Good afternoon to all, and welcome to the Virbac 2024 annual results webcast. We are very pleased to have you join us. Today's call is hosted by myself. I'm Sandrine Brunel, Head of Corporate Communications at Virbac, and the presentation will be given by Habib Ramdani, our Interim Chief Executive Officer. Before we begin, I remind you that the slides and additional financial materials presented today are available in the Investor section of our corporate website, and the replay of the meeting will be available at the conclusion of the meeting. You can submit your question using the chat feature located in the bottom right-hand corner of your screen. If you are far away, not with us in the room, we will answer all the questions during the question-and-answer session or follow up afterwards if we run out of time.
It's now my pleasure to turn the floor to Habib Ramdani.
Thank you, Sandrine, and good morning, good afternoon, and good evening to all of you. This is my pleasure to present to you the 2024 results, which will be the first part of this presentation. I will then move to a few slides to provide some perspectives as well as a view on what we are delivering as part of our Vision 2030. I will end up this presentation with one slide to share with you the guidance, what we expect for 2025. Let's start with our full year financials, a couple of slides to give you a summary, and then I'll go a little bit more into the details on the different components of our financial results. A great year, 2024. We have delivered 13.6% of revenue growth at constant exchange rates. What is remarkable is the way it has been done.
You remember that we are working on two different engines in order to fuel the growth of the company. The first one is organic growth, and the second one is acquisition. You see that in 2024, we have delivered half of the growth on organic, and the other half has been made through the strategic contribution of our acquisitions. Fully aligned with what we try to achieve on a yearly basis. The organic growth has been quite solid, 7.5%, which reflects as well a very good momentum of many of our products, including our key product. That is another remarkable point of what we have achieved. A good portion of the growth is coming from our strategic product, the key product within our portfolio, namely the vaccines, the pet food, some pet care products, some specialty products. I'll go into more details in the following slide.
It has been done as well in a context of a favorable market dynamics. You will see that 2024 has been quite dynamic in terms of the market. Final comments on the top line is the solid performance in all geographies. We have been able to deliver growth everywhere with the exception of Australia, Pacific region, and I will come back to that later on with a little bit more details. This very positive increase on our top line translated, as you can see, into a nice growth of our EBIT adjusted, which reached historical high, 16.6% of EBIT adjusted margin or 16% at constant scope without the impact of the acquisition. This growth has been essentially driven by a gross margin improvement.
This line has improved by 1.7 percentage points at constant exchange rate, which is a combination of, obviously, the volume increase, but also a favorable product mix as well as pricing. You see on the other side of the slide that we've been able to increase price at around 3% in 2024. Obviously, this is an average, and we have a variance that is quite important depending on the product line. We have continued to invest in our operating expense. At constant exchange rate, it increased by 14%. It's driven by personnel cost, obviously the impact of inflation. The personnel costs are based, the increase of the personnel costs in 2024 are based on the inflation of 2023. There is always a lag time.
This has weighted on our expenses and also the good years that we have done with a net result that is significantly above our initial guidance and the budget as well, has generated some additional personal costs. External costs as well with travel. I remind all of you that 2023 was a particular year with the cyber attack that we suffered. We had a sort of a base effect and rebound on travel. Marketing also to continue to invest on our project and some special projects. We had some runoff cost on legal that is a bit higher than what we typically had in the past. We have continued to invest heavily in R&D, 11% growth. We have now invested for increase our R&D expense as a ratio to sales for several years.
It has nonetheless remained stable at around 8% in 2024, essentially linked to the dynamic top line that we had. Finally, and I'll come back to that, M&A has been accretive on profitability in 2024, as you can see on the top of the slide. Let's move briefly on the exchange rate. You see the unfavorable impact, essentially in Asia-Pacific and Latin America, -EUR 19 million of top line linked to exchange rate. This is, however, compensated by the fact that we have also significant cost base in local currency in many geographies. We have been able to offset part of that impact, and the impact on EBITDA has been limited to around EUR 5 million. The impact on the EBITDA ratio has been as well quite limited at 0.2 points. Let's continue to move on net result.
We have increased our net result, moving from EUR 121 million to EUR 145 million. This is a significant increase. The financial result has remained stable at EUR 9.3 million, in line with the previous year. We've had a higher cost of debt, but compensated by a lower exchange rate impact. We have had also this year an improvement of our effective tax rate, moving from around 27%-28% that we typically had in the past years to around 25%. This is essentially driven by a country mix effect. The contribution of some geographies has been less as a percentage and countries where the effective tax rate is higher, namely, for instance, Australia. Let's look at the cash.
We're moving from a negative net cash situation where cash positive at the end of 2023, if you remember, -EUR 50 million, around -EUR 50 million, and we moved to a positive net debt situation, which is around EUR 168 million. This is essentially due to this evolution to the acquisition that we made in 2024, the acquisition of Sasaeah, the Japanese entity, as well as the minority shareholders' acquisition of Globion. You remember we've done that in two steps, one step in 2023, the second step in 2024. We spent around EUR 300 million for the acquisition in 2024. The good news is that it has been partially offset already by a strong cash generation at constant scope. We have delivered around EUR 90 million of cash generation outside of the acquisition. A very solid year in terms of cash generation.
Our net debt on EBITDA ratio remained quite favorable, 0.6x. It was obviously negative at the end of December 2023. 0.6x gives us some room for maneuver, obviously, to continue our M&A journey. This remains, and I'll cover that later on, the key priority for us as we move forward. Finally, we have renegotiated, as you know, our syndicated loan facility with an amount available at EUR 450 million and we've drawn EUR 190 million at the end of December 2024. This is for the big picture. I suggest I move on on the top line to give some colors on what we have achieved in 2024. Very briefly, as a reminder, half of the growth again coming from organic growth, the other half coming from M&A and the negative impact of the exchange rate. A quick comment on the market.
