don't believe that the pandemic has changed anything in the dynamics of animal health, which is so significant at this stage. Of course, it has helped accelerate some trend. I talked before about the home office, of course, people working from home and being used to video conference and meeting virtually.
That is being seen everywhere, across all industries, I guess. In terms of our industry, we see a little bit more consolidation of the industry, the digitalization like in many industries. What we see growing very much is home delivery and autoship programs in companion animals. That's something that chewy.com, for instance, has done very very well. We try to stick to that approach in order to be able to partner with veterinarians, organizing home delivery and autoship programs in order to get, to capture the pet owner and put in place a loyalty program that will make them more loyal and more captive. In food-producing animals, we see an increase of biosecurity measures. In fact, Animal Health has suffered from two pandemics in two years. The African swine fever that hit the swine market 18 months ago, and now the COVID-19.
We see as a consequence that the small producer, in many countries like China, for instance, disappearing. We see a consolidation of this producer and increasing level of biosecurity and hygiene and quality programs. To conclude, I will say that Virbac is very well-positioned, with a strong balance sheet to invest, develop itself from an innovation point of view and organic growth, and take advantage of any interesting opportunity M&A. We have a strong balance sheet and whatever will happen in the coming month or years, we will be very attentive to take all the opportunity.
I finish on this slide before moving to the agenda of the publication, saying that we always try to be quite conservative when we present innovation pipeline because we know that structurally we know what we know, and we don't know what we don't know, which mean that in innovation, they are always delayed. Normally we try to be a bit conservative. Despite that, I have to recognize that we have in this chart, see many product moving from 2021 - 2022 and from 2022 - 2023, and that's a pity, but that's a real situation as of today. It means that 2021 will be a weak year in term of product launch versus the normative level we had historically, with some delayed that will be catch up in 2022 and some unfortunately that will move behind, so 2023 and behind.
We give quite a lot of detail. Without entering too much in detail, you see that some of these have been delayed to the next year, and some have been moving from Q1 to Q4, for instance, within the same year. We had some delay in most of the studies. Each time we had an animal studies to be run, for instance, this was delayed because of COVID. Not only always, but mostly because of COVID in many situations. A weak 2021 in term of pipeline. In term of guidance, as Habib already mentioned, I guess, we are planning to be at the high end of the range, at constant rate. This guidance includes the sell of Sentinel of EUR 39 million in H1. You need to understand that for 2021.
Also it has real perimeter, which means it's the sales of Sentinel H1 and nothing in H2. The Forex impact, which is not in this guidance, is expected to be negative by EUR 25 million-EUR 30 million at mid-July rate. The EBITDA is between 12%-13%, taking into account the -1 point investment impact of the divestment of Sentinel. As we explained before, we will be cash positive at the year-end, and the financing we are kept with initial maturity at the moment, and we will look at that early next year. Maybe we can open the questions session.
First of all, in telling that we will not circulate any microphone for sanitary reason. You can stand up and speak loud so that everyone can hear you. If it is possible, it would be more safe for everyone.
Right.
Shall I start?
Yes.
Should I ask in English or in French?
In English, because we have English-
In English. Okay.
If not-
My first question will be maybe on your expectation for the market, the growth market that you expect for the coming semesters, including 2021, if you can provide some views, regarding your forecast for 2021, how do you see the market? I guess that we should understand that you will still outperform that trend. That's first. Secondly, regarding the OpEx, shall we understand that sustainably a part of the marketing costs, promotional costs should decline spatially due to what we have seen, meaning more re-votes, vote for commercial.
On the first one, if you ask me about the market in 2021, I don't have a crystal ball. It would be difficult to answer. What I can tell you is normally the market over the last 10 years has been running around 4%-5% growth, between 4% and 5%, a little bit closer to 4% than 5%, if you look at the last 10 years. This year, it will be running around 3%. It's more 3% this year. With 5%, we are above the market. We are beating the market. There is no way we beat the market next year, simply because we will lose EUR 39 million of Sentinel. If we look at constant perimeter, there is no reason why we will not beat the market.
If you look at rig perimeter, there is no reason why we could beat the market, because we will lose EUR 39 million sales in the first half of the next year. I don't know if the market will be running with a weak, on the weak side of 3% or on the strong side of 5%, that I don't know. What I know is that with EUR 39 million sales that we will be losing because of the divestment of Sentinel, there is no way we can beat it next year. The second question on the expenses, it's difficult. Intuitively, we would like to say yes.
