Animal Health News & Notes for March 15, 2002

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Brakke Consulting’s
Animal Health News & Notes for March 15, 2002
Copyright © Brakke Consulting, Inc.

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Company Earnings Releases
 
>  In 2001 Intervet International successfully continued its growth pattern of previous years with considerable sales gains and improved margins. The animal health business of Akzo Nobel closed the year 2001 with sales of EUR 1,096 million ($971 million).  In 2001, Intervet placed a stronger focus on strengthening its presence in key country markets, notably the United States. Intervet expects further growth in the companion animal pharmaceuticals segment in the US.  The spread of BSE in Western Europe and the foot and mouth disease (FMD) outbreak in the first half of 2001 put significant pressure on the European market.  In total, nearly 20 new vaccine and pharmaceutical products were successfully launched during 2001. (company press release)

>  PETsMART, Inc. announced results for its fiscal fourth quarter and full year which ended February 3, 2002. The company reported fourth quarter 2001 net income of $29.7 million versus a net loss of $(27.2) million for the fourth quarter in 2000. For the fiscal year 2001, PETsMART generated net income of $39.6 million compared to a net loss of $(30.9) million for the fiscal year 2000, a year-over-year increase of $70.5 million.  Sales for the fourth quarter of 2001 increased 21% to $737.8 million, compared to $610.3 million in the same period last year. Comparable store sales grew 9.2% over the fourth quarter of last year. At $2.5 billion, fiscal 2001 sales were up 12.4% over the previous year, while 2001 comparable store sales grew 6.5% over fiscal 2000. (Business Wire)

>  H.J. Heinz reported that sales of the Pet Products for the third quarter ended January 30, 2002  decreased 9.8% to $259 million.  Favorable pricing in pet snacks partially offset a volume decline in pet products.  Sales for the nine months ended January 30 were $781 million, a decrease of 8.6% from the comparable period in the prior year. (Business Wire)

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Company News Releases

>  Akzo Nobel has announced that it intends to appoint Dr. Ruurd Stolp as the new General Manager of its animal health business, Intervet International, effective July 1, 2002.  Dr. Stolp will succeed Dr. Toon Wilderbeek, who has been nominated to become a member of Akzo Nobel’s Board of Management with specific responsibility for the Pharma group. Ruurd Stolp, who holds a Ph.D. in Veterinary Medicine from University of Utrecht, joined Intervet in 1989 as Head, Microbiological Quality Control. Following his return in 1996 from a post with Intervet’s US business, he was appointed to the Board of Intervet.  He is currently Vice-President in charge of Manufacturing, Logistics, Quality Control and Technical Affairs. (company press release)
 
>  Novartis Animal Health announced the launch of  VetSuite (www.vetsuite.com), a comprehensive medical and business information Web site.  The Novartis Purchasing Center provides authorized clinics access to buy Novartis products online at www.powervet.com.  The Novartis Support Center enables veterinarians and their staff to have convenient access to Novartis product information, as well as e-mail links to contact their Novartis sales representative or the Novartis Professional Services department.  A user name/password is required to have unlimited access to the site, which can be obtained by registering at the vetsuite website.  In addition to the two Novartis-customized components, the VetSuite Web site also includes VetPlace.net, an library of medical content, and the Management Center, a new information source on all aspects of managing a veterinary practice. (company press release)

>  Nestle Purina PetCare Company (formerly Ralston Purina) announced that it is offering to purchase for cash up to $919,853,000 of its outstanding debt securities. The tender offers are being made upon the terms and subject to the conditions set forth in an Offer to Purchase dated March 13, 2002.  J.P. Morgan Securities Inc. will serve as the Dealer Manager for the tender
offers. (PRNewswire)

>  Friona Industries confirmed that the company is selling its animal health distribution business  to position itself to take advantage of opportunities to expand its cattle feeding and feed manufacturing businesses.  The company is negotiating to sell Hi Pro Animal Health to Walco International.  A definitive agreement may be concluded shortly.  The transaction would make Walco, already one of the top two companies, the clear leader in animal health distributors representing all major AH companies and specializing in beef and dairy cattle and horses.  (Feedstuffs)

>  The 11th Circuit Court of Appeals has declined to review an appeal of a ruling against the nation’s largest meat packer, IBP Inc., that granted the lawsuit class-action status.  Pending dismissal motions filed by IBP, the class-action status of a suit by cattlemen who sold cattle to IBP since February 1994 will stand.  The suit, originally filed by 10 cattlemen in 1996, claims IBP illegally cornered the beef market and conspired to fix prices paid on the open market. The cattlemen claim IBP violated antitrust laws by buying mostly packer-owned cattle and cattle committed to packers under long-term contracts – rather than bidding on auction markets – to unfairly depress prices paid to producers. (AP)