We have done that in a dynamic market. As you can see, we have the figures for the end of September 2024 on a 12-month rolling basis. The market has been dynamic, 7.4% growth, which is above what we expected at the beginning of the year. What is also important to mention is that the most significant part of this growth is coming from the new molecules, the isoxazoline, as well as the monoclonal antibodies. We are absent from this market. We have been able, in terms of performance, to deliver a performance in line with the market without, obviously, those product lines that have contributed to the majority of the growth. With our own arms, with our own product, our own focus, we have been able again to deliver a performance in line with the market.
It's also worth to mention that these market figures are without pet food line, which is obviously one of our key drivers for growth within Virbac. With pet food, we would be above that and above the market. If we look at the sales evolution by region, you see Europe and North America delivering 10% growth. Going to say, go a little bit more into the details, but a very impressive performance expected for the U.S., less expected for Europe. It's been extremely solid. The market has been dynamic as well. You'll see that all of our affiliates have grown and some of them have even delivered double-digit growth, very solid double-digit growth in Europe. An excellent performance in Europe in 2024. Rest of the world, 16.3%. This is including the impact of Sasaeah, nine months of sales of the Japanese acquisition.
We are obviously below that without Sasaeah, 6%-7%. This is also including the negative, the decrease of our sales in Australia. Outside of Australia, we've been able to deliver a very solid performance. I wanted to go a little bit more into the details and provide some insight on some of our key countries, some countries that have performed very well and Australia that had a more difficult year. On the top left of the slide, you see U.S., a very good performance, very solid performance, 10% growth, double-digit performance also on our extended sales, the sales outside of the sales of the clinics, vet clinics. The growth driver has been our key products, the ones that are targeted as strategic with the dental, the dermatology product line, the specialty as well with Movoflex, Utazol, Zoletil that have performed very well during this year.
Looking forward to 2025, we expect the same trend next year, backed by all of the effort that we are doing by some new product launches. We had some new product that has been launched in the U.S., Eradia, a parasiticide, for instance, that is doing quite well. We will have some new product launches as well next year with some specialty products, one of them being Ursolix, which is a very nice opportunity that we have in the U.S. We will continue that journey of growth in that geography. A couple of words on Europe with two countries, U.K., Germany. We have several countries that have posted a double-digit growth. Among them, U.K., 19% at constant rate. We have been able to claim the fifth position in the local U.K. market, which is quite a performance.
We've grown across a number of segments, companion animal vaccines, parasiticides, Suprelorin as well. No doubt that we will continue to capture growth with that product in many markets, including the U.K., dermatology, hygiene also, our pet care products are doing well. We expect, looking forward, to continue to grow in our CA vaccines for production. We have also the launch of Trilotab, which will continue to contribute next year. Another extremely solid performance is Germany, 11% constant rate growth. The market has been very favorable, but the team locally has been able to adapt to that and to capture and seize the opportunities in the German market and grow significantly.
Here as well, you can see that the growth has been driven by the products that are targeted and our key products, you know, Suprelorin again, HPM, our pet food that is doing quite well in Germany, growing year-after-year. Cortotic as well, if you remember, this is an alternative to antibiotics here to treat ear infection. Isotic and farm animals, we've been able to continue to grow with Rilexine. We have also launched some new vaccines for swine and cattle. A very solid year. We expect further growth next year with Germany, not with the same magnitude at 11%. It would go back to a more normal rate of growth at 4%-5%, which is again quite solid for Europe. A lot of very impressive performance. Italy has grown double-digit, France 6%. It was a very, very good year for Europe.
One of the drivers, obviously, and I'll come back to that, was the vaccines rebound. We've been able to get rid of some of the bottleneck production difficulties that we had with our vaccine production line for dogs and cats. We have produced and released much more volume, which enabled us to continue to grow and regain some of the growth after a difficult 2023 year. Australia, a more difficult year, as you can see for Australia, - 9%. We were not used to that in Australia, especially with the last three years prior to 2024, where we have enjoyed very nice growth. We are growing above the market in Australia, capturing shares. We have had some product launches as well during those years. In 2024, it has been more difficult. The market has been declining.
The main reason is linked to the market, as you can see, - 13%, essentially due to the unfavorable weather patterns, climatic situation with a lot of drought in some of the key regions for the farmers. A difficult year for the farmers and as a consequence for also our industry. Looking forward, we see some positive early signs for a possible rebound with cattle prices that are in a positive evolution late 2024 and early 2025, but it will really depend on the rainfall, especially in autumn. Above our average rainfall will be required to be able to leave the market and regain some growth there. Let's continue on our geographical coverage. On the top of this slide, North America, Europe, I've already commented. On the very bottom, Pacific, I've commented. Let me focus briefly on the right side of the slide with Far East Asia.
You see 80% growth. This is essentially linked to the Sasaeah acquisition. Outside of the impact of the acquisitions, we are very, very satisfied with the performance in China. You remember 2023 was quite difficult. We have rebounded very well, 11% growth in China. Across here as well, the key product line, the pet care, we have launched a pet food. We've done $500,000. It is an interesting start for that product ranges. We have some specialty products as well, high-end aesthetic that have done quite well. All of the efforts start to pay off in China after a difficult, again, 2023. This has been made in a context of a declining market in China overall. We have been able to grow in a declining market. Some other countries have done also very well, Vietnam, Thailand, South Korea.
Some of them have grown double-digit as well. Let me move to the other side of the slide with Latin America, 7.4%. Two countries are driving that growth, Brazil, sorry, Mexico. Very nice growth in Mexico, double-digit growth across the board on companion animal and farm animals, doing very well. The other one is Chile that has rebounded quite well, essentially linked to a very high demand for one of our parasiticides in the context of an SAS epidemic. Brazil, I shared with you at the end of June that the first semester was more difficult, but we have rebounded quite well in Brazil. We ended up with 3% growth in that country. Some of it linked to a low cycle for the ruminant activities for the farmers in the reproduction. Some of it linked as well to the limitation of production capacity in Uruguay.
We are exporting from Uruguay to Brazil some of our vaccines. We are very confident that we'll be able to deliver a much better year in 2025. Finally, India, Middle East, and Africa, 15% growth. Here as well, a very solid growth. Part of that is linked to the Globion acquisition, obviously. We've added around EUR 12 million with Globion. The rest is linked to essentially a very good performance in India outside of Globion, where we continue to enjoy growth in that country, around 5%-6%. Let me move with some colors by segment. Very briefly, the split between companion animal and farm animals remained the same, more or less the same, 59%, 60%, 60%, 40%.