Reasonably, I would prefer to say no, because when I see how people in September were willing to get back on seminars, meeting, lunch, dinner, and that we had to stop everywhere to do that, the human nature really wants to get back to live, and the best way to prove that we are back in a normal situation is to take again the habits we had in the past. The human reflex is to go back to the normal situation first. If we were to manage structurally savings, it would be by a very voluntarist decision. It will have to be driven, decided, and managed. The truth is that what we have learned is that the virtual exposure or the video conferences, we're adding to, not necessarily replacing everything. If we expect structurally to save on the OpEx, it will be on the travel.
I believe travel may be less, and that we could expect to see savings. To be honest, in Virbac, we have been, over the last five years, very very lean on travel already because we were reducing these expenses very much to try to get back the comeback we did, was done through managing OpEx. In terms of marketing, we are already so low that I don't expect we can do more savings on marketing. What is happening this year is okay for six months or nine months, but is not okay for five years. Structuring marketing, I don't believe we can save. To the opposite, I believe we will have to invest more for pet food, for food producing, for entering new markets. I believe we will have much more expense in marketing in the coming year than we had in the past.
Travel may be a bit less, yes, but it was already very low or little in Virbac. Honestly, I prefer to say no, I don't think that we will manage to reduce OpEx. Honestly, our bottom line is very much driven by the top line, so that's where we should try to improve. The investment in marketing would be to prepare additional top line three, four years later. When I talk pet food and food producing, for instance.
Thank you, Sébastien. We have a question through the chat. Regarding antibiotics, they seem to grow again, especially in livestock. Is it driven by volume or price increase? What is the view on this market? Could you acquire assets, companies in this segment?
No, we will not acquire a company in this segment because this is a segment which doesn't have good fundamentals. Yes, we have grown, and we will keep growing. I did say that two years ago. I had informed that despite what everybody was talking about antibiotics, I thought we will grow in antibiotics, and I believe we will keep growing in the coming years. It's mostly volumes, and it's mostly linked to launch of new products that were in the pipeline. In Chile, for instance, I explained that we launched a new product, which has in part substituted the old product, but replaced it gaining market share, so that's mostly driven by volumes. When it's a new product, of course, you may have a price effect as well, but because it's a different formulation or different presentation.
It's not that we increase price on the old products.
Another question from the chat. You mentioned that Virbac might have under-invested over the last five years in the facilities and in IT manufacturing. Can you share with us the amount you plan to spend on CapEx over the coming years?
The normative level of CapEx in Virbac has been around EUR 40 million year-per -year. We have not done the budget for next year yet. We will start the session in October, November. We have not communicated and decided what we'll do and not we'll do. We'll have to review everything. I'm not sure I said we had under-invested. I said that we have decided to invest more, which is slightly different. We have always done the investment that needed to be done. In term of systems, we want to accelerate because also the need for digital and more precise information and management, we think we need to do more. That's what I said, we need to do more, and we will do that in the coming three years, because again, we plan for the long term. In term of manufacturing, it's a different story.
The main site of Carros started 50 years ago. Many of the production site within the site of Carros has been renewed. Some of them have been built a few years ago, so are totally new. The vaccine site is close to 30 years old in many aspects, and so there we need to have also additional investment. You want [audio distortion] to comment?
No, I just wanted to say that in CapEx investment, you have cycles, obviously, on information system and manufacturing as well, at times where you need to invest a bit more. We are probably entering, as Sébastien said, a cycle where we need to invest more.
We have another question. If you may repeat the question in the room so that everybody online can hear them, it would be helpful. Thank you. We have a question from Laurent Delabarre. The third-party agreement, for Centrovet in Chile, covers what kind of products? Is it 25% of Centrovet sales?
It's not one agreement, it's different agreements. Some of them have different timings to be renewed. Some of the agreement were renewed last year, because they were of short duration. There is a big one, which is ending at the end of next year, which is the one I mentioned as being at risk, and we need to discuss and negotiate, and that is not being done yet. I don't want to disclose the precise product, but it covers different kind of product, some parasiticide and some disinfectant and product like that. It's pharmaceutical product.
Sébastien or Habib, when do you see our production, your production output for vaccines be back to normal?
Back to normal, it is now back to normal. I guess, it is now back to normal. Because of the fact that we operate at 100% capacity, all the backload of back order, we are not able to resolve. We can attend the demand, but we cannot catch if without, resolve the back orders, and the back order will be resolved over many, many months. That's the issue I was mentioning before. If we talk about creating additional capacity or additional productivity, that is a CapEx I was mentioning before, and that will take many years because, in the pharma industry, when you have to build additional capacity or a new building or a new capacity, it takes many years before you build, you qualify, and you can use it. That would be, unfortunately, taking a bit more time.
