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Feed additives firm Anpario stands to benefit from curbs on antibiotics in farm animals

“2018 was one of our weaker years due to external factors but in 2019 we feel more comfortable and more confident, and the team is very positive,” Anpario boss Richard Edwards said.

Cow
Anpario's Omega 3 supplement, Optomega Plus, helps improve the fertility in dairy cows

Curbs on the use of antibiotics on healthy farm animals in Europe and the US could lead to higher demand for feed additives firm Anpario Plc (LON:ANP).

Anpario supplies natural feed additives that improve the gut health and nutrition of livestock, including pigs, chickens, cows and fish. 

A healthier gut makes animals less susceptible to diseases and allows them to soak up the nutrition in their food so they put on weight. 

What that also means is farmers are less likely to need to use antibiotics in animals to stop the spread of disease.

Farmers have come under pressure to reduce the use of antibiotics in livestock amid concerns that it may diminish the drug’s effectiveness in fighting human infections.

In response, the European Parliament cracked down on the overuse of the drug in farm animals with new restrictions announced last October.

Europe has already previously outlawed the practice of using antibiotics as growth promoters but its new rules ban the use of the drug in veterinary medicine and the use of unprescribed animal antimicrobials.

The US Food and Drug Administration in 2017 banned the use of antibiotics on livestock without a prescription from a vet and made it illegal to use the drugs solely to make animals fatter.

Anpario chief executive Richard Edwards said he expects the company to benefit from calls to cut back on the use of antibiotics on farm animals.

He said 70% of immunity is linked to gut health so Anpario's products reduce the need for antibiotics.

“I am quite positive that as we see more resistance to antibiotics in humans, more producers will use it on a last resort basis… so demand will grow for our products,” he said.

Edwards also expects demand to rise on the back of a growing world population and improving wealth in emerging markets, which could lead to higher consumption of meat.

Nature's answer to animal health

Edwards said Anpario’s products stand out from the herd because they are naturally produced and consistent in quality and performance.

"Our strap line is nature’s answer because we try to work in synergy with the natural biological processes of the animal to try and make them more robust and healthier," he said.

Edwards added that consistency in product performance is key for Anpario. 

“What we found with competitors is they have variability in their products so variability in performance, and when you’re talking about billions of chickens, that adds up to a lot of costs for the farmer," he said.

Anpario’s products include the Orego-Stim powder and liquid supplements that contain natural oils to support the gut health of various animals, including pigs, chicken, cows and fish.   

Initial trials have shown that the product helps make vaccines more effective. Anpario is carrying out further research to demonstrate the compatibility of Orego-Stim with salmonella vaccination in poultry.

Following its success in farming, the group is now targeting the pigeon racing market in the US with Orego-Stim.

Another Anpario product is an Omega 3 supplement called Optomega Plus, which helps improve the fertility in dairy cows and enriches chicken eggs.

Others include: Credence, a tablet that is used to disinfect water in animal pens; and Anpro Advance, which is highly effective at binding particularly difficult toxins.

Brexit preparations 

Anpario manufactures its products in the UK and distributes to more than 70 countries.

Raw material supplies largely come from the European Union but Anpario has been making preparations for the event of a disorderly Brexit.

The company has increased stock levels in the UK and has been in talks with distributors to ensure there is enough supplies in Europe. Anpario is also looking to recruit sales people in Germany.

“We’re quite a resilient company because we are well geographically spread, we have a broad product range, we’ve got a strong balance sheet, we’ve been cash generative, we have high operational gearing in our production plant (we are only 40% utilised so we can double, or more hopefully, the throughput so a lot of the gross profit should drop to the bottom line),” Edwards said.

Profits jump on tight cost control 

Last year the company made a pre-tax profit of £4.6mln, up 34% on 2017, on sales of £28.2mln, down 3% year-on-year.

A tight control on costs offset the impact of spending on Brexit preparations, African Swine Fever in China, geopolitical issues in the Middle East, a weaker Latin American performance and a stronger US dollar against currenices in other markets. 

Anpario raised its total dividend for the year to 7.2p from 6.5p, marking the 10th consecutive annual increase, after ending the year debt-free with a cash balance of £12.9mln.

Edwards said the company is aiming for 20 years of dividend rises, “hopefully by double-digit percentages”.

Encouring start to new fiscal year 

The group has started the 2019 fiscal year on stronger footing with trading ahead of this time last year.

“2018 was one of our weaker years due to external factors but in 2019 we feel more comfortable and more confident, and the team is very positive,” Edwards said.

“We’ve just come out of a bit of a dip and there’s good initiatives going on, we see more stabilisation going on, expect for Brexit of course.”

He concluded: “We are at a point where it’s a very good opportunity for investors to take a look at us.”

Quick facts: Anpario PLC

Price: 340 GBX

LSE:ANP
Market: LSE
Market Cap: £79.25 m
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