Good afternoon. We are very pleased to welcome you to the Virbac 2024 half-year's results webcast. Hosting the call today, Sandrine Brunel. I am Head of Corporate Communications for Virbac, and Sébastien Huron, our Chief Executive Officer, and Habib Ramdani, our Chief Financial Officer. Before we begin, I remind you that the slides and additional financial materials are available on the investor section of our corporate website. The replay of the meeting will be available at the conclusion of the meeting. You will be able to post your question by using the chat section on the bottom right-hand corner of your screen. All the questions will be answered during the Q&A session or afterwards if time does not allow us to answer them all immediately. It is now my pleasure to turn the floor to Habib Ramdani and then Sébastien Huron.
Good morning, good afternoon, good evening to all of you. It is our pleasure with Sébastien to share with you some updates regarding our financial performance. That will be the first part, and then our more strategic performance that Sébastien, as usual, is going to cover. Let me start by a brief summary of what we have accomplished during this first semester. First, we have, as you've seen, a very strong organic growth of 11.3% at constant exchange rate and scope, which is reflecting the exceptional momentum that we are having in a context of a favorable dynamics on the market, but we are still taking shares. Sébastien will cover that later on.
We have had some very solid performance in all geographies, and we are very proud of that, with one exception, which is the Pacific region. It was expected, and we're going to comment that a little bit later. There is also a very strong demand across all segments, within our companion animal segments, but also within our farm animal segments. And in addition to the demand, which has driven a very strong volume effect during this semester of more than 7%, we also have a positive price effect of around 3.5% during the semester.
And obviously, on top of that, we have had a very strong contribution of our two recent merger and acquisitions operations, i.e., Globion, the Indian poultry vaccine acquisition that we made last year, as well as Sasaeah, the Japanese acquisition that we made, earlier this year. So those two acquisition are contributing, delivering, around five points of additional top-line growth during the first semester. From an EBIT adjusted standpoint, we have had, an increase of around EUR 40 million, which is close to 40% growth at constant exchange rates. That's extremely solid, and that enabled us, to reach an all-time high in terms of EBIT adjusted ratio to revenue of 21.3%. This has been made, essentially with the contribution of our gross margin, which have increased by three points on the back of volume increase.
We are absorbing much more fixed cost, thanks to the very strong volume increase that we have had during this semester. A favorable mix as well with some vaccines, a strong rebound on our vaccines activities on companion animal, as well as pricing, as I mentioned earlier on. The operating expenses have slightly grown, but at a slower pace than our top line, and the ratio to revenue has reached 44.1% versus 44.7% last year, so slight improvement. We have had a further acceleration on R&D investments. It's part of our strategic intent to invest more on R&D. R&D investments have increased by 15% year on year.
But still, given the acquisition, as well as the very dynamic volume that we had on the top line, as well as the specific phasing of those investment, where it's going to further accelerate during the second part of the year, we have more or less maintained a stable ratio of R&D investment on revenue when we compare with the first semester of 2023. M&A has been accretive on our profitability by half a point. This is a positive contribution of Globion and Sasaeah. And all of that enable us to significantly uplift our EBIT Adjusted ratio before R&D, which has moved from 24.6% in 2023 to 27.9%. So let me cover briefly the Forex impact.
The impact has been quite limited for this semester, with around EUR 6 billion unfavorable impact on sales, and a sort of no impact on EBITDA, which is linked to our sort of natural hedging that we have overall. If we continue to go down our profit and loss statement, the operating profits have increased by 35%. We have had an increase of our financial expenses linked to two elements. The first one is higher financial debt linked to the increase, obviously, of our debt. And the second one is exchange rates impact during this semester, essentially on CLP. It was positive in the first semester of 2023, and it's a negative exchange rate impact on CLP for this semester.
All in all, our net profit is on the rise, reaching slightly below EUR 100 million, versus around EUR 75 million in 2023. Let me finish this summary by sharing with you the net debt situation, which obviously has been impacted by the acquisition of Sasaeah i n Japan. I remind all of you that the deal has been closed on the first of April 2024. So we are now with a net debt of EUR 254 million, versus a net debt situation of minus EUR 52 million last at the end of December 2023. This also, to a lesser extent, the net debt has been impacted by the Globion. We have entirely closed the transaction.
You remember that we still had a second part for the acquisition to have 100% of Globion, which has been done during the first semester of 2023. At the end of June, the net debt on EBITDA ratio is below one, so we continue to have a very favorable financial situation. We have also renegotiated our syndicated loan facility, and we have a line with a potential of going up to EUR 450 million. We continue to be very well positioned to potentially finalize some further M&A operation. Let me move to the sales first, and then we'll go through the P&L, and I'm going to share a little bit more details on the balance sheet and cash flow statement as well later on.
So as I've shared, an extremely solid performance. I can say an exceptional performance for this semester, with 16% growth or 15.1% growth on a published growth and at constant perimeter and scope. Excluding the benefit of Globion, as well as Sasaeah, we have also had a very, very strong performance, double-digit growth of 11.3%. This growth is coming from, I mentioned it earlier, all of our regions, Europe, North America, and the rest of the world. As you can see, Europe has done fantastically well with 12.3% growth. The main affiliate in terms of contribution to the growth in absolute value is UK.
The export zone of Europe in Eastern Europe has done very well as well, and this is the case also for France and Spain, which have contributed also significantly to the growth. But all of our affiliates in Europe have posted a positive development during this semester. I'm going to cover the different segments, but this has been fueled by all of our strategic segments, including the specialty product, the pet food, pet care, and a strong rebound, obviously, on the vaccines as well. Companion animals, vaccines in Europe. North America, 22.2% growth is very significant. We mentioned, when we shared that earlier, that we have had a base effect, a positive base effect, linked to what happened last year, where some of the distributors have decreased their stock.
