Animal Health News & Notes for February 28, 2003

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Brakke Consulting’s
Animal Health News & Notes for February 28, 2003
Copyright © Brakke Consulting, Inc.
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COMPANY EARNINGS RELEASES

>  Alpharma reported that sales of its animal health division in the 4th quarter 2002 were $88.3 million, an increase of 34% over the fourth quarter 2001.  Management noted that the animal health division had good results but that 2001 was an unusually low quarter.  For the full year, animal health sales declined 4% to $322 million.  (company website) 

>  Nestle reported that year-end 2002 sales of its petcare division were CHF 10,719 million ($7,732 million), an increase of 72% over year-end 2001.  Earnings before interest, taxes and adjustments were CHF 1,418 million ($1,023 million), an increase of 213% over 2001.  Nestlé Purina PetCare USA managed to grow both sales and market share while undergoing a very successful integration process. Nestlé Purina PetCare Europe focused on improving margins through product rationalization. Nestle began consolidating sales of Ralston Purina on January 1, 2002.  (company website)

>  AVANT Immunotherapeutics, Inc. reported financial results for the year ended December 31, 2002.  For the year ended December 31, 2002, the Company reported a net loss of $13.8 million compared to a net loss of $22.8 million for fiscal 2001. The full year results for 2002 reflect an increase in revenue combined with a decrease in operating expense compared to the same period in 2001. The increase in revenue of $3.4 million primarily results from the recognition of approximately $4.0 million in revenue upon the termination of the Novartis TP10 agreement offset in part by a reduction in product sales of MeganVac 1 and a decrease in government grant revenue recorded in 2002. (Business Wire)

>  Nutreco reported that sales fell by just under 1% last year to Euro 3.809 billion ($3.99 billion). At the same time profits fell sharply by 25% to Euro 68.2 million ($71.5 million). However, the 25% drop in profits was better than Nutreco expected. Nutreco forecast that net income in 2002 would fall by around 30% below the net income in 2001. Acquisitions had a positive effect on net sales of Euro 146.4 million, or 3.8%. Net sales from existing activities dropped by 4.5% (Euro 172.1 million), primarily as a result of lower prices for salmon and poultry products. (Wattnet Meatnews)

>  Smithfield Foods Inc. reported sharply lower earnings for its third quarter as sales fell 4%. The nation’s largest hog producer and fresh pork processor said it earned $5.3 million in the three months ended Jan. 26 compared with $54.5 million a year earlier.  Sales fell to $2.0 billion from $2.1 billion in the same quarter a year earlier.  The company blamed low prices for live hogs and weak demand for fresh pork for most of the decline, noting that the hog production group posted a loss of $19 a head on live hogs as prices fell while feed costs rose sharply.  For the first nine months of the fiscal year, Smithfield said it earned $21.2 million compared with $171.9 million a year earlier. Revenue rose to $5.96 billion from $5.39 billion in the first nine months of the previous fiscal year. (AP)

>  Sanderson Farms reported net sales for the first quarter of fiscal 2003 were $184.2 million, compared with $164.5 million for the same period a year ago. For the quarter, Sanderson Farms reported net income of $5.3 million compared with net income of $5.3 million for the first quarter of fiscal 2002. (Meating Place)

>  Canadian meat and food processor Maple Leaf Foods Inc. achieved solid performance in 2002, with a 16% improvement in operating earnings for the year. The results were achieved despite challenging market conditions, including a North American over-supply of animal proteins, low pig prices, high grain and feed costs and rising wheat prices.  Sales for the year 2002 increased to $5.1 billion from $4.8 billion for 2001. Earnings from operations were $203.6 million compared to $157.5 million for the previous year ($167.9 million before goodwill amortization). (Wattnet Meatnews)

>  Oil-Dri Corporation of America announced sales of $44.5 million for its second quarter ended January 31, 2003, 1.5% greater than sales in the same quarter one year ago. The company reported net income of $1.2 million, a significant improvement compared to the $74,000 for the same quarter a year ago.  Sales for the six months ended January 31, 2003 were $82.2 million, 1.9% lower than sales in the same period a year ago. Net income for the six months was $1.6 million compared to $341,000 a year ago. The continued and growing presence of the Cat’s Pride brand, as well as Kat Kit, Smart Snacks dog treats and Jonny Cat litter at Wal-Mart have offset some of the lost sales of Wal-Mart’s Special Kitty cat litter brand. (Business Wire)

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Brakke Consulting Due Diligence Seminar 
Kansas City: March 11-12, 2003

Whether your company is licensing technology in or out, buying, or selling a business or product line, this seminar will help you design an efficient, effective due diligence process that will help you test strategic assumptions, determine fair market value, uncover potential problems, identify opportunities and avoid costly mistakes or surprises.  The speakers at the seminar will include Brakke Consultants and senior investment bankers from a major investment bank. All of the speakers have extensive experience in product and compound licensing, divestitures, and acquisitions.

