ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

PRESENTATION TO THE PORTFOLIO COMMITTEE:

2 NOVEMBER 2004

PRESENTATION OUTLINE:

1. Introduction (Mr S C Makama – Board Chairperson)

2. Governance Report (Mr S C Makama – Board Chairperson)

3. Company Performance for 2003/04 (Dr L Makuleni – Managing Director)

4. Human Resource Report (Ms S A Bokwe)5. Financial Performance 2003/04 (Mr M P van

Jaarsveld – General Manager: Finance)6. Conclusion (Dr L Makuleni)

INTRODUCTION

VISION:

“To be a centre of excellence in developing, producing and marketing biological products – Serving Africa…Serving the world.”

MISSION :

“To translate science into biological products, knowledge and technology - resulting in improved animal health, food security and safety for all our stakeholders”

VALUES:

OBP will conduct business in such a way to ensure: A high level of integrity; High ethical standards; The highest standards of quality;

and Excellence in everything that we do.

We accept that: People are our major assets; As a State owned entity we have the

responsibility to provide for Public Good;

We have a responsibility to our society and the environment

VALUES:

As a Company we will strive to promote: Respect for all people; Animal welfare; Development of our employees;

and Customer care and satisfaction.

CORPORATE GOVERNANCE:

CORPORATE GOVERNANCE –

FUNCTIONING OF BOARD The Board retains full and effective

control of the Company To this end, the Board met quarterly, and

also scheduled 6 additional meetings The Board is committed towards Good

Corporate Governance: Induction Director Development Programme

Agreed to assessment of Board and Board Committees

CORPORATE GOVERNANCE – FUNCTIONING OF BOARD

COMMITTEES

COM MEMBERS NO. OF MEETINGS

ACHIEVE-MENTS

Audit Com

Mr H QanguleMr S C MakamaMs K R HlaleleMD & GM: Finance attends by invitation

5 Meetings to deal

with 2004/05 matters

Developed Policies:Dividend MaterialityFraud ManGoing Concern AFS & AR

CORPORATE GOVERNANCE – FUNCTIONING OF BOARD

COMMITTEESCOM MEMBERS NO. OF

MEETINGSACHIEVEMENTS

Rem-Co

Mr S C MakamaDr M M DyasiMs M S KhozaDr P J PullingerMs M D NogeMD, GM:HR &

GM Finance attends by invitation

5 Meetings to deal

with 2004/05 matters

Director RemRem Policy

for CompanyRevision of

Conditions of Service

Impl of market related rem

CORPORATE GOVERNANCE – FUNCTIONING OF BOARD

COMMITTEES

COM MEMBERS NO. OF MEETINGS

ACHIEVEMENTS

Risk Man Com

Dr L MakuleniMs K R HlaleleMr M P v Jaarsveld (GM: Fin)Dr B Dungu (GM: Ops, R&D)EMU Manager attends by invitation

3 Meetings to deal

with 2004/05 matters

Risk AssessmentRisk Man PlanAddressing

risks of facility & equipment

CORPORATE GOVERNANCE – FUNCTIONING OF BOARD

COMMITTEES

COM MEMBERS NO. OF MEETINGS

ACHIEVEMENTS

R & D Com

Dr M M DyasiDr M MadikizelaDr L MakuleniDr B Dungu (GM: Ops, R&D)National Sales

Man. attends by invitation

2 Meetings to deal

with 2004/05 matters

Development of R & D Strategy

R & D Needs Analysis

Prioritizing & assessing R & D Projects

Man. of IP

CORPORATE GOVERNANCE – FUNCTIONING OF BOARD

COMMITTEES

COM MEMBERS NO. OF MEETINGS

ACHIEVEMENTS

OSH Action Com

Ms S Burger (CS)Mr P M Pieterson (GM: TQM)Mr T Msibi (LR)

Monthly Meetings

Assessment of Compli-ance

Institute actions required Monitoring

implementa-tion of

actions

COMPANY PERFORMANCE FOR 2003/04

HIGHLIGHTS:

Onderstepoort Biological Products Ltd has become a respected leader in its niche

market: the production and sale of animal vaccines and related biological products.

World export sales are steady and firm; trade with the continent is being stimulated and is

increasing while domestic market sales continue to be encouraging.

