ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

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ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD
PRESENTATION TO THE PORTFOLIO COMMITTEE 7
NOVEMBER 2006
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PRESENTATION OUTLINE

• Introduction Governance Report
• (Ms N D Shabalala, Board Chairperson)
• Company Performance
• (Dr L C N Makuleni, Managing Director)
• Human Resource Report
• (Ms S A Bokwe, GM Human Resources)
• Financial Performance for 2005/06
• (Mr M P van Jaarsveld, GM Finance)
• Conclusion
• (Dr L C N Makuleni Ms N D Shabalala)

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THE OBP BOARD

• Front (LtR) Dr Linda Makuleni (Managing
  Director), Ms Nozibusiso Shabalala (Board Chair)
• Back (LtR) Mr Montwedi Seane, Ms Stefanie Burger
  (Company Secretary),
• Adv Dave Mitchell, Dr Ruth Forbes

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THE OBP LTD EXECUTIVE TEAM

• Front (LtR) Dr Linda Makuleni (MD), Mr Willie
  Botha (National Sales Manager)
• Back (LtR) Mr Pieter Pieterson (GM TQM), Dr
  Alfred Kgasi (Business Development Manager),
• Ms Siphokazi Bokwe (GM HR), Dr Baty Dungu (GM
  Ops, R D)
• Mr Pierre v Jaarsveld (GM Finance)

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• GOVERNANCE REPORT

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CORPORATE GOVERNANCE FUNCTIONING OF BOARD

• The Board retains full and effective control of
  the Company
• To this end, the Board met 6 times
• The Board is committed towards Good Corporate
  Governance
• Induction of Directors
• Director Development Programme
• Conducted assessment of Board and Board Committees

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CORPORATE GOVERNANCE FUNCTIONING OF BOARD AND
COMMITTEES

• Annual Board Plan considering Reporting
  requirements
• Quarterly Board Meetings
• Three Meetings of Committees per annum
• Two Strategy Planning Review Sessions
• per annum

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FUNCTIONING OF BOARD COMMITTEES

• Remuneration Committee
• Board approved Committee Charter
• 3 Meetings to deal with 2005/06 matters
• Membership
• Dr M Madikizela (Chairperson)
• Adv D J Mitchell
• Mr S S M Seane
• Ms N D Shabalala
• Ms S A Bokwe (GM Human Resource)
• MD, GM Finance (by invitation)

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FUNCTIONING OF BOARD COMMITTEES

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

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FUNCTIONING OF BOARD COMMITTEES

• Audit Committee
• Board approved Committee Charter
• 3 Meetings to deal with 2005/06 matters
• Membership
• Adv D J Mitchell (Chairperson)
• Dr R U Forbes
• Ms N D Shabalala
• Mr M P van Jaarsveld (GM Finance)
• MD, Internal Auditor, External Auditors (by
  invitation)

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FUNCTIONING OF BOARD COMMITTEES

• Audit Committee Activities
• Effectiveness of Internal Controls
• Internal Audit
• External Audit
• Financial Matters
• Management Accounts
• Investments
• Financial Policies
• Annual Financial Statements and Annual Report

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FUNCTIONING OF BOARD COMMITTEES

• Risk Management Committee
• Board approved Committee Charter
• 3 Meetings to deal with 2005/06 matters
• Membership
• Dr R U Forbes (Chairperson)
• Adv D J Mitchell
• Ms N D Shabalala
• Dr L C Makuleni (Managing Director)

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FUNCTIONING OF BOARD COMMITTEES

• Risk Management Committee
• Membership (Continued)
• Dr B Dungu (GM Ops, R D)
• Mr P M Pieterson (GM Total Quality)
• GM Finance, Internal Audit, EMU Manager (by
  invitation)
• Risk Management Committee Activities
• Annual Risk Assessment
• Annual Risk Management Plan
• Risk Management Continuous monitoring and
  evaluation of Risk Management plan

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FUNCTIONING OF BOARD COMMITTEES

• Research and Development Committee
• Board approved Committee Charter
• 3 Meetings to deal with 2005/06 matters
• Membership
• Mr S S M Seane (Chairperson)
• Dr M Madikizela
• Dr L C Makuleni (Managing Director)
• Dr B Dungu (GM Operations, R D)
• National Sales Manager (by invitation)

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FUNCTIONING OF BOARD COMMITTEES

• Research and Development Committee Activities
• RD Strategy and Policy
• Intellectual Property Management
• Monitor and evaluate Strategic RD Projects