>  Future Beef Operations announced that it is entering into Chapter 11 reorganization under the Federal Bankruptcy Code. Only seven months earlier, Future Beef opened its cattle-processing facility in Arkansas City, Kan.  The facility will continue processing cattle during the reorganization period set forth by the federal bankruptcy court. Reorganization is expected to take six months.  Future Beef suffered higher-than-expected losses in operating the new state-of-the-art processing facility and on cattle-feeding arrangements. (Drover’s Alert)

>  ConAgra Foods Inc. may be trying to sell a majority interest in its meatpacking business. ConAgra is the nation’s third largest beef and pork slaughterer, but it has been emphasizing its grocery store brand names over its commodity businesses for some time. Trade publication Cattle Buyers Weekly speculated last week that ConAgra might sell a 51% stake in its meatpacking divisions to a group of investors including leveraged buyout firm Hicks, Muse, Tate and Furst Inc. of Dallas. ConAgra has declined to comment on the reports. A spokesman for Hicks, Roy Winnick, also declined to comment. (AP)

>  Cargill Pork Inc pleaded guilty to violating the Clean Water Act and will pay out a total of $1,551,000, according to the Environmental Protection Agency. This includes a fine of $1 million, $51,000 in restitution to the State of Missouri for natural resources damages and the costs of investigation and $500,000 in already spent remediation costs.  EPA reported that the company admitted illegally discharging hog waste from holding ponds at its facility into the Loutre River, which is a tributary of the Missouri River. (Meating Place)

>   Precious Cat Inc. announced the Cat Attract Guarantee.  The Cat Attract Guarantee is an absolute, no questions asked money-back guaranteed solution for litter box problem cats and kittens.  Cat Attract is designed to minimize litter box aversion through the combination of a natural and completely safe herbal blend and a clumping clay that has a texture and particle size cats prefer.  In addition to being a guaranteed litter box problem solution, Cat Attract has superior clumping ability and natural chlorophyll odor control.  (PRNewswire)

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BRAKKE CONSULTING, INC. announces
Due Diligence Seminar in Dallas
Tuesday & Wednesday April 23 & 24th

Registration, Agenda, Information online at
www.brakkeconsulting.com

Registration is $1,100 if registered on or before April 1, and $1,250 if registered after April 1. Registration is limited.

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Animal Health News

>  UK   Eight weeks after the European Union lifted its export ban on British meat products imposed during the foot-and-mouth outbreak, Brussels regulations have meant that not one beef consignment has left the country.  Meat companies are so frustrated with the tough rules covering British beef exports that they have decided to withdraw from the market. Ministers are lobbying David Byrne, the EU Food Safety Commissioner, to relax the controls.  The continued refusal of France to accept British beef has also depressed business. Even though the European Court of Justice found the French Government¹s position to be in breach of EU law nearly three months ago, Brussels has failed to seek any penalties against France. (AnimalNet – The Times)

>  FRANCE   France will not end its unilateral ban on British beef in the next three months because it still does not have assurances the meat is safe from BSE, according to the country’s new farm minister.   The country’s left-wing government does not plan to address the ban between now and legislative elections scheduled in June.  The European Commission ended its 3-1/2 year ban on British beef exports in the summer of 1999, but France refused to comply with the measure and was subsequently taken to court.  Europe’s highest court ruled in December that France was acting illegally by continuing to ban the meat because of fears that it still posed a risk of BSE. (Reuters)

>  RUSSIA   Russia’s ban on imports of U.S. poultry, imposed after tests revealed salmonella, is unlikely to be lifted for at least 60 days, according to officials.  A 12-strong team from the USDA, the Trade Representative’s office and the FDA flew to Moscow after Russia imposed a blanket ban of all imports of U.S. poultry from March 10. (Reuters)

>  US   The USDA reported that five cattle in Kansas tested negative for foot-and-mouth disease, not seen in the United States since 1929.  Reports of a possible foot-and-mouth outbreak had earlier rattled commodity markets and food company shares.  Mouth blisters had been discovered on the cattle at a livestock market in Holton, Kansas, on Tuesday.  (AnimalNet – Reuters/AP)

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Brakke Consulting Viewpoint

The news this week indicates that some of the companies finished strong in 2001, while others did not do so well.  It will be interesting to see the first quarter of 2002 for many of these companies.  I’ve been on the road the past few weeks and my impression is that the first quarter will be reasonably good for most companies.  There are not many that are preparing special programs in order to make the first quarter numbers.  We’re not seeing any signs of real new growth in the market so there will be some market share shifts taking place.  Hopefully, most of these will not be the result of price reductions. 

A number of you have indicated that you plan to send managers to our Due Diligence Seminar in Dallas in April or to the one in Sydney, Australia in June.  If you’ve not already done so, we would encourage you to register your managers for these seminars in the next few days since we will limit the attendance.  These programs have been very successful, and yes, we are prepared to present them directly to your organization as a group if you prefer.  With the consolidation reported in this newsletter and the merger activity in the marketplace, we believe this is one of the best training programs you can provide to your business development employees.

Have a great weekend.  

[Ron Brakke]

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