Ouro Fino Saúde Animal Participações (OFSA3) Q2 2024 earnings summary

Executive summary

• Revenue excluding Foot-and-Mouth Disease (FMD) vaccine grew 7.3% in 2Q24 and 7.0% in 6M24, driven by strong performance in production and companion animal segments despite challenging market conditions and the FMD vaccination campaign's cancellation in Brazil.

• Launched innovative products, including Ferappease for cattle and pigs, and approved two new swine vaccines for launch in the second half of 2024.

• Profitability improved with gross margin, EBITDA margin, and net margin all expanding, supported by efficiency gains and cost discipline.

• International operations faced revenue declines, mainly due to FMD vaccine discontinuation and challenging conditions in Mexico, though Colombia performed well.

• No significant economic impact from Rio Grande do Sul floods on business operations.

Financial highlights

• Net revenue for Q2 2024 was R$231 million (BRL), with R$27 million from FMD; adjusted revenue grew 7.3% YoY, and gross margin improved to 48.2% in Q2 2024 and 51.2% YTD ex-FMD.

• Adjusted EBITDA for 6M24 rose 51.3% YoY to R$57.0 million, with margin up 5.0 p.p.; net income for H1 2024 reached R$29.7 million, reversing a prior-year loss.

• Operating cash flow generation was R$100 million in 6M24, and cash and equivalents increased to R$343.2 million as of June 2024.

• Net debt reduced by 47.3% YoY to R$67.5 million, with leverage dropping to 0.4x EBITDA.

• SG&A expenses remained flat or declined YoY, reflecting ongoing cost discipline.

Outlook and guidance

• Confident in meeting commercial and financial targets for the year, with expectations of further margin and revenue growth as new products are launched and plant capacity is optimized.

• Two new vaccines for the pig market approved and scheduled for launch in the second semester.

• Continued focus on cost control, innovation, and international expansion, particularly in Latin America.

• No significant operational impacts identified from the Rio Grande do Sul climate event as of the report date.