Business

Norbrook veterinary products recall leads to plunge in sales and profits

Norbrook took the decision in May to recall 34 products over concerns that their sterility had been compromised and their use could result in introduction of infectious agents to animals
Gary McDonald Business Editor

A MAJOR recall of dozens of veterinary injectable drug products earlier this year by Norbrook Laboratories has wiped millions of pounds off its bottom line, latest accounts reveal.

The company took the decision in May as a precautionary measure over concerns that the sterility of 34 products had been compromised, and their use could result in introduction of infectious agents to animals.

Norbrook, which distributes hundreds of products to more than 100 countries, discovered that Newry-made products tested, released and distributed within the USA were manufactured on an aseptic line that subsequently did not pass process simulation tests.

Details emerged as Norbrook Holdings revealed that in the year to August its revenues fell 11 per cent from £275 million to £237 million, while operating profit plunged to just £11m compared to £45.1m earned in 2018.

It's the first time the pharma firm, founded 50 years ago by the late Lord Ballyedmond (Edward Haughey), has reported a decline in its annual trading performance.

And chief executive Liam Nagle admitted the fall-out from the product recall will severely impact on Norbrook's results next year as well, given that the company has only got back to full manufacturing in the last two weeks.

“It's been a hugely difficult year, with our trading performance adversely impacted by a number of manufacturing and supply chain issues, some which have spilled into our new financial year,” he told the Irish News.

“But management has engaged a continuous process to address and reassess each situation, and we are confident we've put the issues behind us and there are clear plans in place to return to normalised output levels by the second half of the 2020 financial year.

“We have a tremendously loyal customer base, and while we've lost share of the market, we know we'll get back to where we were, now that we're back in full production.”

Mr Nagle, who has been at the helm at Norbrook for five years, conceded that "there was an element of historical under-investment" which led to the laboratory problems and equipment failures prompting the recall.

“As a result we've made a capital investment £13 million - that's five per cent of our revenues - into the business bringing the total invested in the last four years to £53 million,” he added.

“We are clear that further investment to develop the manufacturing fabric of the business, production technology and IT is essential in supporting the achievement of growth targets.

“In addition, further progress was made on the implementation of Norbrook's operational efficiency programme, which includes the rationalisation of non-core product ranges, allowing the business to focus on the key long-term growth and value drivers.”

On the issue of Brexit, Mr Nagle added: “As an export focused company, with 85 per cent of our revenue generated outside the UK, the ongoing uncertainty is an unwelcome challenge, and any restrictions to free trade or introduction of duties or tariffs which may arise in the years ahead could have a negative impact on our financial performance.

“This uncertainty makes it difficult to plan for the medium to long term, but we have created clear contingency plans to minimise the impact of a no deal Brexit and believe that the business is as well prepared as possible in the circumstances.”

Norbrook, a world-leading provider of veterinary pharmaceuticals enhancing the health of farm and companion animals, employs 1,900 staff including 1,600 in Newry.

The company said three new products were launched in the last year strengthening its EU and Australian markets, including a pour on anti-parasitic product for cattle and an internal and external parasiticide for pets.

Mr Nagle said it is imperative that Norbrook continues to develop new products to remain at the forefront of technological innovation within the industry, and in the last financial year increased its R&D spend to £11m.

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