Virbac : Consolidated accounts_2023

Consolidated accounts

CONSOLIDATED FINANCIAL STATEMENTS

Statement of financial position

in € thousand	Notes	2023	2022 restated1
Goodwill	A1-A3	165,372	145,110
Intangible assets	A2-A3	185,109	154,397
Tangible assets	A4	268,016	240,643
Right of use	A5	32,940	34,595
Other financial assets	A6	6,243	6,256
Share in companies accounted for by the equity method	A7	4,244	4,423
Deferred tax assets1	A8	22,323	24,668
Non-current assets		684,246	610,093
Inventories and work in progress	A9	339,663	330,909
Trade receivables	A10	167,977	146,290
Other financial assets	A6	2,636	3,538
Other receivables	A11	85,302	65,407
Cash and cash equivalents	A12	175,906	177,383
Current assets		771,484	723,528
	A13
Assets classified as held for sale	-	-
Assets		1,455,730	1,333,620
Share capital		10,573	10,573
Reserves attributable to the owners of the parent company1		889,728	829,066
Equity attributable to the owners of the parent company	A14	900,301	839,639
	A14
Non-controlling interests	9,616	-351
Equity		909,917	839,288
Deferred tax liabilities1	A8	31,560	25,765
Provisions for employee benefits	A15	19,606	18,589
Other provisions	A16	7,299	6,833
Lease liability	A17	25,001	27,392
Other financial liabilities	A18	40,689	18,014
Other payables	A19	22,612	7,154
Non-current liabilities		146,767	103,747
Other provisions	A16	2,309	1,039
Trade payables	A20	149,629	155,820
Lease liability	A17	10,144	9,415
Other financial liabilities	A18	47,709	43,199
Other payables	A19	189,256	181,113
Current liabilities		399,047	390,585
Liabilities		1,455,730	1,333,620

1restatement following the IAS 12 amendment related to deferred tax assets and liabilities arising from the same transaction, applicable as at January 1, 2023 (see "Accounting principles and methods applied")

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Income statement

in € thousand

Revenue from ordinary activities

Purchases consumed

External costs

Personnel costs

Taxes and duties

Depreciations and provisions

Other operating income and expenses

Current operating profit before depreciation of assets arising from acquisitions1

Depreciations of intangible assets arising from acquisitions

Operating profit from ordinary activities

Other non-current income and expenses

Operating result

Financial income and expenses

Profit before tax

Income tax2

Share from companies' result accounted for by the equity method

Result for the period

attributable to the owners of the parent company

attributable to the non-controlling interests

Profit attributable to the owners of the parent company, per share

Profit attributable to the owners of the parent company, diluted per share

Notes

A21

A22

A23

A24

A25

A24

A26

A27

A28

A7

A30

A30

2023 2022 restated2

1,246,901 1,216,187

-433,873-421,192

-230,155-235,527

-342,840-321,907

-15,294-14,188

-44,652-42,610

8,0555,796

188,142 186,559

-3,265-3,743

184,876 182,816

-878-3,296

183,998 179,519

-9,845-3,077

174,153 176,443

-53,520-55,673

455525

121,088 121,295

121,298 121,943

-210-648

€14.40€14.43

€14.38€14.42

Variation

2.5%

0.8%

1.1%

2.5%

-1.3%

-0.2%-0.5%-67.6%

-0.2%

-0.3%

1in order to provide a clearer picture of our economic performance, we isolate the impact of the allowance for depreciations of intangible assets resulting from acquisitions. This turned out to have a material impact considering the latest external growth that took place through acquisitions. Therefore, our income statement shows a current operating profit, before depreciation of assets arising from acquisitions (see note A24)

2restatement following the IAS 12 amendment related to deferred tax assets and liabilities arising from the same transaction, applicable as at January 1, 2023 (see "Accounting principles and methods applied")

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CONSOLIDATED ACCOUNTS | FINANCIAL REPORT

