ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

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ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD
PRESENTATION TO THE PORTFOLIO COMMITTEE 8
MARCH 2006
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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)

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• INTRODUCTION

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OBP FUNCTIONING BOARD COMMITTEES
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FUNCTIONING OF BOARD COMMITTEES

• Remuneration Committee
• Remuneration
• Directors
• Executives
• Employees
• Assessment of Performance
• Human Resource Matters

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FUNCTIONING OF BOARD COMMITTEES

• Audit Committee
• Controls
• Internal Audit
• External Audit
• Financial Matters
• Management Accounts
• Investments
• Financial Policies

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FUNCTIONING OF BOARD COMMITTEES

• Risk Management Committee
• Annual Risk Assessment
• Risk Management mitigating risks

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FUNCTIONING OF BOARD COMMITTEES

• Research and Development Committee
• Monitor and assess R D projects
• Intellectual Property Management

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• BUSINESS PLAN
• 2006/07

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Business Plan

• OBP Mandate
• Market Definition
• Situation Analysis
• Primary Strategic Objectives
• Primary Strategic Initiatives

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COMPANY MANDATE

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

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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

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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

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MARKET DEFINITION SOUTH AFRICAN ANIMAL HEALTH
MARKET SIZE FOR 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)

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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

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STRATEGIC OBJECTIVES

• Financial objectives
• Sales Revenue
• 2006/07 R113.65m
• 2007/08 R136.48m
• 2008/09 R164.18m
• Obtain gross profit margin of 35

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STRATEGIC OBJECTIVES 2005/6

• Financial
• Capex spend of R33 million
• RD operational expenses 5 of Sales Revenue
• BEE 40 x Procurement

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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

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STRATEGIC OBJECTIVES HRD BUDGET 2005/06
OCCUPATIONAL LEVELS TARGET 2005/6 TOTAL NO. OF BENEFICIARIES
Amount allocated R1,354,730.00 (incl. skills levy) 211
Top Management R213 000.00 7
Professionally qualified and experienced specialist and middle management R188 366.00 19
Skilled technical and academically qualified workers, supervisors, foremen R300 000.00 33
Semi skilled and discretionary decision making R300 000.00 94
Unskilled and defined decision making R200 000.00 58
Total 211
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STRATEGIC OBJECTIVES HRD BUDGET 2006/7
Occupational levels Target 2006/7 Total no. of beneficiaries
Amount allocated 1742641.00 ( incl. skills levy) 204
Top Management 208792.00 147
Professionally qualified and experienced specialist and middle management 256571.00 19
Skilled technical and academically qualified workers, supervisors, foremen 500261.66 33
Semi skilled and discretionary decision making 264487.66 94
Unskilled and defined decision making 152527.66 58
Total 204
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EMPLOYMENT EQUITY TARGETS 2005/6
Occupational levels Black Colored Indian White Female Male Disabled
Top Management 4 3 2 5
Professionally qualified and experienced specialist and middle management 8 1 1 9 8 11
Skilled technical and academically qualified workers, supervisors, foremen and superintended 11 3 1 18 18 15 1
Semi skilled and discretionary decision making 66 28 42 52 2
Unskilled and defined decision making 51 6 2 56 3
Total 141 4 2 64 72 139 6
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EMPLOYMENT EQUITY ACTUAL TO DATE
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EMPLOYMENT EQUITY ACTUAL VS. TARGET FOR 2006/7
Occupational levels African African Coloured Coloured Indian Indian White White Total Total Disabled Disabled
Actual Target Actual Target Actual Target Actual Target Actual Target Actual Target
Top Management 5 5 3 3 7 7
Professionally qualified and experienced specialist and middle management 7 7 1 1 1 2 9 9 18 18 1 1
Skilled technical and academically qualified workers, supervisors, foremen 6 12 3 5 0 3 21 20 34 38 1
Semi skilled and discretionary decision making 41 42 1 2 2 29 27 71 74 5 5
Unskilled and defined decision making 72 72 0 0 6 6 78 78 1 1
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EMPLOYMENT EQUITY TARGET STATS 2006/7
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EMPLOYMENT EQUITY TARGET 2006/7
  Actual Target Actual Target
  Female Female Male Male
Top Management 2 2 5 5
Professionally qualified and experienced specialist and middle management 7 7 11 12
Skilled technical and acedemically qualified workers, supervisors, foremen and superintended 19 24 15 16
Semi skills and discretionary decision making 35 34 36 39
Unskilled and defined decision making 27 27 51 51
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GENDER ACTUAL VS TARGET 2006/7
  Actual Actual Target Target
Occupational Levels Female Male Female Male
Top Management 2 5 2 5
Professionally qualified and experienced specialist and middle management 7 11 7 12
Skilled technical and academically qualified workers, supervisors, foremen and superintended 19 15 24 16
Semi skilled and discretionary decision making 35 36 34 39
Unskilled and defined decision making 27 51 27 51
Total 90 118 94 123
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GENDER ACTUAL VS TARGET 2006/7
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STRATEGIC INITIATIVES 2005/6