This two-day seminar was successfully conducted in 2001 and 2002 in various US and International locations.  Registration is $1,500. Registration is limited. 

Please contact Jane Morgan at the Dallas office 972-243-4033 or by email at jmorgan@brakkeconsulting.com for further information.  You may also register for the presentation online at www.brakkeconsulting.com.

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COMPANY NEWS RELEASES

>  Alltech Inc. announced the launch of their new product FEB-20, a nutritional supplement for livestock grazing tall fescue, which is a result of Alltech’s recent patent for a method to control endophyte-infected fescue toxicosis.  FEB-20 is scientifically proven and has the added advantages of low inclusion rate and palatability.  FEB-20 is all-natural, thus reinforcing Alltech’s commitment to provide natural solutions in the marketplace. (company press release)  

>  VetCentric introduced CpakHWPLUS, a single dose of Merial Heartgard Plus mailed monthly to clients on behalf of their prescribing veterinarians. CpakHWPLUS has been dubbed “Compliance in a Box” because it makes remembering to comply with the veterinarian’s heartworm prevention recommendations as easy for pet owners as checking the mail.  CpakHWPLUS is a unique product offered exclusively through VetCentric.  (company press release)

>  Discovery Consumer Products, in partnership with the nation’s top pet manufacturers, will unveil a line of Animal Planet licensed merchandise at the APPMA show in late February. The line includes toys, leashes, pet carriers, accessories and nutritional products; and launches in Fall 2003 at specialty pet retailers, veterinarians, and trainers nationwide.
– Premier Pet Products will develop dog and cat leashes, bowls, toys and apparel.
– Farnam Companies will provide nutritional supplements, and stain and odor removers.
– Global Pet Products will manufacture pet carriers for walking, driving, and flying with your pets.
– Otis & Claude will create a line of “fetching” dog and cat toys.
– Sherwood Brands and CEDCO Publishing will create human-targeted calendars, paper products, and gift sets tapping people’s love of pets and animals.  (company press release)

>  Doane Pet Care Company announced that it has agreed to issue $213.0 million in aggregate principal amount of its 10 3/4% senior notes due 2010.  The Company stated that it intends to use the net proceeds of the offering to repay existing indebtedness, which will provide the Company with additional financial flexibility.  The transaction is expected to close on February 28, 2003. (PRNewswire)

>  VCA Antech, Inc. announced the closing of the sale of 1,507,500 shares of its common stock pursuant to the exercise of the underwriters’ over-allotment option as part of its recent public offering.  500,000 shares were sold by VCA Antech and 1,007,500 shares were sold by certain stockholders.  VCA Antech received total net proceeds of $7,245,000 and intends to use those proceeds for general corporate purposes.  (company press release)

>  Smithfield Foods announced plans to invest $20 million to build a facility that converts swine manure into biodiesel vehicle fuel. Smithfield will be the major partner in BEST BioFuel, LLC, a partnership that will construct the project at Smithfield-owned swine-production facilities near Milford, Utah.  The facility will be constructed at Circle Four Farms in southwest Utah. Construction is scheduled to start in April, pending final approval; the facility could start producing fuels as early as October. (Pork Alert)

>  FORTUNE magazine has ranked Tyson Foods, Inc. as America’s Most Admired Company in the food production industry. The survey ranks the 10 largest companies by revenues in 66 industries, including large subsidiaries of foreign firms. According to FORTUNE, the survey results reflect the opinions of 10,000 executives, directors, and securities analysts, who rated the companies in their own industries using eight criteria. The criteria used to rank the companies included innovation, employee talent, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment value, and quality of products/services. Tyson Foods was rated the top company in the industry in seven of the eight criteria used in the survey. (Wattnet Meatnews)

>  BioGaia AB announced an agreement with the Japanese company Calpis Co. Ltd, granting an exclusive license to sell animal health products containing the lactic acid bacteria patented by BioGaia for chicken and swine.  The license includes rights to sell the products in Japan, China, Thailand, Brazil and Taiwan.  (Pig Progress)

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WESTERN VETERINARY CONFERENCE

The 75th Western Veterinary Conference concluded at the end of last week in Las Vegas.  The meeting’s first year at the Mandalay Bay conference center was a pleasure to attend, and enjoyed great attendance both at the lectures and the exhibit hall.  We congratulate everyone who worked to make the conference a success.

