FY 2019-20 in retrospect
The year gone by was below expectations in terms of sales and profitability. Internaland external challenges were the hallmark for the full year. Macro adverse conditionsprevailing throughout the whole year weighed heavily against the aggressive growth planswhich were made by us at the beginning of the year.
Domestic business saw a disruption. On one side high maize prices shrunk the poultrypopulation. On the other side we embarked on an aggressive growth plan by increasing thesales team as well as by adding newer geographies. Things seemed to improve in Jan 2020but was again subjected to a setback from mid Feb 2020 due to COVID-19.
Your Company reported net sales of Rs. 1694.25 million in FY 2019-20 compared to Rs.1711.87 million in the previous year thereby registering a de-growth of 1%.
Domestic sales were registered at Rs. 1316.04 million as compared to Rs. 1443.45million in FY 2018-19 thereby registering a de-growth of 9%.
On the other hand exports were registered at Rs. 224.19 million as compared to Rs.133.89 million in FY 2018-19 thereby registering a growth of 67%.
Overall Poultry Health Division showed a de-growth by 5% while the Animal HealthDivision registered a growth of 6%.
Supplies through Indian Government tenders which were expected to be executed in Q4mainly the Brucella vaccine tenders under the national immunisation scheme have beendelayed due to reasons beyond our control.
Your Company recorded a net profit after tax of Rs. 312.24 million in FY 2019-20 asagainst Rs. 438.52 million in the previous year a de-growth of 29%. Nonetheless we wereable to maintain the Gross margins in the year.
In the year gone by the progress in our subsidiaries was relatively better.
As mentioned in the year before through Texas Lifesciences our Company aims atachieving complete self-reliance. 72% of our animal and poultry health products are nowmanufactured at Texas. This has helped in gaining control over the supply chain of thehealth products as well as getting a reassurance on the quality.
Texas Lifesciences reported net sales of Rs. 128.03 million in FY 2019-20 as comparedto Rs. 83.50 million in the previous year thereby registering a growth of 53%.
FAO tenders throughout the year as well as independent country tenders for PPR vaccinesaw a major turnaround at Hester Nepal. This was supplemented by our additional push inthe Nepalese domestic market.
Our balance sheet showed profits for the first time. Hester Nepal has been able toachieve a profit of
Rs. 39.39 million with a turnover of Rs. 161.80 million in FY 2019-20 as against aturnover of Rs. 63.97 million in FY 2018-19.
Our prestigious animal vaccine manufacturing project in Tanzania is progressing fasterthan the original timeline. We expect the completion of the construction followed by theinauguration of the plant by October 2020. We hope to release the first batches of thelocally manufactured PPR vaccine and New Castle Disease vaccine at the inaugurationceremony.
We are mindful of the dip in sales and in profitability we have seen in FY 2019-20.Though being one of its kind the lockdown from March 2020 end further made us realisethat macro dynamics could change drastically without any warnings thereby impactingcompanies.
Not losing our objectives of growing aggressively and at the same time ensuring thatwe at the least maintain our historical bottom line we have taken quite a few incisivedecisions.
To address the changing business realities as well as to pursue growth in terms of topline and bottom line we have taken a few initiatives:
1. Efficiency improving measures in sales and in production divisions are beingimplemented which will help us reinstate the business volumes along with the desiredprofitability.
2. We have rationalised our product mix and pricing for optimising growth andprofitability.
3. The Company has set up the Manufacturing Science & Technology Division to focuson implementing innovation and best practices and solutions for vaccine manufacturing. Oneof the objectives of this division is to work on the improvisation of production yieldsand performances of the vaccines in the field.
4. Both our divisions would continue to focus on the health products segment which willhelp towards improving the top line. The health products market is bigger than the vaccinemarket worldwide.
5. We are in the process of establishing laboratory services for nutritional products.This will complement the efforts of the marketing team.
6. The National Animal Disease Control Program of the Government of India is expectedto be implemented for Brucella vaccine (which was supposed to have been started from Feb2020). We have ramped up our Brucella vaccine capacity to ensure that our country'sBrucella vaccine requirement is fully met.
7. Necessary infrastructure is being created in Africa to ensure that exports grow byover 100% in this financial year as well as on a year-on-year basis.
Besides the above Hester has initiated the development of a vaccine against COVID-19disease. A recombinant vaccine is being developed in collaboration with IIT Guwahati. Wehope to get into animal trials by the end of this calendar year.
Further Hester has entered into a technical collaboration agreement with NovapharmaEgypt. Under this agreement Hester would offer technology to Novapharma to manufactureveterinary vaccines. Hester would also have exclusive international marketing rights forthe full range of vaccines manufactured at Novapharma including the Avian Influenzadisease vaccine for poultry which is an emerging disease in the poultry sector. Thisvaccine is not produced by Hester in India or Nepal nor does it have the plan to producethe same in Tanzania. Access to the Avian Influenza vaccine would open up a new market forHester.
In conclusion this year has had many external challenges affecting the performance ofthe Company. However the primary focus on planning streamlining the systems and settingadditional internal control will enable us to perform better and see a remarkablepositive change.
There has been a lot of insightful thinking and analysis that has made us take decisiveactions to address the need of the present to better the coming future.
Last but not the least while our Company was going through various disruptions thecountry and the world got into a massive disruption due to COVID-19. Our Government tookhard steps to combat this pandemic. Companies citizens too started contributing in thisfight. The fight currently continues and relentless efforts are being made to strike abalance between life and livelihood. As part of our Corporate Social Responsibility (CSR)your Company made a contribution to the PM CARES Fund of Rs. 8.50 million to support thework being done to relieve ourselves from the global pandemic.
COVID-19 needs to be treated as a wake-up call for the society economy and businessesto take some bold and radical decisions and actions. It is only a matter of getting usedto the new normal' and realigning our business objectives not only to sustain andrecover but to improvise productivity output and outlook.