ECO Animal Health Group Chinese market recovery expected to result in improved trading

ECO Animal Health Group

ECO Animal Health Group plc (LON:EAH) has issued a trading update ahead of its Annual General Meeting to be held later today. 

The Group reported an exceptional recovery from the African Swine Fever outbreak in China during 2019 and 2020 to record revenues in China and Japan which were 154% higher in the year ended 31 March 2021 compared with the prior year. The Group’s outlook statement issued on 26 July 2021 in connection with the publication of the Annual Report, indicated that Group revenue was marginally behind the unprecedented prior year and the previous strength seen in the China market had eased significantly following the decline in pork prices. The outlook statement also indicated that the Board expected the Group’s historical pattern of second half revenue weighting would be repeated in the current financial year. This was specifically related to China where market softness in the first quarter was expected to reverse later in the year as state purchasing of pork would improve producer margins.

During the second quarter the easing of the Chinese market continued and the revenue from China in the five months ended 31 August 2021, representing 40% of total Group revenue compared with 48% in the prior period, was significantly lower than budget and the prior year. It is expected that there will be some recovery in China revenues during the remainder of our financial year due to:

· Pork prices continuing to improve with state sponsored purchasing of pork

· Increased Autumn and Winter pork consumption

· Increased Autumn and Winter respiratory disease prevalence leading to greater demand for Aivlosin®

· A marketing and sales focus on both mid-tier and large producers, supported by a series of national and regional technical seminars

· Sequential monthly revenue has increased for the last three months

Elsewhere, overall revenues in the Period have been behind a budget which assumed no seasonality but ahead of the prior year.  

In aggregate, the impact of China resulted in Group revenue for the five months ended 31 August 2021, being 6% lower than the comparative period last year. 

In the remainder of the financial year, recovery in the Chinese market is expected to result in improved trading. The markets across the rest of the world for the Group’s products are expected to remain firm and the Board looks forward cautiously but positively to the rest of the year.

Marc Loomes, ECO Animal Health CEO, commented:

“The commodity price reduction seen in China since our year end has put additional pressure on the pork production industry.  Many producers are trading at or below breakeven point, and this has resulted in significant headwinds in our sales efforts.  We expect ongoing improvements in the prospects for sales in China, as the current imbalance of supply and demand is rectified and the typical seasonal increase in the demand for Aivlosin® in the winter months develops.  Notwithstanding the first half shortfall in China we are encouraged with the revenue performance elsewhere in the Group’s international markets.”

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