What is noticeable nonetheless is within farm animals, you see the increase in terms of weight of the poultry and the swine, poultry linked to Globion, obviously, and swine linked to the development of our swine vaccines product line with some internally developed vaccines that we have launched, the PCV2 in particular, that is continuing to grow. Also some in-license product that we have added to complement our portfolio in some geographies. If we go down a little bit more into the details within the companion animals and we look at the sales, the growth by segment, you see all green. We are growing on all the segments. Again, a very solid year in 2024. Some of them double-digit, namely specialties with a contribution of, again, non-products such as Zoletil, Suprelorin, Movoflex. The pet food continues to grow quite well, 12%.
We have reached EUR 130 million of sales with our pet food product line. Parasiticides, no, sorry, antibiotics, dermatology, 13.1%. Dermatology is one of our key product lines within our pet care franchise. The vaccine, you see the highest growth coming from that product line, 29% increase. We have reached the EUR 100 million sales with our vaccines line. This is essentially linked to, obviously, the increased production capacity at our French dog and cat vaccines manufacturing sites. Farm animals, 2.4%. A little bit more contrasted picture here, as you can see. We have some segments that are decreasing. It is essentially linked to what happened in Australia. Australia weighted and impacted the parasiticides product range and explained the decrease. Nutritionals as well, you see only 1.2%. We are used to higher growth on that product line.
It's also injectable micronutrition is one of the key product lines that we are targeted internally. This limited growth is essentially linked again to the impact of the Australian markets. Vaccines and aquaculture have driven the growth with antibiotics as well, 3.6%. In terms of top-line growth rate, vaccines, 6.4% with a very good year and aquaculture as well, the rebound that I commented earlier on. Very briefly now, if we cross region and segment, you see the arrows pointing at the top of the slide, indicating growth. There is only one which is pointing downward. It's the farm animal for other developed countries, and it's linked, obviously, to what happened in Australia in 2024. Very solid, excellent performance on the top line, which translated nicely into the bottom line.
You see, and I've commented already on the evolution of our current operating profit before depreciation of assets arising from acquisitions, moving from 15.1% to 16.6%. This is a nice growth above what we expected at the beginning of the year. It is driven to a large part by the improvement on the gross margin. Maybe a quick comment on a line that I've not commented in the summary, which is the other non-current income and expenses. You see EUR 10 million expense to be compared to only EUR 1 million last year. This is linked to some expenses associated with the acquisition of Sasaeah. Some due diligence fees, banking transactions as well, linked to the bridge that we have implemented, some lawyer fees. That is why it is considered as non-current, non-recurring, and it is part of that line.
We have also included there a little bit more than EUR 2 million for restructuring costs in the context of the closure of a manufacturing site that we anticipate in Australia as we move the production in France. The net financial expenses, you see it's more or less stable, moving from EUR 9.8 million to EUR 9.3 million. It's a combination of an increase of net cost of debt, as well as a decrease of the exchange rate negative impact versus last year. Income tax increase recorded in our profit and loss statement, increase in line with the net result increase. The combination of all of that enabled us to deliver a EUR 145 million of net result. A quick word on the EBIT adjusted evolution, just to illustrate where it's coming from.
You see Europe, North America, and the rest of the world that have contributed quite nicely to the improvement of the EBIT adjusted. Europe having the lion's share of that, and it's linked to the very dynamic top line that we had. Obviously, when we increased the top line in Europe, we have a nice translation of that into a bottom line. A lot of our commercial infrastructure is sort of a fixed cost. It had a nice impact overall. We continue to be in an investment phase in North America, but still we've been able to deliver EUR 8 million more EBIT adjusted. We continue to increase our profitability in the U.S., even if it's still below the group average.
Here as well, the top line is also translated nicely into the bottom line as we have also sort of a fixed cost, not only on the commercial part, but also on the industrial site in St. Louis. We have continued to invest in R&D, as you can see, and also in some of the corporate expenses to fuel the growth of the group. R&D to prepare the future, I'll come back to that, but the ratio again has remained stable at 8%. We have also some increased expenses at corporate, include as well some industrial costs that have been accounted here. We have also some more of a one-off type of expenses linked to some of the projects that we have and some slightly increased legal costs versus what we typically had in the last two years.
Cash flow evolution, a good year as well on that front. We have increased by 20% both our operating cash flow and net cash flow. We are approaching the EUR 300 million landmark for our EBITDA generation on a yearly basis. This net cash flow has translated nicely into free cash flow, as you can see. We have increased our level of CapEx investment, and that was expected, moving from EUR 60 million to EUR 80 million. It is even slightly lower than what we expected at the very beginning of the year. The good news is on the working capital requirements. We had it weighted last year, EUR 49 million needs negative cash flow impact linked to the working capital. You see this year only EUR 6.6 million. It is essentially linked to the inventory evolution.
We are working toward optimizing our inventory after the increase that we've seen during the COVID and the supply chain crisis that we were all industries facing during several years. We are now more in a phase where we try to decrease that ratio gradually and optimize our working capital. Around EUR 108 million of net free cash flow. Obviously, this net free cash flow enables us to compensate part of the acquisition cost. I mentioned EUR 300 million. You see we're at EUR 309 million exactly in terms of spending for the acquisitions. We ended up this last year, 2024, at EUR 168 million of net debt. I will move very quickly on the condensed balance sheet. Nothing more to say. Maybe just a quick comment on the net debt on operating cash flow. I mentioned it during when I commented the summary slide.
We're at 0.6x, so again, a very favorable position to be to continue to fuel the growth of the group and all of the projects that we have, namely within our industrial transformation. I will cover that in the next section. Shareholding structure has not materially changed. As you can see, the majority shareholders remain the Dick family with a little bit more than 50% of the shares and 66% of the voting rights. Let's move now to the second part of the presentation, strategy execution, and some elements regarding the perspectives for Virbac for the coming years. Let me start by spending some time on this slide, which it's been now several years that we commented. It's a very important one because it describes the vision, our 2030 vision, and the roadmap that we have towards realizing that vision by 2030.