Even if we restate for that positive base effect that we have recorded, we continue to have a very strong performance, double-digit growth around 14% in market performance in the U.S., driven there as well by our strategic segments. The rest, 50 million EUR, so around half of the growth is coming from Rest of the World, which is made now by four main regions for us. Latin America, as you can see, 11% growth, with two affiliates driving this performance, Mexico and Chile. Both of them have had a very, very strong performance.
Chile, Sébastien is going to talk about that, with a rebound for some of our products, including a parasiticides product, which has driven the growth during the second part of last year already, and continued to fuel the growth of our aquaculture activities during this semester. Mexico has done very well as well. If we look at the next region on the slide from the left to the right, India, Middle East, and Africa has done very, very well, 19% growth. Obviously, we have there the positive contribution of Globion in India, but even outside of Globion, which by the way, is doing very well from a performance, and we are progressing also very nicely on the integration.
Sébastien is going to cover that later on, but even beyond Globion, the performance in India for this semester has been very, very good, and India has contributed quite significantly to the growth of the group. Nice rebound on the Far East Asia region. You remember probably that it was we had a difficult 2023 in this region, with some of our countries there that have seen sales decrease. We have recorded a very nice rebound with affiliates such as China, Vietnam, Korea, that have grown during this semester, and that contributed to the growth of the group. We are recording in that region, as you can see, obviously the positive impact of Sasaeah as well. Last but not least, Pacific.
Pacific is the only region that is negative. You see, slightly negative, which is quite a very good performance when you take into account the dynamic of the market, which has been quite difficult during this semester. And again, here, Sébastien will cover that later on. Let me move to the sales by segment. I will be very brief there. The split between farm animals and companion animals has not fundamentally changed: 40%, 60%. What is noticeable, nonetheless, is the increased weight of swine and poultry linked to the acquisition of Globion and the development of our swine activity as well on the vaccine. Let me cover now the sales growth by segment.
We are presenting on that slide the different segments of our companion animals pillars, with on the top of the slide our 2023 revenue, on the bottom of the slide the 2024 revenue. You see the contribution of all of the segments. What is remarkable is the fact that all of our segments are positive, with the double-digit growth in many of them. The dental equine business is growing double digit, with a strong contribution of our dental product, a pet care product that is part of our Virbac blockbuster. The specialty is doing well with Suprelorin, Zoletil, some of our key products that are part of that segment and that really are contributing to the continuous growth and development of that segment.
The pet food as well, one of our strategic product range, we have continued to grow double digit with 12%. It has had its 7 million EUR. Parasiticides, antibiotics have grown as well. And finally, a word on our vaccines activity, which has increased significantly. You remember that we have had some difficulties last year, especially on the first semester, and we have seen a very nice rebound, which has had an impact as well on our gross margin, as this activity is essentially made of fixed costs. So let me move to the second pillar, farm animals. Here, it's also remarkable to see only green. All of the segments making farm animals' activities within Virbac have grown during this semester.
The antibiotics, even if it's a very limited growth, we have seen a contrasted dynamic with some decrease on our cattle antibiotics business and some increase on swine and poultry, and also a decrease in Europe and some increase in other region. All in all, we managed to keep it slightly increasing during this semester. Parasiticide has done quite well. Nutritional as well, with a strong contribution of India. You see the very positive dynamic of vaccines with Europe that has contributing to this growth with some product like Bovigen Scour, as well as the Latin America region and to a lesser extent, Pacific. Finally, a quick word on aquaculture.
You see the positive development of our aquaculture sales with 40% growth and seven million EUR more sales, essentially on our parasiticides product and on Vetrimoxin as well, an antibiotics product that has done quite well during this semester. And again, we are going to provide you with a little bit more color during the second part of this presentation. So if we look at the breakdown by region and segment, you see the arrows that are pointing to the top, all of them. So all of our sub-segments are growing, with the exception of the other developed countries, including the impact in Australia and New Zealand, of our companion animals business and farm animals business that is quite limited in terms of growth.
So let me move then to a couple of words on our profit and loss statement. First, again, extremely positive dynamic on our net sales with a 15% growth when we look at the published figures of 2023 and 2024, with a positive impact of the acquisition of Globion and Sasaeah on the top line, obviously. The gross margin on purchasing costs have benefited from that very positive development of our sales. As you can see, we have increased the ratio to sales of our gross margin on purchasing costs. Net expenses, I mentioned it earlier, we have continued to invest.
It's growing double digits, but nevertheless, slightly below our top line, which enable us to increase slightly the ratio, moving from 44.7% to 44.1% of our ratio of net expenses on net sales, and we have continued to invest in R&D, as I mentioned, in our marketing and commercial activities as well, so our current operating profit before depreciation of assets arising from acquisitions, the EBIT adjusted, has moved in ratio to net sales from 16% to 21.4%, so a significant increase versus last year. It's the same for the operating profit from ordinary activities. We have some limited other non-current income and expenses, which is made essentially of two elements.
We have had some expenses, one-off expenses linked to the acquisition of Sasaeah, notably, as we... And this has been, uh, compensated slightly by the sale, of an asset, that we, that we had. I commented earlier on the net financial expenses, you remember, made of negative exchange rate impact, as well as increased cost of debt. And finally, income tax expenses has increased, but in line, with the increase of our profit, and the effective tax rate has not materially changed versus what we had at the end of 2023. So all in all, we've been able to increase our net results, moving from 75 million EUR to close to 95 million EUR, so quite a significant increase. So let me come back, couple of seconds on the EBIT Adjusted evolution.
So you see here, the EBIT Adjusted from 2023, slightly more than EUR 100 million, moving to EUR 150 million in 2024, with the exchange rate impact, which is quite limited. And we see the positive contribution of all of our region, fueled obviously by the top-line growth in Europe, North America, and the rest of the world. And this has been compensated slightly by the additional R&D investment that we have made during the period, in line with our strategic objective. So this very good performance has translated nicely into operating cash flow increase, as well as net cash flow increase. We have had a 30% improvement of our operating cash flow and same percentage increase for the net cash flow.