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OCCUPATIONAL HEALTHAND SAFETY COMMITTEE

• Reports Quarterly to the Board
• 7 Meetings to deal with 2005/06 matters
• Membership
• Ms S Burger (Company Secretary)
• Mr P M Pieterson (GM Total Quality)
• Mr L Gcwensa (Labour Relations Manager)
• Mr B Shandu (Manager Engineering, Maintenance
  and Utilities)

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OCCUPATIONAL HEALTHAND SAFETY COMMITTEE

• Committee Activities
• Legal Compliance
• Policy
• Strategy

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• COMPANY PERFORMANCE
• 2005/06

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COMPANY PERFORMANCE

• FINANCIAL
• OPERATIONS
• RESEARCH AND DEVELOPMENT
• TOTAL QUALITY MANAGEMENT

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• Onderstepoort Biological Products Ltd has
• become a respected leader in its niche
• market the production and sale of
• animal vaccines and related
• biological products.

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COMPANY PERFORMANCE

• FINANCIAL
• Sales History
• Sales compared to budget last year
• Operational Profits

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COMPANY PERFORMANCEFINANCIAL
Annual Sales History
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COMPANY PERFORMANCEFINANCIAL
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COMPANY PERFORMANCEFINANCIAL
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COMPANY PERFORMANCE DOMESTIC SALES MARKETING

• Building partnerships with
• Provincial Departments of Veterinary Service
• Veterinarians
• Commodity Groups
• Emerging and Commercial Farmers
• Expert panel meeting
• Customer Survey

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COMPANY PERFORMANCE DOMESTIC SALES MARKETING

• Sponsorships
• Female farmer of the year
• NERPO
• SAVA congress
• Farmers days
• Extended distribution network
• Major agreements with BEE companies

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COMPANY PERFORMANCE EXPORT SALES MARKETING

• Appointment of Business Development Manager
• Interacted with existing and prospective Export
  Clients
• Developed Strategies for different Export Regions

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COMPANY PERFORMANCE EXPORT SALES MARKETING

• Attended International Conferences and presented
  Technical Papers
• Sponsorships
• FAO
• Botswana Namibian Veterinary Congresses

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COMPANY PERFORMANCE RESEARCH AND DEVELOPMENT

• License Technology Strategic Partnerships
• 3 Research and Development Projects on
  Trans-Boundary Diseases
• Other Strategic Projects
• IP Management

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COMPANY PERFORMANCE OPERATIONS

• Facility Upgrade
• Physical Infrastructure Audit
• Facility Upgrade Plan
• Streamlining Production Processes
• Production Planning Processes

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COMPANY PERFORMANCE OPERATIONS
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COMPANY PERFORMANCE TOTAL QUALITY MANAGEMENT

• Experimental Animals
• Animal Ethics
• Co-operation with other Government Departments
  for animal housing

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COMPANY PERFORMANCE TOTAL QUALITY MANAGEMENT

• Quality Assurance
• Supplier Quality and BEE Audits
• Plant Quality Audits
• Planning of first external ISO audit
• Regulatory Office
• Review of current registered product dossiers
• Registration of OBP products Internationally

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• HUMAN RESOURCE
• REPORT 2005/06

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HUMAN RESOURCES

• Employment Equity Report
• Human Resource Development
• HIV/ AIDS
• Remuneration
• Social Responsibility

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EQUITY STATUS REPORTEMPLOYEE DISTRIBUTION BY
RACE

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EQUITY STATUS REPORTEMPLOYEMENT EQUITY 2005/06
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EQUITY STATUS REPORTEMPLOYEE DISTRIBUTION BY
GENDER 2004/5 vs. 2005/6
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EQUITY STATUS REPORTSTAFF WITH DISABILITY

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HUMAN RESOURCES DEVELOPMENT

• Areas of focus
• ABET
• Bursaries
• Multi-skilling
• In-House Technical Training
• Management Development Programme

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TRAINING AND DEVELOPMENT
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PERCENTAGE OF TRAINING COSTS PER OCCUPATIONAL
CATEGORY
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HIV/ AIDS

• Launched company strategy on HIV/ AIDS
• KAPB study conducted
• OBPs statement of intent was signed by the
  Managing Director on World Aids day in 2005

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REMUNERATION

• We strive to offer competitive salaries
• Remuneration based on performance and scarcity of
  skills
• Survey market yearly as part of 3 year agreement

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RETENTION

• Staff Complement 207
• Labour Turnover- 3
• Management Turnover 0
• 56 of staff- employed longer than 10 years
• Turnover in staff recruited since Corporatisation
  - 1
• Climate Survey conducted