Comprehensive income statement

	2023	2022	Variation
in € thousand	restated1
Result for the period1	121,088	121,295	-0.2%
Conversion gains and losses	-11,951	2,418
Effective portion of gains and losses on hedging instruments	-1,473	1,180
Items subsequently reclassifiable to profit and loss	-13,424	3,597	-473.1%
Actuarial gains and losses	-1,939	2,478
Items not subsequently reclassifiable to profit and loss	-1,939	2,478	-178.3%
Other items of comprehensive income (before tax)	-15,363	6,076	-352.9%
Tax on items subsequently reclassifiable to profit and loss	381	-305
Tax on items not subsequently reclassifiable to profit and loss	527	-624
Comprehensive income	106,632	126,442	-15.7%
attributable to the owners of the parent company	107,304	127,068	-15.6 %
attributable to the non-controlling interests	-672	-626	7.3 %

1restatement following the IAS 12 amendment related to deferred tax assets and liabilities arising from the same transaction, applicable as at January 1, 2023 (see "Accounting principles and methods applied")

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Statement of change in equity

in € thousand

Equity as at 12/31/2021

Impact of IAS 12 amendment1

Equity as at 01/01/2022 retstated1

2021 allocation of net income

Distribution of dividends

Treasury shares

Changes in scope

Other variations

Comprehensive income

Equity as at 12/31/2022 restated1

2022 allocation of net income

Distribution of dividends

Treasury shares

Changes in scope

Other variations

Comprehensive income

Equity as at 12/31/2023

					Equity
Share	Share		Conversion	Result	attributable	Non-
Reserves	for the	to the owners	controlling	Equity
capital	premiums		reserves	period	of the parent	interests
					company
10,573	6,534	614,947	-20,281	113,162	724,935	256	725,191
-	-	324	-	-	324	-	324
10,573	6,534	615,271	-20,281	113,162	725,259	256	725,515
-	-	102,589	-	-102,589	-	-	-
-	-	-	-	-10,573	-10,573	-17	-10,590
-	-	-2,124	-	-	-2,124	-	-2,124
-	-	-	-	-	-	28	29
-	-	9	-	-	9	8	17
-	-	2,729	2,396	121,943	127,068	-626	126,442
10,573	6,534	718,474	-17,885	121,943	839,640	-351	839,288
-	-	110,779	-	-110,779	-	-	-
-	-	-	-	-11,165	-11,165	-7	-11,172
-	-	-18,289	-	-	-18,289	-	-18,289
-	-	-15,865	-	-	-15,865	10,647	-5,219
-	-	-1,325	-	-	-1,325	-	-1,325
-	-	-2,505	-11,488	121,298	107,304	-672	106,632
10,573	6,534	791,269	-29,373	121,298	900,301	9,616	909,917

1restatement following the IAS 12 amendment related to deferred tax assets and liabilities arising from the same transaction, applicable as at January 1, 2023 (see "Accounting principles and methods applied")

The general shareholders' meeting of Virbac, which was held on June 20, 2023, approved the payment of a dividend of €1.32 per share for the 2022 financial year, for a total amount of €11,164,560.

The "Changes in scope" line for the financial year relates to the acquisition of Globion in India (see note A1).

The "Other variations" line corresponds to the impact net of tax of a correction to the amortization of intangible assets. These should be fully amortized. It should be noted, however, that these assets relate to products that we continue to market, and therefore still generate resource inflows for the Group.

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CONSOLIDATED ACCOUNTS | FINANCIAL REPORT

Cash position statement

in € thousand	2023	2022
Cash and cash equivalents	177,383	172,787
Bank overdraft	-639	-628
Accrued interests not yet matured	-65	-23
Opening net cash position	176,679	172,136
Cash and cash equivalents	175,906	177,383
Bank overdraft	-2,517	-639
Accrued interests not yet matured	-31	-65
Closing net cash position	173,358	176,679
Impact of exchange rates	-5,345	-4,856
Impact of changes in scope	7,977	-
Net change in cash position	-5,952	9,398

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Statement of change in cash position