So let me cover now how we have used this free cash flow or net cash flow generation during the semester, which translated into the net free cash flow that you can see on the slide, and we are comparing what happened during the first semester, twenty twenty-four, with what happened during the first semester, twenty twenty-three, so you see first the net cash flow increase moving from EUR 92 to EUR 116. CapEx investment, which have increased. We expect to have an acceleration during the second part of the year, in line with all of the big projects that we have. The working capital requirement has remained more or less stable, I would say, when we compare the two period, especially given the increase of our activity.
This amount is essentially explained by the seasonality of our free cash flow generation. We have some significant cash expenses during the first semester linked to end-of-year rebates, for instance, that are heavily weighted on the first semester. Typically we are generating cash during the second semester, and this is a usual pattern that we see every year. It has been slightly also negatively impacted by one-off elements for this semester, especially on accounts receivable, and it's linked to the activities that we have had in May and June that has been quite strong, which weighed temporarily on our accounts receivable.
But all in all, we continue to expect to have a very strong cash generation during the second part of the year, at constant scope, obviously, outside of any M&A acquisitions. And, Sebastian will cover that as well, but we expect now this cash flow generation to be around 60 million EUR for the full year. So you see that we have had quite around zero net free cash flow during this first semester. So this, the cash generation will happen during the second part of the year. Net debt evolution, the only thing added on that picture, or the main thing that has been added on that picture versus the previous one, is obviously acquisitions.
You see, at the center of this slide, around EUR 300 million spent for acquisition, which is a combination of Sasa acquisition and the remaining shares of Globion. And this explain the evolution of our net debt, moving from negative 52. So we are cash positive at the end, net cash positive at the end of December 2023, and we have a net debt of EUR 255 million euro at the end of June 2024. So very briefly on the condensed balance sheet, I'm not going to cover all of the dimension. Maybe just to comment on the net debt on operating cash flow ratio that you see at the bottom of the slide.
We were negative, we are slightly positive, zero point seven, but it's still an extremely favorable financial situation in which we are. Shareholding structure. As of June thirtieth, 2024, nothing has materially changed. The Dick family continues to remain the majority shareholders and having around 66% of the voting rights. It's now time to give the microphone to Sébastien, who will cover the remaining of the presentation.
Thank you. Thank you very much, Habib. It works? Yes. Thank you very much, Habib. I'm very pleased to present you excellent results. I don't wish to say exceptional results, because I think you may be used to that over the last few years, and hopefully it will continue. But excellent results. I'm not going to cover again what Habib explained, but we have a very significant growth. In fact, what maybe matters the most is we keep gaining market share, and we keep outperforming the market, probably around two times the speed of the market growth. What is remarkable is this is happening in all the region. We have a very strong organic growth across all the geography. Double-digit in North America, double-digit in Europe and Latin America, with the comeback of Chile.
The only exception, as Habib explained, was Pacific. Pacific has a very strong rebound in the second quarter, after a very weak first quarter. We know the market is extremely weak, so even there, we are gaining market share, and the situation is much better than the one of our competitors. We could be very proud of the teams all over the world. This is also good because we see the performance in the key product of Virbac. You know that we talk about the Virbac buster, trying to develop certain franchise, certain products, to a level of sales above 50 million EUR. We have product like VeggieDent, Zoletil, Movoflex, of course, Milpro, Suprelorin, Evicto, all of them are growing quite strongly.
Some of them above 30%, some above 10%, but all of them performing extremely well. We are very happy to gain market share, and as we explained in the past, when the sales are growing quickly, there is a leverage effect on the profitability. Of course, with the current performance, we have now generated the highest level of EBITDA before R&D in all the time, all the history of Virbac. We are close to 28% now at constant rate. It's an improvement of around three points, and that is, to me, extremely important because it means that the performance is sustainable. We have not improved profitability based on cutting OpEx, cutting expenses.
Our OpEx are going up 10%, so to support the growth, we are growing sustainably through improvement of the gross margin of our products and of the EBITDA. And the recurring EBIT is at 21.2%, so a very good situation for the company. And as Habib explained, we have a very low level of net debt, which allows us to keep going on with our programmatic M&A. I will cover that later, but after Globion and Sasaeah, we are still looking at some dossier, and we will keep on with M&A activity. More on the programmatic side, which is a smaller acquisition, as we explained before, but we'll keep doing that.
In terms of geography, we wanted to cover the three large countries, which have been performing very well, and the one which is also a large country for us, but that has been performing less well. So USA, 22% growth at constant rate. It's growing all over the category, dermatology, dental, specialty, so many of the products are performing well. The only exception is a bit in parasiticide. As you know, we have kind of old parasiticide, and as you also know, we have increased R&D spending for four years now. Increasing very significantly our R&D spending in order to develop new products, especially in parasiticide, and to come once the patent will expire, with many new parasiticide products, which will be quite innovative.
But all the other categories are going quite nicely, and we have an expectation for the full year of a double-digit growth. In Chile, a very strong comeback with our parasiticide product, which is being widely used now. That is supporting the growth. In terms of vaccine sales, they are more or less flat, but the parasiticides are doing extremely well. You also know that we have a case against a distributor that cut the distribution of one of the product. This is ongoing in the Washington court, and we hope we'll have positive results. But this is not an accounting year, because this is without this product, of course, which we are not selling for the last 18 months.
In the U.K., we wanted to highlight the performance in the U.K., because over the last maybe five or six years, we have said that we were having too much of a low market share in the U.K. in comparison to other market, like France and Germany. And so we put a huge level of focus on U.K., and the team has done a fantastic job, and we have been growing constantly above European rates across all of our geography in Europe. And so U.K. has been a top performer for many years, and we decided to speak about it now because it's one of the biggest market in the world. And we are pleased that this year, with 23.5% growth at constant rate, we pass number five in the local market.
