Shares of Dechra Pharmaceuticals, the Cheshire-based veterinary drugs giant, fell about 10% on Monday after it published a trading update for the financial year ending June 30, 2023, saying its full year underlying operating profit “will be below £186 million, the guidance provided within the company’s interim results announced on 27 February 2023.”
Dechra said its trading environment during the period January to April 2023 “has been more volatile and challenging than anticipated.”
On May 11, Dechra extended the deadline for a possible £4.63 billion all-cash takeover offer from Swedish private equity firm EQT to June 2.
Under the possible offer, Dechra shareholders would receive £40.70 per share in cash at that price, a roughly 47% premium.
In the trading update, Dechra said: “The board is confident that Dechra’s end customer demand has continued to be ahead of the animal health market in its major geographies.
“However, the trading environment during the period January to April 2023 has been more volatile and challenging than anticipated when the board reported its interim results on 27 February 2023.
“In the US, the impact of the now widely reported de-stocking by US wholesalers has been deeper and longer than initially expected and had a material impact on Q3 (January to March 2023) performance, although there are encouraging signs that this is now re-bounding.
“We have continued to see strong end customer demand as evidenced by product sales from wholesalers out to veterinary clinics, independent data for which shows year-on-year sales are up approximately 11% during the period January to April 2023.
“A similar de-stocking pattern has also been experienced in the UK during April 2023, due to certain wholesalers managing financial year-end inventory levels, although order patterns are beginning to show signs of normalising.
“In the rest of Europe, the market appears to be slowing in response to the changing macro-economic environment and country specific dynamics.
“Accordingly, the board confirms that full year underlying operating profit for the year ending 30 June 2023 will be below £186 million, the guidance provided within the Company’s interim results announced on 27 February 2023.
“The board is confident that the group remains very well positioned to continue to grow over the medium and longer term despite the unprecedented and, by nature, short term trading headwinds.
“The fundamentals of the business and strategy remains strong, our underlying markets remain in structural growth, we continue to grow in our chosen markets and we have an established, highly experienced and focused management team.
“Our strategy is robust, including a very attractive development pipeline of new products to underpin our future growth, supported by a strong balance sheet.”