Now we are back to normal with the production. The problem is the production is back to normal, but the sales level is not back to normal because the vets have been confined for two and a half months. They have not been using vaccines, and now they are using significant amount of vaccine trying to catch up. They are bringing back the customer to the clinic. The sales have been depressed by 30%-40% over the Q2, and we see the market going up very much, and we cannot enjoy the ride. We let our friends enjoy it.
Maybe one question on the tax rates. You said that we should expect something like 28% for the current year, which if I'm not wrong, I heard you saying for the next semesters. What should we anticipate for the 2021, 2022 years first, and what should the financial cost look like given the fact that you will be in net cash position by the end of the year?
The question is on the tax rate. What do we expect for the coming years, 2021 and 2022, and also on the financial cost. On the tax rate, the effective tax rate, which is calculated outside of the U.S. because you know that in the U.S. we don't have any tax impact because of the net losses that we have accumulated. Outside of the U.S., when we retreat for that, the effective tax rate will be around 28%. As we move forward, we expect to be at the order of magnitude of 28% into 2021 and 2022 effective tax rates. Regarding the financial cost, obviously it will decrease significantly, because we are reimbursing part of our debt. We are reviewing, as we speak, all of our lines, and deciding beyond the revolving credit facility of EUR 420 million that we are keeping obviously open.
We are not going to draw on it, at least definitely not at the same level of magnitude as it used to be drawn, but we'll keep it. Beyond that, we are looking at all of our lines and deciding which one we will keep and which one we could reimburse. It's obviously smaller lines. We continue to have credit in some of our countries. In Centrovet, for example, we have local credit line in place. Some of them could not be reimbursed easily because of duration, and so we continue, obviously, to have financial costs, but we will see a significant decrease as we move forward. Several millions decrease.
A single-digit figure more.
Yes.
Question regarding Sentinel. Is the disposal of Sentinel set to be tax-free? Habib.
Yes. Again, because of the accumulated losses, we will finalize all of the calculation during the second semester, but we expect it to be either tax-free or a significant portion of it to be tax-free.
Do you contemplate doing a generic product such as Trifexis?
The question is if we plan to launch a generic of Trifexis?
Yes.
No. No, we don't.
You do not contemplate.
Could we not contemplate? No.
Okay.
I don't believe the future of this product is good. Let's put it this way.
Yes.
Is the rise of the pet food due to lockdown? If yes, should we expect a decrease in the future, or by how much?
No, I don't think so. I think that in Q1, yes, we had increased the sale by 14% at the end of Q1 for Virbac, and among which a huge portion was pet food. Because of the lockdown, people anticipate purchase. Of course, this has been regulating by now and by September, we don't believe there is an overstock at home in the customer. No, we don't believe that. We think that the 27%, the 30% growth you see, it's something strong, recurrent. We believe it would be sustainable long term, because of geo expansion. Maybe what we will see is a lowest growth in current geography where we are, but it will be relayed by additional growth because of geo extension. We are quite confident that pet food will keep growing nicely and strongly over the coming three to four years.
A question regarding the margin. Given a strong H1 margin of 17.9% and 12%-13% guided for the full year, how should we think about the exit margin going into next year?
Can you repeat?
Sorry. With the mask. Given a strong H1 margin of 17.9% and 12%-13% guided for the full year, how do we think about the exit margin going into next year?
I can take this one. It's very difficult. It's already a difficult exercise to try to anticipate how the second semester will look like. Sébastien commented on the net sales. I mentioned that a good portion of the improvement is obviously linked to the operational improvement, which is linked to the evolution of the net sales. It's a difficult exercise for us to anticipate what will be next year. What is for sure is that we will have a rebound, unless the COVID crisis is continuing, and we continue to be extremely limited in terms of what we are doing. We shall expect a rebound in terms of cost next year versus what we have experienced this year.
To complete, I will say that the only thing we know for sure is that EBITDA contribution and ratio in the first half of next year will be much lower, because we are benefiting from Sentinel this year of EUR 39 million sales that we will not have next year. We are benefiting from what Habib just explained, the full effect on the OpEx are only delayed and everything of the COVID. You have a double effect. You will have a sales-based effect and an OpEx-based effect. We do not project for the full year of next year, but what is for sure is the first half of next year will be complicated versus because of the base effect, versus this year.
How much did you say that the extra margin comes from Sentinel on H1?
We didn't say Sentinel, but we say that because of the product mix and a huge part of the product mix, Sentinel, and the sales, it's one further the improvement. I think we said that.
We should, on pro forma basis, we should get one third of the improvements with the H1 20 basis for the calculation of the H1 2021.