We pass Dechra, in fact, in the local market, and we are quite happy, and this is coming from all the very diversified portfolio we have, as we have Suprelorin, we have the microchip, we have the vaccines and the parasiticide. Australia, very, very complicated first quarter with a very unfavorable base effect, linked to the very good performance of the last two years. We had a double-digit growth in Australia over the last two years. The first quarter was very weak for the market, and we have suffered. A quite strong comeback in the second quarter, so we are minus 0.3, if I'm flat, more or less, at the end of June. We expect that the market start to show some sign of rebound, sign of improvement, so we expect this to improve.
But here again, despite the performance, we are outperforming the market, especially on vaccines, for livestock and with the new product we have launched. In terms of acquisition, just a quick update on Globion and Sasaeah. So Globion, as Habib explained, is going extremely well. The team locally has done a fantastic job. We are number one in India, in Animal Health. You know that. We have more than one thousand people. We are extremely well equipped, but we see now that we manage to add the poultry vaccine to our current product line, and we perform extremely well. So the two most important elements for me are the third-party customer, which is a market outside of Suguna. Suguna has been the company who divested this activity.
We have a contract with them, so we are obliged in one way to buy a certain level of vaccines, so that could catch up during the year. So we have a minimum level of purchase guaranteed by contract with them, so it's not the most important point. What is important is how well this activity develop outside of Suguna. And here we have 53% increase in the third-party customer in India. So it's extremely a good sign for us, a very dynamic growth. And in term of export, which is outside of India, this is also something we wanted to develop. This will take more time because we need to have a registration dossier, approvals, and things like this, but already we have 22% improvement of the activity.
In Japan, the process will be a bit longer because, to the opposite of India, we were much smaller in Japan. Then there is, of course, the language barrier, but we have sent one of our best performers in Japan to manage the company locally. And the integration roadmap is fully completed in terms of design, and we are now trying to find the main opportunities that we have acquired through the acquisition, for instance, of the manufacturing site. We have increased capacity in a tremendous way. We have many opportunities to leverage this on the manufacturing site. There are many things we could do in Japan in terms of vaccine production that will probably allow us to reduce CapEx and investment in other parts of the world.
We even consider to find synergies by closing some sites to reduce OpEx and transferring some of the product there. So there are many opportunity to explore, even if this will take time, of course, because you know, in pharmaceuticals, the manufacturing transfer takes some years. But today, the current performance is quite good. The affiliate is growing 6% at constant scope and rate, and with Sasaeah, of course, the growth is 328%, which is a very significant transformation locally. So all that, extremely positive and in line with expectation. I... As you know, because of my resignation, we decided to make just a quick focus on what has been achieved over the last six and a half years.
Just because sometimes we look at quarter after quarter, but what really matters for Virbac is very long-term and sustainable performance. In 2017, the company was heavily indebted. We had EUR 460 million in debt on a turnover of EUR 362 million. There was a low product margin, and so very limited room for maneuver, and the R&D expenditure were of EUR 69 million, okay? And the EBITDA of 9%, with EUR 58 million of EBIT, and the net income of EUR 29 million. The share price was around EUR 123, and there were 4,800 employees around the world. In 2024, Virbac has very little debt.
In fact, following the acquisition of Ceva last year, we finished with EUR 52 million cash at the end of 2023, but with the acquisition, we still have a debt-to-EBITDA ratio below one, inferior to one, and therefore, we still have a considerable room for maneuver. You will probably see in the coming months or years that we keep executing our programmatic M&A approach because we have the intention to keep remaining very active in M&A. We expect sales above EUR 1.4 billion this year, so it's quite significant when we recall that we divested Sentinel. Sentinel was around EUR 70 million, so we have a very significant growth over the last six and a half years. Double digit expected this year, and we will improve margin seven point above the level of twenty-seven.
When I say margin, I'm talking about product margin, which is a part which make it very sustainable because it's linked to the quality of the product, the price positioning, and the product mix. And we saw that we have been able to improve that line very, very much, and it was not just by managing expenses and OpEx. And so we have an EBITDA ratio expected to be around 16% for this year, and as you know, it's 21.4% at the end of June. And we have more than 6,000 employee today, which mean that the company has really grown very nicely over the last six years. What is probably more important than this figure is the fact that we have gained market share constantly, year after year.
Every year, we gain market share, and over the last six and a half years, I think we are the number one in terms of organic growth, if we look just at the organic growth. In all the market data we can find, most of the time, pet food is not recorded, but if you consider pet food, which is a significant part of our growth, we have the strongest organic growth of the animal health market all over the world, over the last six and a half years. We have gained market share in every species, despite the huge innovation we have seen in companion animal with monoclonal antibodies, new class of parasiticide. It has been a bit more difficult for us over the last few years. We still have increased from four point six to four point eight, and we expect...
And this is without pet food again, huh? Because pet food is most of the time not tracked into this kind of statistic. So we move from 4.6% to 4.8% market share, and that is before the arrival of all the new products we will have in the coming years, with the launch of all our new parasiticides and all the innovation we have put in the pipeline over the last few years. So we will probably see an even better performance in companion animal moving ahead. In cattle and ruminants, we move from 4.4% to 6.9% market share, so that is a really great performance across almost all geographies.
Even swine, Abi mentioned it. We have started to increase from two to two point five, but now we see an acceleration in swine vaccines over the last eighteen months, two years. We are entering the poultry vaccine segment with the Globion acquisition, and that is a very dynamic market. So that should also help us very much in the coming years. In terms of countries, most of them, we gain market share. This is a list of countries where we have gained market share significantly. You have small countries like New Zealand, Vietnam, but you have also a very large country like USA. And many countries in Europe, France, Germany, Spain, and all the regions of Latin America, because whether it's Brazil or Mexico or Colombia, in every country, we have gained market share.
