The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for April 28, 2001

Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  Akzo Nobel reported that first quarter 2001 sales for its animal health division Intervet were 257 million euros ($226 million), an increase of 8% over the comparable period in 2000. (company website)

>  Bayer reported that sales in the Animal Health Business Group fell by 7%, mainly because of the BSE and FMD crises in Europe and the divestiture of the livestock vaccines business in the United States.  (company website)

>  Novartis reported that first quarter 2001 sales for its animal health division were CHF 240 million ($139 million), a decrease of 4% from the comparable period last year (0% in local currencies).  Sales were underpinned by the significant growth of Tiamulin (respiratory and gastroenteric diseases in pigs) and by the recently acquired vaccine businesses. Fortekor, the heart failure product for dogs also grew strongly, boosted by the additional indication of renal insufficiency in cats.  The positive trend was offset by the Farm Animal Business crisis in the UK (foot-and-mouth disease) and by slow sales of parasite treatments in the US pet segment. (company website)

>  Pharmacia reported first quarter 2001 sales in the Animal Health business were $113 million, an increase of 14% over the comparable period in 2000.  The increase was based in part on a renewed focus on the key brand Naxcel/Excenel.  (PRNewswire)

> Ralston Purina Co. reported that its fiscal second-quarter earnings fell 3%, missing estimates,
primarily due to lower equity earnings from its investment in Interstate Bakeries Corp. The company had earnings before unusual items of $77.9 million in the quarter ended in March, compared to pro forma earnings from continuing operations before unusual items of $79.9 million a year earlier. Pro forma comparisons are necessary because Ralston spun off its battery
products business on April 1, 2000.  Second-quarter sales rose to $706.1 million compared to $690.8 million in the year-earlier period.  Sales for North American pet foods increased 1% in the second quarter.  (Reuters)

>  Virbac Corporation announced in an 8K that projected income from operations for the year ending Dec. 31, 2001, to be approximately $5.4 million, compared with $2.8 million for the year ended Dec. 31, 2000, a 93% increase. (Business Wire)

>  Heska Corporation reported that, for its first quarter ended March 31, 2001, the Company’s net loss declined to $4.6 million from $5.9 million in the first quarter of the prior year.  This represents a 23% improvement over the results reported in the prior year.  Total reported revenue for the Company declined from $14.4 million in 2000 to $10.9 million in 2001.  The total revenue reported in the prior year included approximately $1.8 million from businesses sold during 2000 and included non-recurring revenue of $1.25 million related to the sale of one of the Company’s products.  Product revenue from the Company’s continuing core business decreased by 2.6%.  This decrease was attributable to a weak quarter at the Company’s Diamond Animal Health subsidiary, which was partially offset by strong growth in the Company’s proprietary pharmaceuticals, vaccines and diagnostic products. (PRNewswire)

>  Nestle reported strong growth in its Friskies Europe division, but sales from its U.S. pet food volumes fell 11% in the quarter due to stiff competition from Procter & Gamble’s Iams brand. (Reuters, company website)

>  IBP reported that financial results for the first quarter of 2000 were affected by tight livestock supplies.  However, they also noted that improved market ready supplies of cattle are forecast for the next several months, while increased hog numbers are expected for the remainder of the year. Both factors should contribute to improving earnings. Net earnings before unusual and extraordinary items and an accounting change for the first three months of 2001 totaled $20 million, compared to $60 million during the same period last year. Net sales for the quarter totaled $4.1 billion, compared to $4.0 billion in 2000. Unusual items in the first quarter 2000 earnings included $31 million of pre-tax ($19 million net of tax) CBFA merger-related costs and an $11 million pre-tax ($7 million net of tax) bad debt provision. First quarter 2001 earnings included a $12 million pre-tax credit to the company’s stock options expense due to decreased stock value during the quarter. (AgWeb)

>  Pilgrim’s Pride announced a net loss of $9.8 million for the second fiscal quarter ended March 31, 2001, a $18.8 million decrease compared to net income in the prior year’s second quarter.  The reported results are slightly better than the earnings guidance previously released by the Company.  The Company also announced second quarter net sales of $541.6 million, a 45.1% increase, compared to the $373.3 million for the same period last year, with the increase resulting primarily from the acquisition of WLR Foods, Inc., which was effective January 27, 2001. (PRNewswire)

>  ImmuCell Corporation announced the results of its operations for the three months ended March 31, 2001.  During the quarter, total revenues increased by 3% to $1.5 million compared to the same period in 2000. The net operating profit before taxes of $193,000 compares to the net operating profit before  taxes of $227,000 for 2000.  (Business Wire)

Company News Releases

>  Veterinary Products Laboratories announced that it has acquired marketing rights to Feliway Pheromone Spray, previously available to veterinarians through Abbott Laboratories
Animal Health.  Feliway is a unique product used to control cat urine marking.  Feliway is an environmental spray containing synthetic analogues of naturally occurring facial pheromones.  Observations have indicated that cats do not leave urine marks on objects previously marked with facial pheromones.  Feline urine marking is a natural habit of both male and female cats.  In addition, Feliway demonstrates a calming effect on cats in new and stressful environments, or when traveling. (company press release)