	Notes	2023	2022
in € thousand	restated1
Result for the period1		121,088	121,295
Elimination of share from companies' profit accounted for by the equity method	A7	-455	-525
Elimination of depreciations and provisions	A16-A24	47,618	49,066
Elimination of deferred tax change	A8	1,686	-5,739
Elimination of gains and losses on disposals	A25	1,973	439
Other income and expenses with no cash impact		-4,090	4,092
Cash flow		167,820	168,627
	A27
Net financial interests paid	159	-1,140
Income tax accrued for the period		51,454	61,716
Cash flow before financial interests and income tax		219,433	229,203
Effect of net change in inventories	A9	-9,027	-55,771
Effect of net change in trade receivables	A10	-22,040	-37,836
Effect of net change in trade payables	A20	-9,941	25,443
Income tax paid		-61,457	-75,428
Effect of net change in other receivables and payables	A11-A19	1,673	13,374
Effect of change in working capital requirements		-100,792	-130,219
Net cash flow generated by operating activities		118,641	98,984
Acquisitions of intangible assets	A2-A20	-18,859	-14,834
Acquisitions of tangible assets	A4-A20	-41,042	-38,743
Disposals of intangible and tangible assets	A25	203	374
Change in financial assets	A6	645	-1,154
Change in debts relative to acquisitions		-925	-475
Acquisitions of subsidiaries or activities		-62,367	-
Disposals of subsidiaries or activities		-	-
Withholding tax on distributions		-	-
Dividends received		475	-
Net cash flow allocated to investing activities		-121,869	-54,832
Dividends paid to the owners of the parent company	A36	-11,165	-10,573
Dividends paid to the non-controlling interests		12	-8
Change in treasury shares		-19,422	-3,451
Transactions between the Group and owners of non-controlling interests		-	-
Increase/decrease of capital		-	-
Cash investments		-	-
Debt issuance	A18	88,651	85,439
Repayments of debt	A18	-50,492	-96,478
Repayments of lease obligation	A17	-10,149	-10,824
Net financial interests paid	A27	-159	1,140
Net cash flow from financing activities		-2,723	-34,755
Change in cash position		-5,952	9,398

1restatement following the IAS 12 amendment related to deferred tax assets and liabilities arising from the same transaction, applicable as at January 1, 2023 (see "Accounting principles and methods applied")

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CONSOLIDATED ACCOUNTS | FINANCIAL REPORT

NOTES TO THE CONSOLIDATED ACCOUNTS

General information note

Virbac is an independent, global pharmaceutical laboratory exclusively dedicated to animal health which markets a full range of products designed for companion animals and farm animals.

The Virbac share is listed on the Paris stock exchange in section A of the Euronext.

Virbac is a public limited company governed by French law, whose governance evolved in December 2020 from an organization with an executive board and a supervisory board to an organization incorporating a general management (which relies on a Group executive committee) and a board of directors. Its trading name is "Virbac". The company was established in 1968 in Carros.

After the joint ordinary and extraordinary shareholders' meeting held on June 17, 2014, which adopted the resolution on reviewing the by-laws, the company's lifetime was extended to 99 years, i.e. until June 17, 2113.

The head office is located at 1ère avenue 2065m LID, 06516 Carros. The company is registered in the Grasse Trade and companies register under the number 417350311 RCS Grasse (France).

Our consolidated accounts for the 2023 financial year were approved by the board of directors on March 15, 2024. They will be submitted for approval to the shareholders' general meeting on June 21, 2024, which has the power to have the statements amended.

The explanatory notes below form part of the consolidated accounts.

Significant events over the period

Cyberattack

Virbac was the subject of a cyberattack on the night of June 19 to 20, 2023, on several of its sites around the world. Exceptional measures were immediately taken as soon as we became aware of this attack, and a crisis unit, including experts dedicated to cyber security, was set up in order to assess the impacts on our systems and quickly organize the corrective measures necessary to ensure business continuity.

This attack resulted in a slowdown or temporary interruption of some of our services, which was contained thanks to the responsiveness and mobilization of our teams. We have been able to rely on our systems and data (not corrupted) till June 19, and on reinforced measures of internal control implemented from June 20, on.

Corrective action continued throughout the summer, and as of the month of August, we have been operating almost normally across all our operations again. We have also recovered all IT data and applications while further strengthening our IT infrastructures.

Although the impact of the cyberattack on the financial year results is limited, it resulted in additional costs and the major impacts have been related to the vaccine production in Carros.