You can see that it has not materially changed year over years. We are very constant into what we are trying to achieve. We are obviously adjusting it whenever it's required, adjusting some of the projects whenever it is required. Fundamentally, the compass remains the same, and we are all delivering toward it on a yearly basis. I am going to comment it, and then I will show you some of the progress that we have realized in 2024 to support that vision and to support that objective of 2030. The financial target has remained the same. The one that we are contemplating is to reach 20% of EBIT adjusted in the horizon 2030. We remain very much committed and focused toward doing that.
What has been achieved in 2024 and what we have shared and what I'm going again to share with you for 2025 positions us very favorably to realize that ambition. We have several levers that we will actionate. Three of them are listed in that slide and are among the most important, the one where we allocate most of our resources. The first one is innovation. We are obviously in an industry where innovation plays key roles. We made the decision three years ago to increase our level of R&D investments to fuel what we consider to be a rich pipeline that we have, to prepare as well for some patents that will be finished in the horizon 2028-2030. It was a good time to invest and get ready for that. We have delivered on that year-after-year.
We have moved our investment from 6.5% to 8% as a ratio R&D to revenue. We are tracking the progress very rigorously year-after-year. I am going to share a few elements on what has been achieved in 2024 on the next slide. Acquisition remains a priority for us. We are still extremely committed toward acquisition. We are again a very favorable balance sheet. We have a team that is in place at headquarters locally. We are also leveraging and having the support of all of our GM in all of the countries to scout, identify, and work with us. We are very busy on that front. I cannot obviously guarantee you need to be too, too dense as we say in all of our presentation, but I can tell you that we are still extremely committed toward that and addressing that with a lot of energy.
Competitiveness, third lever, you know that we are working year-after-year to control our expenses with a very specific focus on the industrial part. When we look at and benchmark our profitability versus our peers, we are still behind on the gross margin. We are putting a significant emphasis on our gross margin through competitivity programs in all of our manufacturing sites. We are also engaged into industrial transformation with a significant CapEx investment. We anticipate to spend more than EUR 100 million for several years to fuel that transformation and that vision. We have several projects that are quite important. On the next slide, I will give some updates on a few of them.
Each of those CapEx projects is an opportunity for us to look, search very actively on productivity in the way we are making our product available, in the way we are producing them. Just below that, below those three levers, you have where to play, what we qualify as where to play in the cube, which is our market, you remember, and you know geography, spaces, segment, three dimensions. Our ambition is to continue to strengthen on the geography dimension, our position in all of the countries where we are present. We have a specific focus in two countries, U.S. and China. Those are the two major markets. In those countries, we have a market share that is below the average. We are fueling those countries through R&D, through commercial investments as well.
We have engaged over the last few years, and we have shared that in the past with a significant number of R&D projects for China, for instance, to complement our portfolio. We will continue that over the next years. I will be more brief on spaces and segments. We had the opportunity to comment on that on numerous occasions, but we have from a spaces segment, two backbones, the pillars of the company, companion animal and ruminants want to be present in all the key markets with the largest offer as possible to offer to our customers on those two segments. Aquaculture and swine, where we call that venture. We are trying to establish our position with a long-term vision to build the right portfolio.
To encapsulate all of that, I'd like to finish by the top of the slide, which is the most important asset that we have internally. Our teams, they have demonstrated on numerous occasions a level of engagement that is quite unique, that is anchored into the culture of the company, a culture of trust, a culture of freedom, a culture of entrepreneurial spirit as well. We want to nurture that. We want to maintain that. We want to continue to keep and to build, to improve, create a great place environment for all of our employees. We have been engaged into the great place to work polls. I will share that in the next slide. We had some nice results in 2024, which is very encouraging for us to continue on that journey. We have also a very long-term focus.
We want to create a sustainable future for Virbac. As such, we have also ambitious objectives within ESG that we are communicating on a regular basis, and we are committing on many different dimensions within ESG. Finally, process, the main transformation there is through digital. We have also, and it's a good transition with the next slide, achieved a very important milestone for us on that dimension in 2024. Illustration of some of the progresses, some of the successes that we had in 2024, more on the qualitative dimension after the financial performance. Those obviously are progresses that we are doing on a yearly basis to progress along the way to achieve our vision by 2030. Product launches, a nice year, two specialty products. You remember that specialty was targeted for us with Movoflex. We had a fantastic performance with Movoflex Dog.
We are implementing and launching Movoflex Cat, Trilotab as well, another specialty project. HPM, our pet food. We have registered pet food, therapeutic pet food with new claims in 2024. We have also launched some new swine vaccines. The list could go on. We had also Eradia that I mentioned in the U.S., a parasiticide that has done quite well. Also not mentioned on that slide, but still very important for us. You remember it's part of the vision as well is a geo extension, making our key products available in all of the geographies. A good illustration of what we have realized again in 2024 is the geo extension of Cortotic, the product that I mentioned, which is an alternative to antibiotics for the ear infection. We've been able to register that product in a couple of new geographies in 2024.
We have just finalized the registration for Japan, for instance, early 2025. This was for 2024-2025. If we look further away, we've made some nice progress on our R&D projects. We are tracking the milestones for our portfolio, and we have achieved 90% of the milestone that we had at the beginning of the year. I can mention as well that we have four ongoing approval processes in EU. Industrial transformation, we have several significant and transformative projects. We have initiated the building of our biology new site in Carros. We have made good progress in the administrative step to create the condition to be able to build our pet food facility in Nîmes, in France. We have also acquired the land in Carros to be able to build our French logistics center. That was also a nice progress that we have made.