In terms of segments, you have the list below. I will not look at it if I read it, but it goes from the parasite side, endoparasite side, not ecto. As you know, in ecto, we lack the innovation of the isoxazoline that we will have in a few years, but not yet, and all the other segments, we have been outperforming. It's not just about gaining market share and financial performance. To us, as we are very much invested in the long term, in a sustainable performance, we also look very carefully at the social and ethical performance. Great Place to Work has been something we launched in 2018, and we have improved more than 11 points over the period.
Despite the COVID, despite the inflation, the war in Ukraine, where the mood of the people could have been the touched in 2023, 2024, with inflation, things like this, we have seen a significant improvement in almost all dimension. In particular with management, which has been perceived as being walking the talk and representing the culture of the company, or whether it is on the business conduct, and with more than 14 countries, we have been certified Great Place to Work. We are quite proud of this social performance and the fact that the people are really strongly engaged and really highly committed to the company. We have also improved in diversity, nine point, with trying to become more international and with a better representation of women.
This is true in the management bodies, and we have moved from a group executive committee, which now is close to 40% of women, versus a board or executive board that were made only of men back in 2017. The professional inequality index has also improved. The accident frequency rate reduced, and so we have tried to maintain a very social approach in Virbac over the last few years with the crisis, with inflation, with all we know, and that has paid. As, as I mentioned before, the team are really engaged. We do that for the people, but we have also to take into account the planet and the environmental performance.
We have also performed over the last five years with 16% reduction in the CO2 emission, with the energy down 13%, the water consumption 23%, and we have created a department just in charge of all that, setting up a new direction, new objective for 2027 and 2030. Last but not least, with my departure, I wanted to insist that the governance of the company is very strong. When I took over the job back in December 2017, we have created what we call a board office. Now we created the group executive committee, of course, that was made of three people. We moved to eight people, so it is much more diverse, much stronger, with a better representation and more competency within the team.
We have also created a board office to help us in the execution of the strategic plan, and that has probably helped us a lot in being very rigorous and very good in discipline for execution and in speed. And we have a global network team, which is made of the top ninety people, of the group, all over the world, with all the country managers and all the main function represented. And this allows a very rapid, very quick, and very strong alignment on any strategic plan we want to implement or on any remediation action or any plan we need to push in a short period of time. So this alignment of all these people, we meet once a quarter, allows us to have a much, more rapid and much more, much stronger, execution.
I believe that with this in place, the governance is extremely strong and will keep delivering results in the coming years. With that, back to what we intend to do. I'm going to go quick because this roadmap to 2030, we will keep presenting it every semester, I guess. Just a quick update, so Great Place to Work. We explained that we have improved on all these dimensions. What I would like to remind you is what we intend to do in a very few sentences. Number one, over the last three years, we have increased the R&D spending very significantly. Remember, we have increased R&D spending by more or less EUR 40 million per year.
That was the intention, to move from 6.5% of R&D after tax credit, 7.5% before, 6.5% after, back in 2021 to 8.5% this year. That is... That was the plan, but the intention behind that is to have a full pipeline of new product. Some of them will come next year, and a big quantity of product will start to come in 2027, with large product, in particular in the field of parasiticide. And so this innovation was the best way for us to invest our money, and so we have now a pipeline extremely rich. The second one was to have a programmatic M&A, not to buy a huge company and make it very transformational and complicated to digest and shock of culture. No, this is not the ambition.
The ambition is to make many small acquisitions that we can digest easily, that will not slow us down, that will not occupy too much of our resources, but to the opposite, that will add product, add competency, and help us grow faster in the strategic dimension where we want to go, and Globion is a good example. Sasaeah is a bit bigger than what we will have targeted, but of course, it's a question of offer and demand, and we have many projects at the moment we are looking at, and I believe some of them will come through. Competitiveness is the last pillar. The first two are really engaged. Innovation is really engaged. Acquisition is really engaged. Competitiveness is also truly engaged, but some of the execution remains to be done. We have a new logistics and warehouse center that is being built in Carros now.
We have a new plant for pet food in Nîmes, which is currently being submitted the building permit and the different administrative dossier to get the authorization to do it. We have the transfer of Suprelorin, which is one of our big product from Australia to Carros. That will be very good because it will absorb fixed cost. And we have the intention to do a new site for biology and vaccines, because if you follow Virbac since twenty twenty, we have missed many opportunity of growing during the COVID period, and now recently because of the vaccine.
Due to capacity and due to the fact that our manufacturing site becomes a bit old and that we need now to increase with a new site, more capacity, but also more technology to produce at a lower cost of goods with more productivity. So that's what we'll try to do in the coming years. In terms of country, where to play? USA, I mentioned it. We have gained market share recently. We are now going to launch a new product. The therapeutic pet food will be a key element to track and to follow, because when we launch only the physiological range, it is difficult to penetrate. But as soon as you have the therapeutic pet food range, which is what vets, veterinarians are used to sell, it should accelerate the penetration in the pet food market.
That is something that will have to be tracked. It will be planned for the end of next year. Farm animal entry, same thing. The big products are coming next year, so that is something that we'll have to track in the coming two to three years. We keep developing, unfolding the roadmap to grow and develop more in the US. China, very good news. We launched the parasiticide eighteen months ago. The pet food was launched late November 2023, but as a pilot to test the right approach. It is being expanded this year very, very aggressively. We have extended the pet food launch to many more countries, many more cities, sorry, to many more cities. We have just obtained this quarter the dog vaccine registration.
We are among the top three company with the dog vaccine in China. Now that we have the three legs: parasiticide, pet food, and vaccines. We have a complete range, complete portfolio to be able to accelerate our growth and market share in China. In terms of segment, products, and pipeline, I will not comment too much again. We have blockbusters and the key products are growing very nicely. Pet food around 14%, specialty 21%, vaccines 46%. That's probably the most important part, the vaccines. That is outside of aquaculture. But aquaculture is growing. You see in the growth venture at the bottom of the slide, 55%. The swine vaccine is growing 52%, constant scope versus last year. And if we add the poultry vaccine from Globion, of course, it goes to 128%.