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OBP SOCIAL RESPONSIBILITY

• Take a girl child to work
• Participated in Cell C take a girl child to work

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OBP SOCIAL RESPONSIBILITY

• Internship Programme for Engineers
• Two appointed within the Company, of which one
  received a better offer
• Experiential training of Scientists
• (Landbank / OBP Collaboration)
• Accommodated two graduates for experiential
  training for a period of twelve months
• Partnerships with Service Providers
• Students placed with OBP Service Providers for
  experiential training (e.g. Stuart Scott)

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OBP SOCIAL RESPONSIBILITY

• Tumeleng Mission (Klipgat)
• Hospice
• Crèche
• Childrens home
• Donated our time and money

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FINANCIAL RESULTS OFONDERSTEPOORT BIOLOGICAL
PRODUCTS LTD2005/06
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INDEX

• Income Statement
• Balance Sheet
• Cash flow

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INCOME STATEMENT

• Sales
• Cost of sales
• Other income
• Operating profit

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LOCAL SALES vs. EXPORT SALES (Rm)
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ANNUAL SALES GROWTH (RAND MILLION)
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LOCAL SALES ANNUAL GROWTH (YEAR ON YEAR)
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EXPORT SALES ANNUAL GROWTH (YEAR ON YEAR)
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COST OF SALES

• 2004/05 R41.2m
• 2005/06 R40.4m
• Decrease R0.8m
• Improved production technology quality
  implemented in the Viral Production Unit.

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OPERATING INCOME

• 2004/05 R6.8m
• 2005/06 R3.3m
• Decrease R3.5m

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OPERATING PROFIT vs. MARGIN
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SALES vs. TOTAL COSTS
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COS AND OVERHEADS AS A OF SALES
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INCREASE IN COST OF SALES

• Depreciation R1.1m
• Production cost R1.7m
• Labour R3.0m
• Product losses (-R2.2m)
• Stock movement (-R4.4m)

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INCREASE IN OVERHEAD EXPENSES

• RD R2.1m
• Staff cost R4.8m
• Marketing R1.4m
• Electricity R0.7m
• Bad debt (-R6.1m)

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BEE PROCUREMENT

• OBPs new Procurement Policy established end of
  2004
• Policy based on
• PPPF Act (Act No 5 of 2000)
• AgriBEE ( BBBEE Framework for Agriculture) July
  2004
• DTI BEE Strategy (July 2004)
• OBP BEE Procurement
• 2004/05 48
• 2005/06 56

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BALANCE SHEET

• PPE (Fixed Assets)
• Inventory
• Trade receivables
• Cash
• Trade payables
• Provisions

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PROPERTY PLANT EQUIPMENT

• 2004/05 R29.0m
• 2005/06 R88.0m
• Increase R60.0m
• Acquisitions R65.5m
• Depreciation -R5.5m
• Transfer of land and buildings to OBP R53.6m
• Plant equipment R11.9m

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INVENTORY

• 2004/05 R13.1m
• 2005/06 R12.5m
• Decrease R0.6m

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TRADE RECEIVABLES

• 2004/05 R5.7m
• 2003/04 R8.9m
• Increase R3.2m

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CASH

• 2004/05 R77.4m
• 2003/04 R80.7m
• Increase R3.3m
• Increase due to operational cash flow.
• Cash invested in three major banks.
• Cash is retained for upgrade of the facilities

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TRADE PAYABLES

• 2004/05 R5.8m
• 2003/04 R9.5m
• Increase R3.7m

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CASH FLOW

• Cash position of OBP
• OBPs Liquidity

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CASH POSITION
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ASSETS vs. LIABILITIES
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• CONCLUSION

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VALUE OF OBP TO SA

• Ensure domestic competencies in vaccine products
• Farming community able to respond swiftly to
  disease outbreaks
• Establish economic viable vaccine business
• Develop and retain skills and expertise in
  vaccinology
• Establish strong Research and Development
  capability in vaccinology

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CONCLUSION CHALLENGES / OPPORTUNITIES

• Growing the Company
• Domestic market
• International markets
• International Strategic Partners
• Funding for Upgrade

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CONCLUSION CHALLENGES / OPPORTUNITIES

• Improve Product Line
• New / improved products
• New technology
• GMP / ISO accreditation
• Intellectual Property management

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CONCLUSION

• Company in operation for six years
• Positive Growth Financial, Human Resource,
  Operational Processes, Client Base (including
  export)
• Significant role in NEPAD Trans-boundary
  diseases