We have continued to work quite extensively on our inventory management and productivity initiative. Acquisitions, I covered them. I would like to speak more on that slide about something that is probably a little bit less visible, but still creates a nice value for us, which are the commercial in-licensing and the technology licensing. We have signed six commercial licensing deals. It is a way to complement our portfolio in some geographies. One example was the swine ruminant vaccine that we have launched in Europe and in some parts of Latin America as well. We have some very strong partnership with some companies to fuel that. We have also signed four technology licenses. It is early phase, but it will fuel our R&D project as we move forward. I mentioned about the digital transformation.
We are very proud of the deployment in France of three systems at the same time: ERP, new ERP, a manufacturing execution system, and a laboratory information management system. All of them deployed at the same time was a huge project for us, a lot of sweat, many employees mobilized, more than 100 employees, a lot of users that have been trained extensively. We have pushed the button in June last year, and it's been a successful go-live with no interruption in production and delivery of our products. We are very, very happy and very proud of that. We are continuing now the deployment of that digital transformation in all of our commercial and industrial side. France was really the lion's share of it because it was the biggest entity that we had to cover. Last but not least, great place to work progress.
We had the result in 2024 of our polls that has been done early 2024, and we have made some significant progress, +9 points on the trust index. The efforts that we are doing are really paying off. We have now 14 subsidiaries that have been certified, which is an excellent result. We are obviously continuing the journey. We have analyzed all of the results. We have a working group that are working as we speak in order to continue to implement initiatives that will help us to move even further than what we have achieved so far. M&A. I wanted to say a few words to update you on where we stand. It's been obviously a busy year in both last year in 2024. We hope it's going to be as busy in 2025.
It's been a busy year in materializing some of those opportunities, namely Sasaeah and Mopsan, and finalizing the Globion acquisition, and also obviously in integration. The first priority for all of us when we're doing an acquisition, it's obviously business continuity. We've been very much focused on business continuity for those acquisitions during the early weeks, early months. You can see at the bottom of the slide that it has done quite well. Globion has had a very nice performance. We are growing in terms of Globion sales. We moved from EUR 12 million to EUR 15 million. These sales are being made outside of Suguna. You remember Suguna was the company that divested Globion. We had a contract with them as part of the acquisition whereby they were guaranteeing us some volume following the acquisition. We've been able to grow outside of Suguna significantly.
The company has been integrated nicely into our Indian organization. You remember that we have more than 1,000 employees in India. It's a well-organized affiliate, and it went very well. It's now fully integrated from a commercial standpoint, and we are able to benefit from the muscles of our organization to drive and develop Globion sales. Sasaeah, nice performance as well in line with the historical performance. No interruption or no issues with the business continuity. The integration process is going well as well. It's not an easy one, of course, with the language barrier. We have a very nice team locally in place. We have combined the leadership of our existing Virbac affiliates with the leadership of Sasaeah. We have now a 100% clarified organization, which has been communicated and in place at all levels of the Virbac Japan organization now.
We have merged the commercial team. We have merged also the commercial policy. From a business standpoint, everything is in place now, and we can move to the second phase, which is really looking at delivering even more value, leveraging the industrial footprint that Sasaeah is offering, as well as potentially some synergies within the portfolio, and that will be the focus for 2025. Mopsan, this is the Turkish acquisition that we made. You remember it's our main distributors. We knew them very well. We were working with them since 2018. Obviously, it's easier to combine the organization. The leadership is in place, and the early results are quite encouraging. You see what we have achieved in only one month with our new Virbac Turkey organization. Integration is going well according to plan.
I wanted to cover the typical and usual portfolio slides that we share every year. Here you can see for companion animal and food-producing animal year by year for the next four years. You can see the nature of the type of products in which segments that we are going to launch with an estimated pixels potential. By convention, we consider the pixels after three years. Some of those products will continue to grow after three years, but we had obviously to take a convention. A couple of comments there. The first one is it has not materially changed when you compare to last year. On food producing, if we look at on a year-to-year basis, we had a little bit more in 2025, and it has been pushed to early 2026. It is slightly less in 2025, and it is more in 2026. That is the first comment.
The second comment is we mentioned, you remember the increased R&D. We add obviously every year one year. You see 2028, you had not 2028 last year, obviously. You see it starts to increase. We start to have a higher number for 2028. This is the benefit of the additional investment that we have done over the past three years. It will continue in 2029 and 2030, moving from around EUR 40 million to around EUR 70 million in that year. Maybe a last comment to cover 2025. You see it's a busy year. We will have some nice launch. I wanted to tease with one product that we are going to launch in 2025, which we are very proud because it's going to be a first of that kind in the world.
We are going to launch the first medicalized pet food, which is registered. It is going to be launched in 2025. It will target one of the main conditions for aging cats. Again, it is a combination of a pet food with a drug, a registered medicalized pet food. I am not going to say more, but stay tuned. You will see some communication later on on that project, which is a nice illustration of what we try to achieve combining pet food and our medical expertise. Let me finish with the guidance for next year, outlook for 2025. I am going to repeat what we shared with you already in mid-January when we shared our guidance for next year. We expect a net revenue growth at constant rates and scope between 4%-6%. This does not include the impact of Sasaeah.
We will have obviously an impact because we will consolidate Sasaeah for 12 months versus 9 months in 2024. These three additional months will more or less add another 1 point of growth to this 2025 guidance. The EBITDA ratio to revenue will sort of stabilize at 16%, in line with what we have delivered in 2024 at constant rates and scope. I say stabilize, it's not exactly correct because actually it will improve. At the same time, as I mentioned, we are increasing. We expect to increase our R&D ratio by 0.3 points. We will compensate for that 0.3 points by operational improvement of our EBITDA before R&D. We will continue that journey to improve our profitability, but obviously it will be slightly less than what we have achieved in 2024. We expect to have here a neutral impact of the Sasaeah acquisition.
You've seen that the impact was quite positive in 2024. In 2025, we will have some depreciation linked to the investment in the new manufacturing site in Sasaeah. You remember that they had a brand new biology plant there. We start to have that impact kicking on in 2025. We expect to have a neutral impact from an EBITDA. The Sasaeah acquisition will still be very positive in terms of EBITDA contribution to the group. Finally, net debt evolution, a very solid net debt evolution expected at around EUR 80 million. As I mentioned, we will have an increased CapEx next year versus what we have spent in 2024. We expect CapEx to be above EUR 100 million. It was at EUR 80 million. EUR 80 million in that context is a very solid cash flow generation that is expected for 2025.
