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ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD. PRESENTATION TO THE PORTFOLIO COMMITTEE: 8 MARCH 2006. PRESENTATION OUTLINE:. Introduction (Ms N D Shabalala, Board Chairperson) Business Plan (Dr L Makuleni – Managing Director)

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ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

PRESENTATION TO

THE PORTFOLIO COMMITTEE:

8 MARCH 2006


PRESENTATION OUTLINE:

  • Introduction (Ms N D Shabalala, Board Chairperson)

  • Business Plan (Dr L Makuleni – Managing Director)

  • Budget 2006/07 (Mr M P van Jaarsveld – Chief Financial Officer)

  • Conclusion (Dr L Makuleni)


INTRODUCTION


OBP FUNCTIONING BOARD COMMITTEES


FUNCTIONING OF BOARD COMMITTEES

  • Remuneration Committee:

    • Remuneration:

      • Directors

      • Executives

      • Employees

    • Assessment of Performance

    • Human Resource Matters


FUNCTIONING OF BOARD COMMITTEES

  • Audit Committee:

    • Controls:

      • Internal Audit

      • External Audit

    • Financial Matters

      • Management Accounts

      • Investments

      • Financial Policies


FUNCTIONING OF BOARD COMMITTEES

  • Risk Management Committee:

    • Annual Risk Assessment

    • Risk Management – mitigating risks


FUNCTIONING OF BOARD COMMITTEES

  • Research and Development Committee:

    • Monitor and assess R & D projects

    • Intellectual Property Management


BUSINESS PLAN

2006/07:


Business Plan

  • OBP Mandate

  • Market Definition

  • Situation Analysis

  • Primary Strategic Objectives

  • Primary Strategic Initiatives


COMPANY MANDATE

“To play a pivotal role in the management and prevention of animal diseases in the Country, SADC, and Africa”


MARKET DEFINITION :

  • Biotechnology, Animal Health, Veterinary Vaccines

  • Geographic Focus

    • Domestic

      • Commercial

      • Emerging sector

      • Government Tender Business

    • International:

      • SADC, East Africa, North Africa, West Africa

      • EU

      • Middle East

      • South America

      • India, China


MARKET DEFINITION :

  • Target Species:

    • Cattle, Sheep, Goats, Horses

    • Other possible species (e.g. poultry, rabies, camel)

  • 50 Products:

    • Bacterial, Viral, protozoa and diagnostic

    • Produce vaccines unique to African disease (tick-borne and insect-borne, African Horse Sickness, Bluetongue, Lumpy Skin Disease, Rift valley Fever, CBPP)

    • Sole / main producer of eight vaccines

    • Broad product range (Clostridial, Neo-natal, reproductive, respiratory etc.)

    • Local Strains


MARKET DEFINITION: SOUTH AFRICAN ANIMAL HEALTH MARKET SIZEFOR THE 2005 CALENDAR YEAR

  • Total Market R843 million

  • Antibiotics R241 million

  • Ectos R161 million

  • Endectos R76 million

  • Endos R65 million

  • Vet. Vaccines R70 million (excluding Intervet)

    (OBP Ltd R 38.8 million)


SITUATION ANALYSIS:

  • Well established competitors

  • Well trained sales, marketing, and technical staff

  • Broader Animal Health Product Range

  • Distribution channels established and profit margin driven

  • Stringent Regulatory requirement Internationally, Local Regulatory requirement less stringent

  • International Markets Requirement - GMP Accreditation

  • Well informed customers

  • Outbreaks of Trans-Boundary Diseases


STRATEGIC OBJECTIVES :

  • Financial objectives

    • Sales Revenue

      • 2006/07 = R113.65m

      • 2007/08 = R136.48m

      • 2008/09 = R164.18m

  • Obtain gross profit margin of 35%


STRATEGIC OBJECTIVES: 2005/6

  • Financial

    • Capex spend of R33 million

    • R&D operational expenses 5% of Sales Revenue

    • BEE: 40% x Procurement


STRATEGIC OBJECTIVES 2005/6

  • Non – Financial

    • Upgrade of Packaging Department

    • Production Success Rate 90%

    • ISO Accreditation Audit Review

    • Release 2 products per year

    • EE & Skills Plan

    • Implement Succession Plan

    • Ensure Good Corporate Governance:

      • Risk Assessment

      • Three year rolling Internal Audit Plan


STRATEGIC OBJECTIVES HRD BUDGET 2005/06


STRATEGIC OBJECTIVES HRD BUDGET 2006/7


EMPLOYMENT EQUITY TARGETS 2005/6


EMPLOYMENT EQUITY ACTUAL TO DATE


EMPLOYMENT EQUITY ACTUAL VS. TARGET FOR 2006/7


EMPLOYMENT EQUITY TARGET STATS 2006/7


EMPLOYMENT EQUITY TARGET 2006/7


GENDER ACTUAL VS TARGET 2006/7


GENDER ACTUAL VS TARGET 2006/7


STRATEGIC INITIATIVES 2005/6

  • OBP Strategic Initiatives - - National Imperatives

    • Investment in Infrastructure

    • Skills Development

    • Accelerated Growth: Livestock Sector


OBP Strategic Initiatives 2005/6

  • OBP Strategic Initiatives - - National Imperatives

    • Investment in Infrastructure

      • Upgrade of Facility and Equipment - GMP

      • Improve Production Processes

      • Improve Production Planning System

      • Preventative Maintenance of Facility and Equipment


OBP Strategic Initiatives 2005/6

  • OBP Strategic Initiatives - - National Imperatives:

    • Skills Development

      • OBP Technical , Sales & Marketing Dept

        • Farmers days ( NB OBP, Provincial Dept – AHT & State vets,)

        • Disease management program

        • OBP/ UP /ARC-OVI : Collaboration

        • Expert Panel Meetings


OBP Strategic Initiatives 2005/6

  • OBP Strategic Initiatives - - National Imperatives:

    • Build Expertise

      • Production Process Technology

      • IP management

      • Learnership Program - Process Engineers in Biotechnology

      • Building R&D capacity & capability

      • Succession Planning


OBP Strategic Initiatives 2005/6

  • OBP Strategic Initiatives - - National Imperatives

    • Accelerated Growth:

      • Marketing and Distribution

      • Vaccine manufacturing facilities within the Continent

      • R&D on Trans boundary diseases – vaccines

        • CBPP, Rinderpest, PPR, Sheep & Goat Pox


OBP Strategic Initiatives 2005/6

  • OBP Strategic Initiatives - - National Imperatives

    • Accelerated Growth:

      • New / Improved Products

      • Master Seed Management

      • Total Quality Management

        • Experimental Animal Facility

        • International Registration of OBP

          Product Line


BUDGET:

2006/07


PROFIT BEFORE INTEREST & TAX


PROFIT BEFORE INTEREST & TAX

R8.9m Improvement due to:

  • Increase in Sales 22%

    In spite of

  • Increase in Cost of Sales (-10%)

  • Increase in Overheads (-15%)


INCREASE IN SALES


COST OF SALES


COST OF SALES

R6.0m Increase due to:

  • Increased repair & maintenance R1m

  • Increased Depreciation R5m


OVERHEAD EXPENSES


OVERHEAD EXPENSES

R5.5m Increase due to:

  • New positions & vacancies R3.7m

  • Market related salary adjustment R3.1m

  • Contractors (Work study, Audits, etc.) R0.6m

  • Increased Travel: R0.8m


OVERHEAD EXPENSES

R5.5m Increase due to:

  • Increased Marketing: R0.9m

  • Other R0.4m

  • Higher salary recovery in COS

    (-R4.0m)


CASH FLOW 2006/07


CAPITAL EXPENDITURE


GRAPHICAL COMPARISON OF BUDGET TO PREVIOUS YEARS

  • Sales (Local & Export)

  • Expenses

  • Expenses as % of sales


CASH FLOW FOR 2006/07

R’000


BALANCE SHEET FOR 2006/07

R’000


BALANCE SHEET & CASH FLOW

  • Land & Buildings transferred in 2005/06 – Valued at R47m

  • Increase in Operating Capital R5 786 needed as Sales increase

  • Negative cash flow mainly due to Capital expenditure: R33.1m


CONCLUSION:


VALUE ADDING ACTIVITIES

  • Ensure a domestic capacity in vaccine production which will enable DoA to respond to disease outbreak.

  • Address disease problem specific to the region

  • Produce market driven products


VALUE ADDING ACTIVITIES

  • Establish an economically viable Business Enterprise

  • Develop & retain local vaccine production related skills & expertise.

  • Establish strong R&D capabilities


CONCLUSION:

“To play a pivotal role in the management and prevention of animal diseases in the Country, SADC, and Africa”


CONCLUSION:

  • Sincere Appreciation

    • Shareholder

    • OBP Ltd BOD

    • OBP Ltd Exco

    • OBP Ltd Manco

    • OBP Ltd Staff

    • WE CANNOT SPELL SCCESS WITHOUT U


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