All that to say that we mentioned that vaccines and pet food, pet care, but vaccines is one of the key dimension, key element of the strategy, and we are executing it very well with all that. In terms of processes, just to let you know, we have the successful deployment of our ERP, MES, LIMS, and EPIMS in France at the beginning of this year, and so now we are expecting the roll-out in the other country in twenty twenty-five, but this has happened nicely without any disruption, and so we could be quite happy with that, and the digital business transformation is ongoing, with 51% growth of the e-commerce in twenty twenty-four, more or less in line with what we did last year. I think we are coming to the end.
We presented this roadmap in March, the part in gray. At that time, we had a guidance of 15% EBITDA. So we say we need five points from to move from 15% to 20% before twenty thirty. So we had presented three source of profit improvement. Two points coming from R&D spending normalization, that we explained. Two points coming from the margin rate expansion, and two points coming from the OpEx. Two plus two plus two, then six points versus the five point we said we had to go for. We see that this year we will outperform the guidance and what was expected at the beginning of this year. So now we have only four points to go to reach the 20% EBITDA. Only four points to go.
So we will adjust this slide by next year to see whether some of it has already come from the R&D spending or from the margin expansion. But we are very confident that with this free level of performance, we have enough room to guarantee or ensure the reach of the 20% before 2030. And so the guidance, which we have reaffirmed at the moment, is net revenue growth at constant rate and scope from 7-9%. Of course, with the acquisition of Globion and Sasaeah, it will be between 12.5 and 14.5. EBITDA ratio is 16%, same thing, constant rate and scope.
We have said that the acquisition will be slightly accretive, bringing a bit more EBIT in term of ratio, and the net debt evolution will be a cash generation of EUR 60 million, which is above the previous guidance. And with that, we can open the Q&A session. Thank you very much.
Yes, I have some questions from Christophe Ganet. Let me read the first one, in two parts. What is the reason for the phasing in of R&D expenditure? And what level do you anticipate for two thousand and twenty-five R&D expenditure?
Yeah. So, the probably the main reason for the phasing of R&D expenditure is our budget cycle, which is an annual one. So, this could have an impact, you know, a rolling basis every year. So we tend to have more expenses during the second part of the year versus the first part of the year. We expect to be around as a ratio to sales around 8.5%. And I say expect, because it's still too early. We have not finalized, as you can imagine, the budget. So it could be below that, it could be above that.
It will very much depend on the projects that we have and the intensity, but it shall be around that percentage as a ratio to sales.
Maybe just to add that with the acquisition, we may have a positive effect on the ratio, because some of the companies we have acquired do not require so much R&D in terms of R&D spending. And so we may have a slightly lower percentage of spending in R&D in some of the acquisitions we do, or synergies, if you wish, because sometimes we develop the same kind of product. So that could help also the ratio in the mid-long term when we will look in the coming years.
Question two: How should the contribution from acquisition behave in 2025? Will we see some accretive effect or not?
Yeah, it's a good question. So we mentioned with Sébastien positive impact in 2024, 0.5. I mentioned the fact that it's still too early to be definitive on the R&D. It's about the same on the acquisition. There are still works that are being conducted regarding the integration. So it's difficult to say. I would say still that we can expect a positive impact, and but I would, I think, it shall be in the order of magnitude of what we have seen in 2024. But it could be slightly below that or slightly above that.
... And maybe just to complete as well, the current acquisition we are looking at should be accretive if they come to realization, and we will still have the one more quarter for Sasaeah. So as you saw, each time the sales are growing very nicely, it's easy or easier to leverage on the bottom line. So we will have one more quarter, and we know Globion is doing quite well, so hopefully the dynamic of Globion will remain and help also.
Question number three: How did the headcounts evolve?
What do you mean by the headcount? The headcount, we have added more or less 500 people with Sasaeah. It's much less with Globion, and we keep adding people because the company is growing very fast. So we keep adding people in all the key areas, whether it's manufacturing, vaccines, R&D, for instance. We have very good people, very good talent, who have joined us in R&D for vaccines, which is one part of our strategy for the long term.
Thank you. Question number four. Can we have an update on CapEx for 2024 and 2025, given your HQ and the pet food manufacturing site projects?
Yeah. So we are, as you know, and we have extensively discussed or presented that on several occasions. We have an intense CapEx program that we are conducting with several key projects. They are moving according to plan. The pet food site is moving. You know that we have some difficulties locally, but we are addressing them. And we mentioned last time that we will have some more updates at the end of this year and beginning of next year. So it's we are progressing on those projects, and it's the same for the headquarters.
There is some timing, obviously, and so we expected to spend around EUR 100 million of CapEx for this year. We will probably spend less than that, but it will translate into a higher CapEx level to be spent in 2025, as some of the spending will move from 2024 to 2025. But overall, the plan is going according to what we want it.
For HQ, the same?
Yes, the same.
Last question from Christophe Ganet, regarding U.S. revenues, but he asked the question before you talk, Sébastien. The question is: Do you observe any slowdown, as Vetoquinol said? But you announced a plus twenty-two-
No, no, we don't expect any slowdown. To the opposite, what we are trying to do is to transform our U.S. position. You know that the U.S. is more or less 35% of the global market. If you look at our market share, we are quite strong in many geography besides U.S. and China. So we are trying to push, push, push the lines in U.S. and China. And in U.S., we have made many choices and many decisions over the last quarter that should pay. Hopefully, it will. So we remain confident, and so far, so good. We don't see any slowdown, and it's always difficult when we look at the U.S. market because there is a type of diversion from the classical vet business, where we have data to the online sales, Amazon, Chewy, and other sites.
And we know that because our product range made of pet care product, for instance, we have a very strong dynamic in these segments, which are not always tracked and reported as for classical pharmaceutical product on the on the vet side. So, well, and then Vetoquinol and us are not exactly on the same product and segment, so I can't comment for them, but for us, we don't see that so far.