Not going to comment on the financial calendar, but it's available. I suggest we move to the Q&A session.
Thank you very much, Habib. I have a lot of questions with the people who are listening to us. There are almost 50. I have perhaps 12 or 14 questions, but we shall start there. I will try to ask the questions that I have on my paper.
Thank you for the question. Thanks for the presentation, Habib. Nicolas Paulliac from Kepler Cheuvreux, maybe just a few questions before I let it to the chat. First, you talk about M&A being one of the drivers. You mentioned that you are still in a very good net debt to EBITDA ratio. What will be the maximum threshold you don't want to cross? How should we think about potential future acquisition in terms of size?
Will it be more Globion or more the size of Sasaeah? That would be the first. Then two quick ones on vaccines. You had a very strong rebound in 2024, which was partly driven by the issues in 2023. How should we think about 2025 normalization or still continuing to grow? For Australia, it will be interesting to see what are your current assumptions when it comes to the guidance. I.e., will it be still a negative year for Australia or normalization there? Thanks.
Thank you. M&A, levers, vaccine, and Australia. Try to cover that. Start with M&A. I sleep well with a ratio below three. I'm ready not to sleep well for one year or one year and a half. If there is a nice opportunity and we have some conviction that it will, at the end of the day, generate enough cash or that we will generate enough cash to go back to something that will be more around three. It means we still have some significant room for maneuver. In terms of the nature of acquisition, we continue to be very much focused on programmatic M&A, which means small to mid-size. We like the small-sized type of acquisition. It's easier to integrate. It's a nice way to complement a portfolio. Usually, typically, it translates very nicely into a bottom-line impact. If there are some mid-sized opportunities that we consider are worth exploring, we obviously won't hesitate to look at them. Anywhere between small to mid-size will be something that we can cover. Sasaeah was on the highest bracket for a mid-sized type of acquisition.
If there is another Sasaeah and it crosses a lot of boxes as Sasaeah did, we will definitely look at it. That is for the acquisition on the vaccine. We do not expect to see the same lift, obviously, in 2025. Part of the gross margin improvement is linked to the vaccines rebound because it is a fixed-cost activity from an industrial standpoint. Anytime you increase the volume, it has a direct impact. We expect to grow next year, but definitely not 30%. We have recovered from 2023, and we will be much more in a normal type of development as we move forward. The last part was Australia with the dynamic in Australia. It is still too early to be conclusive into what we are seeing. There are some early signs.
I'm quite optimistic that we may see some growth, but it will not be a very strong rebound. If we have a low single-digit growth, I would be very happy.
When does Virbac plan to appoint a new CEO, Habib? No, it's not me.
The short answer is 2025. I can elaborate a little bit more on that. To say that it's still ongoing, it progresses well. We continue to not be in a rush. It's managed by the remuneration committee, a nomination committee of the Board of Directors. We have appointed a headhunter to do the search. The objective and the intent and the willingness is to find the right person that would blend very nicely into the Virbac culture that could bring add to the existing team and help us to continue to move forward and reach the next step of the development of Virbac.
We can take our time to make sure that we find again the right person. In between, we have governance in place. It's very solid. We are not in a position where we need to transform the company radically, where we need to change the strategy. We have a clear vision again, our compass, and we are delivering toward that. I can tell you that we will have the news in 2025.
Thank you. Shall I continue? How do you explain the bad reaction of the Sapari Stock Exchange this morning with Virbac despite those good results?
It will be a very, very short answer. I'm not commenting that.
Thank you, Habib. Good afternoon. Two first questions. We haven't done an update since years about the contribution of the top 10 products. Is it possible to have a new focus on the concentration of the portfolio, which species or which therapeutic area would be helpful? Second, still on this high view, is it possible to have a split of revenues, thinking about distribution, thinking about big chains of vet or individual vet? That would be the two first questions. I would be, I know you do not comment so much on a quarterly basis, obviously, but I think that since we will have significant basis effects looking at the quarterly sequence, is it possible to have your view, at least qualitatively, on the first half and second half contribution sales? Should we see specific phenomenon? It would be helpful as well. Thank you.
Thank you, Christophe Rafael. Concentration of portfolio, channel, and first half. Concentration of portfolio, it's true that we are not providing details on the product line. I can nonetheless comment a little bit. The way we are structuring our portfolio, the way we are looking at our portfolio, and we had the opportunity to share that in some earlier presentation is sort of a pyramid, very classical. On top of the pyramid, we have what we call the Virbac Buster, the product for which we think that there is a very significant potential that they can continue to drive the growth very significantly over the coming years. Obviously, we have the pet food within that, pet food range. We have Suprelorin that is part of that, the dental ranges, and we have some others. For competitive reasons, I prefer to not comment on them. We have five, six. We had in the past around three.
We have now five, six products that are considered as Virbac Buster for us. We have what we call the key products. We have around 50, five, zero key products. We have the rest of the portfolio. We have more than 1,000 products in total. The 50 products, we have identified them. We have aligned the entire organization in all countries. The logic behind them is if you have to make arbitration in terms of resources, you have to do it toward those 50 products. They have been identified because of their sales potential, profit potential, or strategic value. What I can share with you is if you look at Companion Animal, 80% of the growth in 2024 has been driven by product within that list. In terms of growth, we have a nice concentration.
This concentration is less important in our farm animals, but also because of the nature of the activity, the business. We've covered that in the past, but it's much more regional. You don't necessarily have the same needs from one continent to the other, from one country to the other. We have much more contribution from local products than what we have in Companion Animal. One of the beauties, which is both a blessing and a curse, is the fact that we don't have a single product that is representing a very significant part of our shares. The top range, and it's several products, is pet food, EUR 130 million. We have nothing above that. Pet food is several types of products because it's physiology, therapy, it's dog, and it's cat. The range in total is EUR 130 million. We are extremely diversified.