That become too complicated for me. It's for you, Habib.
Yes, please.
You said that one third of the improvement comes from Sentinel. If we were to calculate a pro forma basis, calculate the H1 2021, we should discount by one third the improvement of the margin for based on 2020.
Except that we didn't say Sentinel. We didn't say Sentinel. I say from the sales and product mix, which large part comes from Sentinel.
Yes. No, but the difficulty is that it's an improvement versus last year, 29 versus 20. We are looking at delta, an improvement between two periods. Now if you want to do a 20 versus 21, it's a different exercise. I wouldn't do it that way. You shall take the EUR 39 million of sales that we have and make an assumption on the margin of Sentinel.
The only thing we know, the market knows, and we have shared is, Sentinel was very dilutive in terms of growth because we were underperforming, but was accretive in terms of margin. That's why we have spent a lot of time to decide what we do with this asset before we decide to divest it.
Do you have the other ones, the reference that would lead this-
No
Detail?
No. We have no obligation to do a pro forma basis. We won't do a pro forma basis on the disposal of Sentinel.
A question for Sébastien. On the U.S., your business is very diverse and has had a good performance in all areas except U.S. in constant currencies, which decline excluding Sentinel. How should we think about the recovery of this region and level of infrastructure required post-Sentinel?
That will be our main challenge, is to be able to deliver and to execute the plan. The belief is that the asset we purchased was not so much Sentinel, but was the sales force. Because what has really much value is the relationship between the vets and the sales force. When you disrupt that, when you have a merger and acquisition, why you lose so much value is because normally you have to redesign the territory, you break the relationship between the vets and the sales reps. That takes years to build and has a lot of value. The reason why we decided to keep the sales force while divesting Sentinel is because we believe the value is in the sales force, not in the asset Sentinel anymore.
Sentinel was divested, but we decided to keep the sales force and try to extract maximum value from everything that we will do in the coming year or two. Again, I mentioned initially, we are choosing sustainability. That is not just a nice word on the paper. It's walking the talk. It's doing what we say. That means accepting to depress EBITDA and profitability for one year and be able to rebound or be much stronger three years from now. That's what we do. We will launch pet food. We will launch new products. Not now, not tomorrow, because there are delays. Three years from now, we believe that if we were to reduce the sales force, we will be marginalized, and then we will never come back in the U.S.
The U.S. being the number one market in the world, we must be there, we must succeed. It's an act of faith. We'll have to prove we can execute. We have to prove we can deliver. It will be difficult. It's the most competitive market in the world, and the top four are very strong there. It's their backyard. We play with a willingness to be strong in three to five years from now. We are prepared to spend more money and to degrade the EBITDA ratio for one year or two in the U.S. in order to manage that.
I'm still in the U.S. with the last question. We said that we are going to close the question on the chat because timing is running. The last question from the chat is about the U.S. When could we expect the first launch of a FPA product in the USA?
Next year.
Next year. Quick answer. Excellent.
As I mentioned, it is very important. We mentioned and we put each word I thought progressive. It means one product doesn't mean many product, and one product may be small and not do a lot of things. If there is no bad news and everything runs smoothly, the ambition is to manage to get in next year. Of course, it's R&D, it's development, we may have bad news and not be able to execute. It's what the ambition is. It's not a guarantee.
Thank you very much. The questions on the chat are closed.
Thank you.
Thank you.
What about here?
Maybe one more question regarding more or less the.
[Non-English content] It's in French? It's in English. Okay.
We are still recording, but we said that we are about to close.
Same kind of question. I would like to ask the FPA launch. Same question regarding now the calendar launch for pet food regarding Brazil, U.S., and China. Can we get an update on that?
Yeah. Brazil is some years away. We have not started because of what I said. We are growing so fast and so quickly, we don't have the teams yet to operate properly the manufacturing transfer and the organization. Brazil is not on the radar yet. China is on the catch-up mode because since 2019 we want to launch, but we have been delayed, and we are delayed by regulation and many, the crisis on swine and then there is another crisis. It's linked to sanitary problem and regulation between China, Europe and import, export. It's not linked to the pet food. We are depending on these kind of things because we don't have a local manufacturing site, of course. We are really much depending on this regulation. It's difficult to give you a date.
There, even if I was for sure, I may not share it because of competitive reason. Same reason for the U.S. I prefer to keep it a secret. The reason why I shared for FPA is that if the competition do their job, and I think they do it, they know. There was no secret.
This was the last question. We are ending today's session. On behalf of all the Virbac team, we want to thank you for your time and interest.
Thank you very much.
Bye-bye.