>  Smithfield Foods, Inc. announced another transaction to build its case-ready meat business
in the Northeast United States. By acquiring a stake in Pinnacle Foods, Inc., Smithfield is taking advantage of the synergies initially created by the recently announced agreement to purchase Moyer Packing Company last week.  Pinnacle has expected sales of about $30 million for 2001. 
Smithfield Foods signed an agreement in principle to acquire up to 13.5 million shares, or 50% of the outstanding common shares of Pinnacle Foods, for a total purchase price of $6 million.  The agreement also calls for Smithfield Foods to provide a $30 million revolving line of credit to Pinnacle for working capital and other purposes. (PRNewswire)

>  Biacore International AB announced that FoodSENSE has successfully demonstrated the applicability of Biacore’s SPR (Surface Plasmon Resonance) based biosensor technology for the analysis of veterinary drug residues in foods such as milk and meat.  Final results from the project have shown that substantially higher daily throughput of tests can be performed using SPR technology, with the capacity to detect a much wider range of residues compared to existing test methods.  The FoodSENSE project is supported by the EC Program For Agriculture And
Fisheries (EC FAIR), started in mid 1998 and involved eight other organizations from four countries.  (PRNewswire)

    2001 US Animal Health DISTRIBUTORS Directories are now available

2001 U.S. Animal Health Distributors Directories here!  If you have already ordered this directory, you should receive it in the mail early next week. 

If you have not ordered your new directories you can do so by contacting Jane Morgan in our Dallas office.   The directories are $250 each.  Additional copies of the same directory to the same shipping address are $75 each.   Orders maybe placed by contacting Jane Morgan in the Dallas office at or (972) 243-4033.  

Animal Health News

>  Uruguay has detected an outbreak of foot and mouth disease near its shared border with Argentina and had suspended all meat exports. The Uruguayan government said the disease could devastate the country’s beef industry. Uruguay is currently the only member of South America’s Mercosur trade bloc – which includes Argentina, Brazil and Paraguay – considered completely free of the disease, or FMD-free without vaccination.  Beef exports make up about 20% of Uruguay’s total exports.  Uruguay’s woes are cropping up as Argentina struggles to contain its own FMD crisis. Argentine officials have found nearly 300 FMD cases and are vaccinating 98 percent of the nation’s 50 million cattle. The disease has halted exports of Argentina’s world-famous beef. (AgWeb)

>  Legislators plan to expand Gov. Jim Hodges’ moratorium on any new factory-style hog farms in South Carolina, asking for swift action to ban open waste lagoons. The South Carolina Farm Bureau Federation said it was surprised by the governor’s call for tougher regulations, saying it wanted to state leaders to make decisions based on science instead of “emotions, rumors or inaccurate information.’’  Virginia-based Smithfield Foods and its North Carolina subsidiary, Carroll’s Foods, want to build two huge hog farms near Blenheim and near Sellers that would house a combined 32,000 hogs. Smithfield already has about 30 somewhat smaller farms in South Carolina with an average of 5,000 hogs each.  (AP)

>  An independent U.S. food-testing laboratory is using a new test developed at Colorado State University to detect minute quantities of central nervous system tissue (CNST) in raw and cooked meats. CNST in meat has been linked to the transmission of bovine spongiform encephalopathy (BSE).  ABC Research Corporation is using an enzyme-linked immunosorbent assay (ELISA) test to detect the nervous tissue. While there is currently no direct way to test foods for the presence of the BSE disease agent, ABC Research’s ELISA test method may be the next best thing.  (AgWeb)

Alltech’s 17th Annual Symposium
Science and Technology in the Feed Industry April 8-11th
We recently attended this symposium in Lexington, Kentucky along with more than 700 other delegates from over 60 countries around the world.

The symposium was introduced by Dr. Pearse Lyons, President of Alltech who spoke on Solutions for the 2001 feed industry. The keynote speaker was Mr. Dan Glickman who was Secretary for Agriculture for 6 years during the Clinton administration.

With the banning of in-feed antibiotics, concerns on antibiotic resistance, food safety and contamination issues, shortages of protein and GMO product concerns has the time come for the “natural products” feed companies to finally emerge as major suppliers to the meat and fish production industries?

In three days over 30 scientific papers were presented along with numerous poster exhibitions. Certainly the science presented was of a very high quality. The use and benefits of natural feed products are becoming clearer and defined uses becoming proven. The industry, in which Alltech is a major player, could be poised for major advances if it continues to scientifically establish the credibility of its products and is able to broadcast its message to receptive ears in the meat production industries.

We suspect doing  the science will be easier than spreading the message. 
[John Short]

Agribusiness News

Brakke Consulting Viewpoint
There was a mix of results for the first quarter by the companies reporting this week. One observation is that those serving the food animal business did better than those that are mainly serving the companion animal market. Is this another indication that the companion animal sales are slowing and more attention is being given to the food production area?

The news stories on foot and mouth outbreaks and BSE issues were greatly reduced this week.  Hopefully, these will be history for the industry in the near future.

Have a good weekend.  We hope to see many of you in Indianapolis May 7-9th at the AFIA meeting.

[Ron Brakke]
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