We are looking to massify. That was also part of the vision to have much bigger products because obviously it helps to generate profits. We are working toward that. We continue as of today to be highly diversified, which is also, and that's why it's a blessing. It's also a way to manage risk within our portfolio. The last question was channel. Yes. It's much more difficult to comment there because it very much depends on the countries. We do not have a consolidated view on how much is done through clinics and how much is done through individual vet practice. You have also some individual vet practices that are part of buying group. At the end of the day, the behavior is somehow or could be in some dimensions quite similar to vet clinics. What we've seen in many geographies is a concentration, obviously.
Some companies buying independent vet and building vet clinics groups. That's a pattern that we've seen, again, in many geographies in the U.K., in the U.S. We continue to have a certain percentage of independent vet in many of those countries. What we've seen lately, and I don't know if it will be a lasting pattern, is a slowdown in the acquisition of those clinics, a slowdown of the independent vet, and maybe linked also to the economical context, the highest interest rate. That could be an explanation. I can also say that because that's a question that we are very often asked, whether it has an impact on our development, the fact that the consumers are more and more, customers are more and more concentrated. We have not experienced that so far.
You see U.K., 19% growth, and it's probably the market where you have the highest percentage or number of clinics that are part of vet chains, of clinic chains. We don't see any necessarily impact. Sometimes it's positive and sometimes it's negative when you have one customer that is independent and is being bought by your clinics. At the same time, when a clinic that is customers of you is buying an independent, it increases also the volume. It's neither negative nor positive. At least that's what we've experienced so far.
Habib, I have a long question. It's very financial. Hope I will be able to translate it correctly. The guidance implies a 60 basis points decline in adjusted EBIT margin. 30 basis points of this seems to come from increasing investment in R&D. What drives the rest, given the growth in sales you anticipate, should help your operating leverage?
I think I understand it.
I think you save me.
I think the question refers to what I shared, the 16.6% and the guidance of 16% that we gave for 2025. Let me try to answer. First part of the answer is let's take away the acquisition. Let's take away Sasaeah, for instance. Outside of Sasaeah, at constant scope, what we have delivered is 16.0% of EBIT adjusted. That's the performance of 2025. At constant exchange rate, it's 16.2%. I mentioned that the exchange rate impact had diluted a little bit our profits. If you take the exchange rate of 2024, we have delivered 16.0%. The guidance for next year is 16.0%. It's more or less stable.
We are not decreasing by 0.6% at constant scope. Outside of the acquisition, we move from 16.0 to 16.0. The 16.0 of 2025 is even an improvement because we will increase R&D by 0.3 percentage points. This 0.3 percentage point of more R&D, moving from 8% to 8.3%, will be compensated by an operational improvement of 0.3. We will continue to improve. That is the first part of the answer. The second part of the answer is obviously then, okay, Sasaeah was positive in 2024 and it is now neutral, I would say, in 2025. That is what I shared. The answer to that is what I communicated already linked to the depreciation. The cost base of Sasaeah will increase next year. We will have more depreciation. The contribution on an EBITDA before depreciation will continue to be at the same level. But from an EBITDA standpoint, it will be a neutral impact in 2025. I hope I've been clear.
Certainly. What is the impact on 2025 earnings linked with the Trump import tax and with the French Bayrou extra tax? Trump import tax, I know, but I was not aware of the French Bayrou. I mean, first minister, extra tax.
I'll first comment on the commercial war. I would say signs of commercial war that we are all experiencing and that is part of what we all see in the news. It's quite difficult, obviously, to anticipate where it will end and what will be the end game at the end of the day. It's tough to simulate as well. What I can say is two things.
The first one is, and that's also a blessing and a curse, another one for Virbac, is the fact that we are producing locally. We have a very significant portion of our sales in countries that are done with product manufactured locally. It's a blessing when you have commercial war like that because obviously you have less of an impact. I'll give you some more specific figures for the U.S., for instance, later on. It's a curse as well because we are trying to optimize our industrial footprint to maximize the volume. It's not always easy to have several manufacturing sites where you have a certain level of expertise. We are trying to find the right balance between being local, closer to the customers as well, that has a value, and also optimizing our profitability by being global.
The current status for us is really a lot of our production is being local in Australia, in India. We have a manufacturing site in Latin America. We are producing in France for the world for the cat and dog vaccines for other products. A good percentage of that is for Europe. The French Carros entity is serving with a good percentage of Europe as well. In the U.S., for instance, just to give a concrete illustration, 80% of our turnover in the U.S. is being made with products that are being produced in the U.S., either in our St. Louis plant or with a U.S. CMO. Obviously, you see that the impact, if there are some tariffs, will not be that much. We have the active ingredient because even when you produce locally, you still have to source active ingredients.
You may know that within our industry, 80% of the active ingredients are coming from China and to some extent from India. Obviously, if there are tariffs, it will have an impact. The entire industry will be impacted by that. Virbac will not be the only one. We simulated for the U.S. a 10%-20% tariff because we have some products within 20% are exported from Mexico, some other from Vietnam, some from France. It is a very limited part, but still. We simulated it will be a couple of million EUR impact with 10%-20% of tariffs for all of those countries, China, Mexico, and just to give a rough order of magnitude.
Short question.
Bayrou, very briefly. We had, yes, some change with the last budget that has been validated in some of the taxes, CVAE, and for which we expected to get some additional decrease in 2025 with the previous budget that has been stopped. Yes, it has some impact, but it's a very limited impact for us so far.
Okay. A short question regarding the other non-current expenses related to the acquisition of Sasaeah. You booked a EUR 4 million charge in H1 2024, then an additional EUR 4 million in H2 2024. If I'm not wrong, I mean the person is not wrong. Why and should we expect another one-off charge related to this acquisition in 2025?
Very precise question. Yes, it is true that we had part of the acquisition cost booked in 2024. The second part is linked to the integration process. We have had some help to realize the integration, some consultants that have helped us throughout 2024. The cost of that has been booked, obviously, during the second part of the year when the service has been rendered. We have also booked some restructuring costs for one of our manufacturing sites that we expect to close to move the production to Carros for a little bit more than EUR 2 million. This has been booked during the second part of the year. That explains why. I think the question was, you closed the acquisition in April. Why did you not record all of that cost in the first semester? I answered that part of the question. The question is next year.