Thank you, Sébastien. An additional question from Arnaud Cadart: Should we understand when you talk about the guidance of cash position improvement around 60 million EUR over the full year of 2024 as a net free cash flow, which means after dividends?
Yes, this is EUR 60 million after the payment of the dividend. Yes.
Thank you, Habib. A question from Julien Baudouin: Could you please comment on the development of specialized e-commerce platforms, notably in the United States? Are they gaining market share? What are the impacts on your business model, prices, marketing?
I'm not certain to have understood the question, so I will try to answer, and you tell me if I'm okay. We know it depends segment by segments. But for many segments, to make it simple and to understand, the vet, the frequency of visit to a vet is once a year or twice a year, and people go on the internet every day. Vets don't have a lot of space to store product. On internet, you can have warehouse and store a lot of products. So each time there is not a prescription, each time it's a product which do not require prescription, the market tends to overdevelop and grow very fast on internet. And it's not. We don't have the choice than to go with it. And so that's why we have, in many country, developed webshop.
Why webshop? Because we want to benefit from that while we keep the vets in the loop. Historical partner and purpose is a relationship with the vets, and we want to remain them in the loop. So what we are developing is webshop that allows us to keep the vet in the loop while we benefit from the home delivery and all the, you know, the direct payment, it's a word now. When you do the shipping, you have a direct payment charge on their credit card, and you have the auto-ship. The auto-ship. So it's a auto-ship program where you have the home delivery, and we benefit from that while we still have the vets in the loop, recommending, advising, prescribing. And that is very powerful.
That's what we do everywhere, and yes, that is gaining market share when you look at this category of product, which you cannot compare with injectable vaccines, implant, anesthesia, and other kind of product or prescription products. So here again, the complexity of animal health forces to divide the product in category to really understand what's going on.
Thank you very much, Sébastien. So a new question from Just James Vane-Tempest: Given the mix from some of your recent deals, how should we think about your longer-term margin target? If you can get R&D leverage, and B, any benefit from the sustainability of cost reduction that you are targeting.
This is very clear. First, in terms of M&A, which is another part of the question to me, we are trying to bring M&A. When we do a livestock vaccine, for instance, we know this is higher margin. Vaccines in livestock, we know it's structurally higher margin, so we try to find M&A that will be accretive. Now, when I go to your question, is. Yeah. We say that we will. There is no reason why Virbac is not at or above the average of the market in terms of profitability. So when we define that, it's a bit. It could be argued, because you have some company, which I will not name, but the biggest company with a much higher level of profitability than the smallest company.
So you have a huge standard deviation variance in the profitability level. But we have defined that the average of the industry was around 20%, and so what we have said, like three years ago, back in 2021, there is no reason why Virbac should not be at or above the average profitability level of the animal health market. And we have targeted 20%, and we are proving now, end of June, that we will manage that. There is structurally absolutely no reason why we cannot do that or much better than that. What I was sharing with my friend Habib is probably over the last two years, with the COVID and all what we have seen with inflation, the overall average of profitability of the animal health market is slightly improving.
So we will have to go for the 20%, and once we will get there, we will see what it means and whether the average of the market is still at 20% or is at 22 or whatever, and we will try to outperform that. Because, in fact, there are two dimension we are measuring financially: growth, and in term of organic growth, we are really outperforming, and financial profitability, profitability. And here, we were below the average, and that is not acceptable to us, so we have a clear roadmap to be at or above the average of the industry. So hopefully, this explain why we want to go at or above 20%.
Okay. So still about R&D, a question from Sarah Thirion: Two out of five points of margin gain were supposed to come from the normalization of R&D in percentage of our revenue, after still 8.5% in 2024 and 8.5% in 2025. What would be the normative level of R&D in the long run, not to create a break in the effect of launch?
No, we not get any break. I mean, it's. I think one of my slides will respond, answer to that. We were spending 69 million EUR back in 2017, and that has been the history of Virbac as we were managing R&D by ratio. So we were spending more or less 70 million. We are spending more than 125 million EUR, so way above the 70 million, and because we wanted to disconnect the R&D spending from the ratio, as we make a very long-term company thinking in the long term. The R&D ratio and the level of spending in R&D should depend not only on the sales, but should depend on the opportunities.
And when you have a patent cliff, when you have a family of product that goes off patent, it will be, sorry, a bit stupid to not spend the money in order to benefit from it. And as we have this opportunity to do that, we have decided to over-invest, to be ready on day one, to be competing against the big guys on all this market of isoxazoline and isoxazoline combination as soon as possible. Once this product will be off pipeline, I mean, finished, developed and launched, there are not so many new behind. There are the monoclonal antibodies and other category, but some of them come in 2032, some in 2035, so we will adjust based on the need. But what we don't need to spend to spend, so it will always be linked to opportunities.
We will seize the opportunity. That's why Habib said it could be a little bit above, a little bit below. It will depend on the program. Based on M&A, we also accelerate very much the top line. You understand that when you add 16% of top line, and you have to spend 8.5% of your top line, it's so much more money you have to spend. You need to have the team, you need to have the space, you need to have the rooms. I mean, you cannot immediately transform that in spending. Just be reassured, we are not going to cut R&D for cutting R&D. We have accelerated R&D to a level we never did before. When we talk 8.5%, I explain again, it's 9.5%.
8.5 is 9.5% because there is a tax credit in France of more or less one point, and we have one third of our turnover coming from pet food and pet care, where the spending in R&D is close to 2% to 3%. So if you take into account these two things, tax credit and one third of our portfolio made of pet food, pet care, in fact, our spending on pharma is way above, way above all the competition. So just be reassured that there is no reduction of R&D that will create a large break, to the opposite.
Thank you, Sébastien. So far, to my knowledge, I am going to ask you the last question, unless some additional arrived, from Edward Bottomley. "Given the very strong margin development in the first semester, your full year guidance implies an abnormally high drop in margin in the second semester versus first semester. Is there any particular reason that will drive this decline, or is your guidance being conservative?
