Genus profit declines as research and development costs climb

Global animal genetics company Genus posted a minimal rise in half year revenue, but a slight decline in pre-tax profit after an increase in research and development costs for the six months ended December 31st.

Revenue for the period totalled £167.2m (2011: £166.9m), broadly unchanged in actual currency, but a 2.0% rise in constant currency. This was boosted by a 6.0% rise in Bovine sales volumes and a 1.0% increase in Porcine volumes.

Adjusted operating profit was 1.0% lower at £22.8m (2011: £23.0m) in actual currency (up 2.0% in constant currency) despite higher feed costs, adverse weather in Latin America and increased revenue investment to support future growth.

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Reported pre-tax profit fell to £24.8m from £26.0m a year earlier, while earnings per share for the period declined from 30.2p to 28.7p year-on-year.

Research and development costs rose 13% (17% in constant currency) from £12.7m to £14.4m during the period.

Karim Bitar, Chief Executive, said: "A strong second quarter performance enabled the group to overcome the challenging first quarter and report results for the first half in line with last year. This was a solid performance given the significantly higher feed costs incurred and planned revenue investments made to position the group for future growth.

"Genus has made encouraging progress in implementing the new strategy, including the announcement of our second porcine joint venture in China, and the group remains on track to accelerate its rate of growth from 2014 onwards."

Cash and equivalents at the period end fell from £18.8m to £11.4m year-on-year.

The interim dividend was increased to 5.0p per share, compared to 4.5p the previous year.

Genus scores second porcine JV in ChinaThe company also unveiled its second porcine joint venture agreement in China, which is for a 1,000 sow nucleus farm with Yunnan Shennong Agricultural Group, the leading integrated pork producer in the Yunnan province.

Genus has formed the agreement to further expand its porcine business in the country and to grow its focus on growing in key markets and segments such as the Chinese integrated pork producer segment.

Genus will be a 65% partner in the JV through a cash investment of approximately £2.7m. The JV will operate a state of the art nucleus farm, scheduled for completion within the next 12 months. The group will provide pureline porcine stock from the Genus porcine genetic division's (PIC) global high health pyramid to stock the farm. The JV farm will be managed by Genus.

Chief Executive Officer Karim Bitar said: "This is a significant milestone in our strategy of growing our porcine business in China. The JV with Shennong marks our second JV in China and we continue to pursue further opportunities for porcine joint ventures in this large and important market.

"We look forward to strengthening our partnership with Shennong and achieving our shared objectives of producing affordable, safe and high quality pork."

The share price fell 0.89% to 1,443p by 08:40.

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