Yes, we can have potentially, it will not be the same order of magnitude, but we will continue our integration journey and we might continue to have in 2025 some non-recurring integration costs as we finalize the integration, but not the same order of magnitude.
Would you mind giving us some colors about CapEx for 2025 and 2026? It was before you commented the last or the almost last slide.
Yes, above EUR 100 million, above EUR 100 million in the next coming years. It's difficult for me to be more specific because at the same time, the group will continue to grow. As a ratio to sales, you know the CapEx investment, but based on all of the transformational projects that we have, we know that for several years, we will be above EUR 100 million.
Could you remind us the percentage of sales derived or made with commercial partnerships?
In licensing.
Yes, I guess it is in what we call internally in licensing.
Yes, it's below 15%, closer to 10%.
How much will Virbac be able to raise average prices on products by over 2025 and 2026?
It's a difficult question. It's really a difficult question in an uncertain environment. We had to make some assumptions, obviously, to build our budget. You see that we managed to do 3%, but again, 1,000 products, some products are in a monopolistic situation with no competition. Some others are in very crowded space where we have some even decrease of prices. It's a blended average, but the variance is very significant. 3% in 2024, I would be surprised that we could be above 2% in 2024, 2025. Sorry, that's what we've retained for our budget. Around 2% would be my guess.
Two questions. First, coming back on the sequence H1, H2, actually, I don't think that you...
I tried to avoid that, but...
The second question is regarding the R&D. When should we anticipate a decline? Should it be post-2028, I mean, after the patent expirency, or is there any phenomenon and trigger that would change earlier this percentage? Thanks.
Christophe Rafael knows that I don't like to speak about the quarterly performance. Nonetheless, no, I'll talk about the semester, six months growth. It's true that with what happened in 2023, you remember, 2023, we had 0% growth first semester, a combination of cyber attack and the vaccine issues, and then 10% during the second part of the year. We had a strong base effect in 2024.
Other way around, we had 3% growth during the second part of the year and much higher growth during the first part of the year. I would expect sort of oscillation, gradual oscillation toward coming back to something more usual. I think we will still have in 2025 a base effect. I expect to have a first semester probably slightly lower and a second semester probably slightly higher because we will compare to a growth rate that was lower during the second semester. The magnitude, I cannot really comment. On quarterly basis, again, there could be so many. We are delivering to distributors. You can have on a quarterly basis one big order that could have an impact on the quarter if it's delivered on the last month of March or the first month of April.
It could have an impact on your growth rate on only three months. I would expect that on the semester. You had the second part, sorry. Yes, R&D. What we have toward our journey towards 20%, what we have communicated is we will go there through operational improvement, but we will also benefit from having an R&D ratio that will come back to a normative level, historical level between 6.5% and 7%. We have a year where we will continue to increase, 8.3% in 2025. I expect that to continue to be at that order of magnitude 2026. It will be either 2027, 2028, more probably 2028, where we start to see some decrease of that ratio based on what we see right now in terms of R&D phasing for key projects.
I have two last questions on my side on the digital part. Another question on the biological. You want to launch in 2028. The person understands that it's a monoclonal antibody. I don't know how, but I understand that. If it is the case, do you intend to produce it internally?
It is not monoclonal antibodies. We are not giving details on the type of products that are part of the R&D portfolio slide.
Thank you, Habib. I understand. I support you.
I hope you do.
Of course. I am also in charge of relaying the questions. The last question I have is about Mopsan. What impact will the acquisition of Mopsan have on the revenue growth in 2025?
It will not be significant. It is very interesting, obviously, and it is a long-term move as well. We are very convinced that on the long run, Turkey has some nice potential. The situation in the country is quite special today with a very high inflation rate. Part of the growth is linked to inflation. When you look at it on a euro basis, obviously, it's not the same story. It will be a couple of decimal points that will be added to the group thanks to the acquisition. Just a reminder, the product, we are not acquiring product with Mopsan. It's our distributor. We are already selling the product. We are already recording revenue. It will be higher revenue because obviously Mopsan was taking a margin. It's not the classical type of acquisition where you add some business.
One last question from me. Elango seems to be very vocal about its different launches and the segmentation. What would you think as a change of competition in the U.S. market, notably for you, obviously? Thanks.
We do not like to comment on what the others are doing. What I can say is that we do not see in the U.S., we are tiny. We are very, very small. It is less a question of the market dynamic for us. It is more what we have to offer, the products that we have. We have less than 2% of market share. We think that we have a nice opportunity to continue to grow. We are more focused again into what we have to offer, our R&D pipeline to deliver new products, the products that we have currently in our portfolio. We are convinced that they still hold a lot of additional value that we can continue to grow them.
What has been achieved in 2024 is very encouraging. We are very much focused as well on pet food and FPA. It's difficult. We mentioned it in the past on pet food. We are lacking the therapeutic. We will have it late 2025 and early 2026. We will continue and re-put some strong emphasis on the pet food when we will have the complete product ranges for the U.S. A big portion of the market at vet clinics for pet food in the U.S. is therapeutic, contrary to what you can see in European countries. We really need the therapeutic product ranges in order to be competitive there. We are working toward building that. We continue our journey to add product within our farm animals new segments. It's a very long-term view.
We are really concentrating on ourselves and what we have to offer. We have signed, for instance, deals to add to our portfolio some vaccines, some ruminant vaccine lately. You may have seen that. It is quite small. It is not differentiated vaccines, but it is a nice way to build up our portfolio and be more credible and visible in that new segment in the U.S.
Many thanks, Habib. I think we have come to the end of the meeting. Perhaps it has been the longest session question-and-answer. Many thanks because you are alone to answer. It was, I guess, quite great. I wanted to thank you all on behalf of Virbac for your attendance and also your loyalty to our company. I wish you, of course, a good end of day, a good weekend since we are Friday.
Thank you very much. Thank you. Have a good day.