Inflation

Cost increases continued in 2023, as expected and to a lesser extent compared to 2022. However, their impacts have been limited by price increases in some of our products, as well as the negotiation over several years of certain supply contracts.

Vaccines

2023 has been impacted by temporary limitations in the production capacity of dog and cat vaccines, which were more significant than expected.

This has weighed on our absorption of fixed costs as well as on our sales, given the low level of our vaccine inventories.

Acquisition of GS Partners on May 2, 2023

On May 2, 2023, we completed the acquisition of 100% of the shares of GS Partners, our long-standing distributor in the Czech Republic and Slovakia and also one of our oldest distributors in Central Europe.

This acquisition, which represents several years of successful partnership between our teams and GS Partners, fully aligns with our external growth strategy. It will enable us to become more autonomous in fast-growing markets and to secure and further develop our business in these two countries while strengthening our presence in Central Europe, where our products for animal health are already accessible through our presence in Hungary and Poland.

About twelve GS Partners employees joined Virbac's teams as part of the acquisition.

The acquisition was treated for accounting purposes as a business combination in our consolidated statements, in accordance with IFRS 3. Information relating to IFRS 3 is presented in note 1 to the consolidated accounts.

Acquisition of Globion on November 1, 2023

On November 1, we completed the acquisition of 74% of Globion India Private Ltd. This transaction will strengthen our position as a leader in animal health in India by extending Virbac India's existing poultry ranges to the growing avian vaccine segment.

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Founded in 2005, as a joint venture between Suguna Group, one of India's leading poultry conglomerates, and Lohmann Animal Health, a German poultry vaccine specialist, Globion has developed solid know-how and expertise in the development, manufacture and marketing of live and inactivated vaccines targeting a wide range of avian pathogens.

Globion is based in Hyderabad, where its industrial and R&D facilities employ approximately 120 full-time people and generate an annual revenue of approximately €12 million.

The acquisition of this first tranche for 74% of the capital, was treated for accounting purposes as a business combination in our consolidated accounts, in accordance with IFRS 3. Information relating to IFRS 3 is presented in note 1 of the consolidated accounts appendix. The consolidated accounts also include the provisions of the acquisition contract relating to the remaining 26% interest (see notes 1 and 19).

Virbac launches a share buyback program

Following the decision of the board of directors on June 19, 2023 and its approval by the shareholder's meeting, we contemplate to buy back 100,000 of our own shares (less than 1.25% of the capital). The main objective is to decrease the company's share capital by canceling treasury shares purchased.

This buy back program takes place within the limits of the program as set by the shareholder's meeting which are the following:

• nature of shares: ordinary shares;
• maximum of the company's share capital: 10%;
• maximum number of shares: 845,800. It should be noted that in the event of a capital increase through incorporation of reserves and allocation of performance-related stock grants, a share split or reverse shares split, this amount will be adjusted by a multiplier equal to the ratio between the number of shares in the share capital prior to the transaction and the number after the transaction;
• maximum purchase price per share: €1,000.

To implement this program with a view to reducing capital by canceling shares, Virbac's board of directors has appointed an investment services provider, with a mandate expiry date on September 30, 2024. The terms of the mandate will relate to a maximum volume of 100,000 Virbac shares (representing less than 1.25% of the company's capital as of December 31, 2023) for a unit purchase price not exceeding €270 and a total volume of buyback therefore not exceeding €27,000,000. Shares redeemed under this mandate will be fully canceled by our company.

As of December 31, 2023, the number of shares purchased in this context is 67,343 shares representing a total of €17.5 million (see note A14).

Significant events after the closing date

Acquisition of Sasaeah in Japan

On March 6, 2024, Virbac signed a definitive agreement with ORIX Corporation for the acquisition of its animal health subsidiary Sasaeah for an enterprise value of approximately €280 million.

Formed through the combination of two legacy animal health providers (Fujita Pharmaceutical Co. Ltd. and Kyoto Biken Laboratories Inc.) under the stewardship of ORIX Corporation, Sasaeah generates annual revenues of about €75 million, of which 50% from vaccines. With strong footholds in Japan, Sasaeah develops, manufactures and markets a large portfolio of veterinary products targeting both farm animals and companion animals.