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ANIMAL HEALTH NEWS

>  US   The Animal Agriculture Alliance has completed its science-based report on criteria to be used in assessing farm animal care programs, according to a news release. The report commissioned by the Alliance and conducted through the joint efforts of the Federation of Animal Science Societies (FASS) and the American Registry of Professional Animal Scientists (ARPAS) provides by-species criteria for the evaluation of animal care guidelines developed by the various producer organizations.  The report is designed to provide a means for “evaluating producer animal care guidelines or programs” to ensure they are consistent with current scientific understanding for animal well-being.  The FASS/ARPAS report includes general management principles and criteria for animal well-being, in addition to species-specific criteria for beef cattle, dairy cattle, swine, broilers, egg layers, turkeys, ducks, sheep and veal producers. (Meating Place)

>  US   The poultry death tally reached 3 million in Southern California, where the poultry industry continues to be ravaged by exotic Newcastle disease. The Exotic Newcastle Disease Task Force said that the virus has infected a flock of 55,000 chickens in San Diego County. It’s the fifth commercial flock in the county and the 17th in Southern California to be infected. (AnimalNet – Knight-Ridder Tribune)

>  UK   Several hundred cattle have been slaughtered and emergency restrictions imposed in the north of England and Scotland after an outbreak of bovine brucellosis. According to wire reports, the outbreak has been detected so far in six herds.  This is the first outbreak of brucellosis in nearly a decade. (Meating Place)

>  PORTUGAL   The Portuguese ministry of agriculture announced that flocks of chicken and turkeys have been contaminated with the carcinogenic antibiotic Nitrofuren.
Birds on 43 farms have been contaminated with the antibiotic and the farms have been sealed off, while secondary tests are conducted. If the secondary tests prove positive, the birds will be slaughtered and incinerated. It is believed that farmers were using the Nitrofuren to both protect the birds from illness and also to help stimulate growth. (Wattnet Meatnews)

>  US   Texas A&M University-Kingsville announced the creation of the King Ranch Institute for Ranch Management.  The new Institute was developed in cooperation with the King Ranch as part of the Ranch’s 150th anniversary. The new Institute features an interdisciplinary graduate degree program to train students in a “systems” approach to integrative ranch management. (PRNewswire)

>  JAPAN   The Japanese government has passed new legislation that will introduce compulsory ’retail to farm’ traceability systems in their domestic cattle herd.  The Ministry for Agriculture, Forestry and Fishery (MAFF) developed the mandatory traceability systems for beef, which require Japanese producers to register cattle identification numbers in a central database. In May 2002, 95% of the Japanese cattle herd had been tagged with a number allocated to each animal recording the date of birth, sex, breed, birth place, transport history and slaughter date. The new legislation takes a whole-of-chain approach; from production to slaughter and through to retail. At this stage, the proposed system will not extend to foodservice industries. (AnimalNet – Meatnews)

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BRAKKE CONSULTING VIEWPOINT

This past week, we had the opportunity to spend time at the AFIA Purchasing and Ingredients Conference in Orlando. It was nice to be able to avoid the ice in Dallas. David Bossman and the staff at AFIA had another great conference for the participants.  Thanks to all of you that attended the presentation on Trends in the Animal Health and Nutrition Industry. We hope it was helpful to you as you plan your business for 2003 and beyond.  It was good to hear that so many of you are off to a good start in 2003. 

You can see from the year end 2003 financial reports that 2003 was a difficult year for some manufacturers and integrated animal protein food companies.  We’ve said before and we’ll say it again.  The food animal protein business is a tough market place, however those firms with creative marketing programs and an eye on expenses will have a reasonable year.  In the face of bottom line problems, don’t forget to invest in R&D for the future. We see too much attention to short-term bottom line. Remember many of you are still a few years from retirement and will need new products to introduce to maximize your income those last few years.

Have a great weekend!
 
Ron Brakke

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