• OBP Strategic Initiatives - - National
  Imperatives
• Investment in Infrastructure
• Skills Development
• Accelerated Growth Livestock Sector

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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

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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

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OBP Strategic Initiatives 2005/6

• OBP Strategic Initiatives - - National
  Imperatives
• Build Expertise
• Production Process Technology
• IP management
• Learnership Program - Process Engineers in
  Biotechnology
• Building RD capacity capability
• Succession Planning

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OBP Strategic Initiatives 2005/6

• OBP Strategic Initiatives - - National
  Imperatives
• Accelerated Growth
• Marketing and Distribution
• Vaccine manufacturing facilities within the
  Continent
• RD on Trans boundary diseases vaccines
• CBPP, Rinderpest, PPR, Sheep Goat Pox

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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

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• BUDGET
• 2006/07

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PROFIT BEFORE INTEREST TAX
Budget 2006/07 Budget 2005/06 Variance
R5.2m -R3.7m R8.9m (100)
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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)

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INCREASE IN SALES
Budget 2006/07 Budget 2005/06 Variance
Local Sales R55.8m R40.8m R15.0m (37)
Export Sales R57.8m R52.4m R5.4m (10)
Total Sales R113.6m R93.2m R20.4m (22)
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COST OF SALES
Budget 2006/07 Budget 2005/06 Variance
R66.8m R60.8m R6.0m (-10)
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COST OF SALES

• R6.0m Increase due to
• Increased repair maintenance R1m
• Increased Depreciation R5m

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OVERHEAD EXPENSES
Budget 2006/07 Budget 2005/06 Variance
R41.6m R36.1m R5.5m (-15)
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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

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OVERHEAD EXPENSES

• R5.5m Increase due to
• Increased Marketing R0.9m
• Other R0.4m
• Higher salary recovery in COS
• (-R4.0m)

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CASH FLOW 2006/07
Cash flow from operations R13.2m
Capex R33.1m
Cash flow for the year -R19.8m
Opening bank balance R75.9m
Closing bank balance R56.1m
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CAPITAL EXPENDITURE
Upgrade Packaging R15.0m
Packaging Equipment R4.0m
Bacterial Prod. Equipment R3.4m
Other Equipment R5.5m
ERP Computer Equipment R2.9m
Land Building (excl Pack.) R1.4m
Furniture Fittings R0.4m
Vehicles R0.4m
Total R33.1m
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GRAPHICAL COMPARISON OF BUDGET TO PREVIOUS YEARS

• Sales (Local Export)
• Expenses
• Expenses as of sales

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CASH FLOW FOR 2006/07
R000
Retained income 6 112
Plus Depreciation 12 939
Operating Capital needed - 5 786
Capital Expenditure -33 052
Net Cash flow -19 787
Opening Bank Balance 75 952
Closing Bank Balance 56 165
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BALANCE SHEET FOR 2006/07
R000
Fixed Assets (PPE) 49 095
Current Assets 94 773
Total Assets 143 868
Capital reserves 114 568
Long term Liability (Def. Tax) 1 424
Current Liabilities 27 876
Total Equity Liabilities 143 868
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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

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• CONCLUSION

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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

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VALUE ADDING ACTIVITIES

• Establish an economically viable Business
  Enterprise
• Develop retain local vaccine production
  related skills expertise.
• Establish strong RD capabilities

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CONCLUSION

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

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CONCLUSION

• Sincere Appreciation
• Shareholder
• OBP Ltd BOD
• OBP Ltd Exco
• OBP Ltd Manco
• OBP Ltd Staff
• WE CANNOT SPELL SCCESS WITHOUT U