Upon completion, this strategic acquisition will bring to Virbac a leadership position in the farm animal vaccine market in Japan, notably in the cattle segment, and a large portfolio of pharmaceutical products for all the major species. Virbac will benefit from Sasaeah's local manufacturing sites in Japan and in Vietnam, its R&D capabilities as well as more than 500 passionate and skilled employees. Virbac will be propelled as a leading animal health player in Japan, with an opportunity to leverage these capabilities across Asia.

Completion of the transaction is not subject to any regulatory approval; it is therefore expected to close by the beginning of April 2024.

Accounting principles and methods

Compliance and basis for preparing the consolidated financial statements

The consolidated financial statements cover the twelve-month periods ended December 31, 2023 and 2022.

In line with regulation n°1606/2002 of the European parliament and of the council of July 19, 2002 on the application of international accounting standards, our consolidated financial statements are established in accordance with the international accounting standards and interpretations, which encompasses the IFRS (International financial reporting standards), the IAS (International accounting standards), as well as applicable interpretations by the SIC (Standards interpretations committee) and the Ifric (International financial reporting interpretations committee), whose application was compulsory at December 31, 2023.

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CONSOLIDATED ACCOUNTS | FINANCIAL REPORT

Our consolidated financial statements as of December 31, 2023 have been prepared in accordance with the standard published by the IASB (International accounting standards board) and the standard adopted by the European Union as of December 31, 2023. The IFRS standard adopted by the European Union as at December 31,

2023 is available under the heading "IAS/IFRS interpretations and standards", on the following website: http://ec.europa.eu/finance/company-reporting/standards-interpretations/index.

The consolidated financial statements have been prepared in accordance with the IFRS general principles: true and fair view, business continuity, accrual basis accounting, consistency of presentation, materiality and consolidation.

New standards and interpretations

Mandatory standards and interpretations as at January 1, 2023

• IFRS 17 - Insurance contracts - including amendments to IFRS 17
• First application of IFRS 17 and IFRS 9 - Comparative information
• Amendment to IAS 1 and IFRS practice statement 2 - Disclosure of accounting policies
• Amendment to IAS 8 - Accounting policies, change in accounting estimates and errors: definition of change in accounting estimates
• Amendments to IAS 12 - Income taxes: deferred tax related to assets and liabilities arising from a single transaction

These new texts have had no significant impact on our accounts.

Indeed, the only impact of these new standards and applications on our consolidated accounts relates to the IAS 12 amendment, which clarifies the exemption of the accounting of deferred tax assets and liabilities arising from a single transaction. This exemption is not applicable if it results in different deductible and taxable temporary differences later on. This exemption was used by the Group since the first application of IFRS 16 Leases, on January 1, 2019. The amendment application being retrospective, we have restated our financial statements to take into account the effect of the amendment in the equity opening balance as at January 1, 2022 (which corresponds to the opening balance of the first comparative period). The impact is a positive adjustment of €0.3 million in the Group equity. The net result impact at December 31, 2023 is a deferred tax loss of €24 thousand.

The economic and social environment in France during the first semester of 2023 has also been impacted by the French pension reform, which was voted on April 14, 2023, which progressively raises the retirement age from 62 to 64 years, and increases the mandatory number of years required to earn a full pension to 43 years. We have assessed the impact of this reform on our retirement plans in France, which is a loss of €0.3 million recognized through equity (see note A15).

Further, in September 2023, the French Cour de cassation rendered a decision that confirmed the right to employees to acquire annual leave whilst on a sick leave, regardless of the reasons for the sick leave or the length of it. The application of this decision was immediate. The impact on the Group accounts was nonetheless immaterial.

Last, since 2022, Turkey was added to the list of hyperinflationary economies. However, the operations we carry out in that country are not material at the Group level. Thus, in the absence of significant impact, the provisions of IAS 29 were not applied as at December 31, 2023.

• Amendments to IAS 12 - Income taxes: international tax reform, Pillar 2 model rules.

The Finance bill in France for 2024 transposed the European directive concerning global anti-base erosion rules ("GLOBE" rules) and adopted the OECD Pillar 2 model rules.

