Eco Animal Health Group (AIM:EAH) on Friday told investors that it expects half-year group revenue of £33 million for the six months to 30 September, down from £39 million a year earlier, after a slump in Chinese pork prices hit demand for animal health products.
The London-listed veterinary products developer, which markets the antibiotic Aivlosin alongside a growing vaccine pipeline, said revenue excluding China grew 6% over the prior year, with South and South East Asia up more than 50%.
Despite the group-wide revenue decline, Eco expects adjusted EBITDA of approximately £3.0 million for the period, consistent with the first half of the prior year, helped by a further improvement in gross margin to approximately 52% from 49.6% a year earlier.
Earnings per share is expected to be "strongly favourable" against the prior year, which the company attributed to the exclusion of the minority interest in the China segment.
Eco said trading in the first half was in line with the board's expectations as outlined in its full-year results announced in July, when it flagged that low Chinese pork prices, driven by oversupply, were curbing producer spending on animal health products.
China's breeding sow herd fell 10.7% year-on-year to 36.0 million head at the end of September, which the board said points to a material reduction in future pork supply and provides a foundation for a price recovery in 2027.
The board expects that sow herd reduction, combined with seasonal winter demand and greater disease prevalence requiring treatment with products such as Aivlosin, to improve China revenue in the second half, though full-year revenue from the China and Japan segment is still likely to come in at less than half of the prior year's level.
Weaker Chinese trading is expected to produce a shortfall in full-year group revenue against market consensus, which stood at £89.6 million as of 5 November, though the company said gross margin gains and cost discipline should keep adjusted EBITDA and earnings per share broadly in line with consensus figures of £8.5 million and 3.30p respectively.
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The company recorded its first sales of ECOVAXXIN MS, its poultry vaccine against Mycoplasma synoviae, following the vaccine's EU commercial launch in July; early revenue contribution was modest and in line with expectations, with uptake expected to accelerate as customers move beyond initial trials.
"A strong performance in other regions and our continued efforts improving gross margins are expected to deliver half year adjusted EBITDA in-line with the prior year, with market conditions expected to improve during H2," said chief executive David Hallas, adding that ECO "remains well positioned for our next phase of growth" as ECOVAXXIN MS sales ramp up.
Net cash stood at £24 million as at 30 September, in line with the board's expectations; Eco expects to announce its interim results for the six months to 30 September on 30 November.