Huvepharma EOOD

Overview Key strengths Key risks Top-10 player in the expanding global animal health industry, with track record of product innovation and winning market share from large competitors in recent years. High inflation could potentially keep pressure on EBITDA margins in the coming 12 months, delaying debt-reduction prospects. Favorable characteristics of the animal health care market with a lower cost of innovation, limited patent cliff risks, and no exposure to blockbusters. Modest size compared to larger, and more diversified players in the sector, notably Zoetis Inc., Elanco, and Merck?s animal health business. Established track record of good organic growth with vertical integration that provides some protection from inherent industry volatility. Weak exclusivity profile of the animal health market, with about 50%

...Huvepharma EOOD's performance in full-year 2021 was weaker than expected with notably negative FOCF and adjusted debt to EBITDA of about 3.4x. The company reported weaker-than-expected revenue growth of 7.4% (to about 632 million) with its adjusted EBITDA margin declining to 25.6% from 27.1% in 2020. This compares with our expectations for 11%-12% revenue growth and EBITDA margin improvement toward 29.5%-30.5%. In addition, negative FOCF (after working capital, capital expenditure [capex], and lease payments) of about 15 million and high dividend distributions of 60 million kept adjusted debt to EBITDA well above 3.0x--at 3.4x in 2021, from 3.0x in 2020--our upgrade trigger for the '##' rating. This compares with our expectations for 2.5x-2.6x. The main causes for the material deviation from our forecasts were the strong rise in key commodity input costs (notably soy, sunflower oil, wheat, starch, and others) that hit the company's profitability, particularly from second-half 2021 due to...

Full Report