It's a good question. Maybe a bit of a reminder of the seasonality that we have, that Virbac has when we compare H1 with full year. So I mentioned the seasonality on cash flow. We also have a seasonality on profit generation. Historically, if you look at 2021, 2022, we had around four points of margin drop. And I talk about a bit adjusted comparing H1 with full year. Last year, if you look at, it was only three points. When you compare H1, we're at 18.18%, and we finished the year around 15%, so three points.
But if you remember, we had a very special first semester last year with the impact of the cyber plus the cyber crisis that we had, the vaccine as well. So this year it's slightly above. If you do the math, as that has been done, we'll have a higher drop. But there is also a very special configuration that we have. We have a very strong first semester in terms of dynamic of sales. We expect to have still growth, but less for the second semester. And we'll have a second half in terms of sales that will be below the first half, which was not the case last year, for instance. So we have a bit of a scissor effect with acceleration of the cost.
We have more cost during the second part of the year versus the first part of the year. I mentioned the budget cycle. This plays a role. We are very prudent as well, and that's part of the culture of the company, making sure that we invest if the sales are there. So that has also shape a little bit this seasonality. So we'll have a sort of a scissor effect with less sales and more cost, which explain why this year it will be slightly above what we typically see on a sort of a normal year for Virbac.
I have additional question. Just, two seconds for me, two seconds for me to be able to read it. A question, I love this question. Oh, I love the forthcoming question. It's for you, Sébastien. Sébastien, if I may, if he may, you still seem very hands-on. Are you really sure you want to retire?
Yes, but it's not a retirement, it's a break. I really need a break, maybe because I am too much hands-on. So I really need a break. I explained the reason. It's personal reason, has nothing to see with Virbac. Virbac is just an amazing company. It has been the my professional love. It's eighteen years with the company, and except my wife, who was twenty-five years, this one has been the longest relationship I ever had, eighteen years. So it's been the my professional love, and it's only for personal reason, but I need a break. But I'm too young, so yes, probably I will come back, and I will do something in the future, but I don't know yet what and how, but I remain confident, so.
So the two following questions are still on the same topic, Sébastien. So, so Laurence Aglio said: "What? Sébastien is really leaving? Virbac is on top, on top form. So are you. Whom do you... do replace you, or, or who is going to replace you? You've done a great job.
Thank you very much. Thank you very, very much. The most difficult part in this is the decision to leave many, many friends. I know it's a temporary leave. As I say, hopefully, I will come back at one stage. But the people, the employees of Virbac, it's very painful. Many, many friends, it's like a huge family to me. And the investors and the relationship we have developed over the time, it becomes very close relationship and with sometimes some jokes and things like this. So all this atmosphere, I will be missing very much so. I don't know how long I will last without it, six months, one year, one year and a half, I don't know, but certainly. Who will replace me is Habib. Habib has been working with me for eight years.
We have been collaborating very, very closely, and if there is one person in the world that I will trust to endorse what we are doing, that is very well aware of the strategic plans, the mission, the roadmap, the ratio, and has been always next to me, helping me, supporting me, is Habib. So yes, I deposit my full trust and confidence in him, and I'm sure that you will see the level of execution you have seen so far. The strategy we was built all together. It's clear, it's well communicated, we just have to execute, and I think the team is really prepared for that. Otherwise, I would not have left, to be honest. I have a professional conscience that make that if I would have thought that the team was not prepared, I would not have leave now.
But if I leave, it's because, as you said, the company is doing extremely well. The dynamic is very strong. It has been robust for many years, and it's just to keep on going.
Sébastien, may I add-
So-
that is a temporarily,
Yeah, I will.
situation. Yes.
Yeah. So I'm replacing Sébastien on an interim basis.
Yes.
Just to be 100% clear, I'm very honored, obviously, to have been given that responsibility, and you can count on me to continue what we have done together. I know I have the full support for that interim period from the board of directors, from my colleagues, a lot of colleagues within the company, from the executive committee, but also from all over the place. As you said, we have a very clear roadmap, so I will and continue to endorse that with a lot of passion, enthusiasm, and serenity.
I'm not a candidate for that position on a medium to long-term basis, and I have a full trust on the board of directors that are conducting a search to find our new CEO who will fully embrace all of the Virbac cultures and values. I'm 100% sure of that, and I'm extremely serene.
And then-
And just maybe to complete-
Yeah.
We are very active for the last three months in the search, so we already have identified some short list, and we are collaborating, Habib, the board of director, the-
You mean the appointment and compensation committee?
... the family and myself, to find the right profile as the next CEO so we should be confident that this will be well done.
Last question, because there is a small detail in that question always regarding your departure, Sébastien, from Alexandre Dusseur. "Are there any particular reasons for the CEO departure, and will this have an impact on M&A strategy?
No, it will not have any impact. Before my departure, we have recruited a fantastic profile, really fantastic profile in M&A. It will be announced in due time, but it's a fantastic profile. It will help us a lot, and the reason of my departure is purely personal, so there is absolutely no nothing related to Virbac, nothing related to the status of the company or anything like this. It's, I think I shared that in the past. I spent twenty-five years married. I got a painful divorce, which finalized in June. I want to take a bit of time for myself after thirty years of dedicating myself to my family and to Virbac, and I think it's now time to do it for me because I will have to work again for eight or ten years later.
So I want to make a break for one year or one year and a half now and try to come back with a lot of energy, which is important, and passion and willingness to do so.
Thank you, guys. I guess we have come to the end of the meeting. I don't have any additional question. It has been a privilege, Sébastien, to work with you during this year. It is our last webcast, so I want to thank you all, Bruno, Florian, Habib, and Sébastien. And thank you all, you attendees, on behalf of the Virbac team, and for your attendance, of course, and for your loyalty to our company, and I wish you a very good end of day.
Thank you very much. All the best to all of you. Thank you!
Thank you.
Bye.