The Group, falling within the scope of the new legislation, has carried out an initial assessment of its potential exposure to the new legislation with its entry into force.

This assessment is based on the most recent tax filings, country-by-country reporting and financial statements of the Group's constituent entities. Based on the assessment, as the effective tax rates in the jurisdictions in which the Group operates are above 15%, the Group does not expect any exposure to the new legislation at this stage.

The Group expects to be in a position to reassess the potential exposure in its next interim financial statements for the period ending June 30, 2024. The Group is currently engaged with tax specialists to assist it with applying the new legislation.

Standards and interpretations available for early adoption from January 1, 2023 on but not yet adopted by the EU

The standards and interpretations listed below will be applicable from January 1, 2024 on:

• Amendments to IAS 7 and IFRS 7 - Supplier finance arrangements

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We have chosen not to adopt these standards and interpretations early, choosing instead to conduct an analysis of the implications involved in adopting them. Where necessary, we will apply these standards in our accounts once they are adopted by the European Union

Standards and interpretations released but not yet applicable as at January 1, 2023

• Amendments to IFRS 16 - Leases contracts: lease liability in a sale and leaseback
• Amendments to IAS 1 - Presentation of financial statements: classification of liabilities as current or non-current
• Amendments to IAS 1 - Presentation of financial statements: non-current liabilities with covenants

Consolidation rules applied

Consolidation scope and methods

In accordance with IFRS 10 "Consolidated financial statements", our consolidated financial statements include all of the entities controlled, directly or indirectly, by Virbac, whatever equity share it may have in these entities. An entity is controlled by Virbac once the following three criteria are cumulatively met:

• Virbac has power over the subsidiary whereby it has actual rights that give it the ability to direct relevant activities;
• Virbac is exposed to or has rights to variable returns because of its connections to that entity;
• Virbac has the capacity to exercise its power over this entity so as to affect the amount of returns that it

receives.

Determining control takes into account potential voting rights if they are substantive, in other words, whether they can be exercised in a timely fashion when decisions about the entity's relevant activities should be taken.

The entities over which Virbac exercises this control are fully consolidated. As applicable, any non-controlling (minority) interests are valued on the date of acquisition in the amount of the fair value of the identified net assets and liabilities.

In accordance with IFRS 11 "Partnerships", we classify partnerships as joint ventures. Depending on the partnerships, Virbac exercises:

• joint control over a partnership when decisions regarding the partnership's relevant activities require unanimous consent from Virbac and the other parties sharing control;
• significant influence over an associated company when it has the power to participate in financial and operational decisions, albeit without having the power to control or exercise joint control over these policies.

Joint ventures and associated companies are consolidated using the equity method in accordance with IAS 28 "Investments in associated companies and joint ventures" standard.

The consolidated financial statements as at December 31, 2023 include the financial statements of the companies that Virbac controls indirectly or directly, in law or in fact. The list of consolidated companies is provided in note A40.

The changes in perimeter that took place during the year were the following: acquisition of GS Partners (now Virbac Czech Republic s.r.o) and of Globion India Private Ltd.

All transactions between Group companies, as well as inter-company profits, are eliminated from the consolidated accounts.

Foreign exchange conversion methods

• Conversion of foreign currency operations in the accounts of consolidated companies

Fixed assets and inventories acquired using foreign currency are converted into functional currency using the exchange rates in effect on the date of acquisition. All monetary assets and liabilities denominated in foreign currency are converted using the exchange rates in effect on the year-end date. The resulting exchange rate gains and losses are recorded in the income statement.

• Conversion of foreign company accounts

In accordance with IAS 21 "Effects of changes in foreign exchange rates", each of our entities accounts for its operations in its functional currency, the currency that most clearly reflects its business environment.

Our consolidated financial statements are presented in euros. The financial statements of foreign companies for which the functional currency is not the euro are converted according to the following principles:

• the balance sheet items are converted at the rate in force at the close of the period. The conversion difference resulting from the application of a different exchange rate for opening equity is shown in the other comprehensive income;
• the income statements are converted at the average rate for the period. The conversion difference resulting from the application of an exchange rate different from the balance sheet rate is shown in the other comprehensive income.

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