HIGHLIGHTS:

FINANCIAL

Sales Growth

Domestic

Export

Operational Profits

-

10

20

30

40

50

60

70

80

Total Local Export

R'm

HIGHLIGHTS:

Sales History

0%

26%

69%79%

01020304050607080

2001 2002 2003 2004

0%10%20%30%40%50%60%70%80%90%

Sales Value Annual growth %

HIGHLIGHTS

HIGHLIGHTS:

Cumulative Sales Income 2003/04

0

10

20

30

40

50

60

70

80

Apr May J un J ul Aug Sep Oct Nov Dec J an Feb Mar

This Year Budget Last Year

R'm

HIGHLIGHTS:

Cumulative Operating Profit2003/04

-5

0

5

10

15

20

25

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

This Year Budget Last Year

R'm

HIGHLIGHTS:

Our strengthened Research and Development capacity has resulted in

OBP having identified and initiated research projects that have led to a number of products in the pipeline.

HIGHLIGHTS:

RESEARCH AND DEVELOPMENT

Broaden Research and Development Partners:

International Local – Academic

Institutions

3 Research and Development Projects on Trans-Boundary Diseases

HIGHLIGHTS:

RESEARCH AND DEVELOPMENT

Establish and Strengthen Research and Development Capacity

3 Functional Departments

Increase Number of Scientists

Increase R & D Expenditure (5% of sales)

HIGHLIGHTS

SCIENTISTS EQUITY STATUS REPORT

2000 2004

20%

60%

20%

AMWMWF

24%

13%

25%

25%

13%AMWMAFWFCM

HIGHLIGHTS:

The streamlining of production processes has had the effect of improving our

production success rate to 90%, as well as improving our production quality, our

product availability and thereby ensuring increased customer

satisfaction

HIGLIGHTS:

OPERATIONS Production Success Rate: 75% to 90% Facility Upgrade

Physical Infrastructure Audit

Facility Upgrade Plan Streamlining Production Processes Production Planning Processes

Repair & maintenance since 2001

1.9

4.4

8.6

12.1

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2001 2002 2003 2004

x R1

000

000

HIGHLIGHTS:

The new state-of-the-art small animal holding facility that has been erected is important for facilitating experimental work requiring controlled environment

and bio-containment. It will also provide much needed opportunities for

international researchers to form partnerships with OBP (Ltd).

EXPERIMENTAL ANIMAL FACILITY:

HIGHLIGHTS:

TOTAL QUALITY MANAGEMENT

Regulatory Affairs

Dossiers submitted

Local

International

HIGHLIGHTS: TOTAL QUALITY

MANAGEMENT

Two new products submitted, and registered

Quality System

Experimental Animal Facility

HUMAN RESOURCE REPORT: 2003/04

HIGHLIGHTS:

Our Human Resource Management and Development Policies have

enabled OBP to effect a successful restructuring and transformation in terms of representivity and gender especially within the management

and decision making cadres.

HIGHLIGHTS: HUMAN RESOURCE

Staff Compliment – 187 Human Resource Development

Skills Development ABET Bursaries Multi-skilling In-House Training Management Development programme

System and Process in place

COMPANY PERFORMANCE:

EQUITY REPORT:

Executive: 50% Designated group, 40% female) Management: 69% Designated group, 32 % female) Scientist: 75%Designated group, 50% female)

7%

66%

27%

AM

WM

WF

EQUITY STATUS REPORTMANAGEMENT LEVEL (2000 vs.

2004)

2000 2004

23%35%

18% 14%

5%5%

AM

WM

AF

WF

CM

IM

SKILLS PROFILE:2002/03

PG = Post GraduatePG

6%Degree

and Diploma

20%

Grade 1242%

Below grade 1232%

SKILLS PROFILE:2003/04

PG = Post GraduatePG6%Degree

and Diploma

25%

Grade 1241%

Below grade 1229%

Financial results ofOnderstepoort Biological Products

Ltd2003/04

Index

• Sales• Production• Cost Analysis• Profit• Capital expenditure• Cash position• Balance Sheet

Sales in doses

• Budget 95m• Actual 100m• Variance 5m• Percentage +5%

Sales in Rand

• Budget R61m• Actual R70m• Variance R9m• Percentage +14%

0%

26%

69%79%

01020304050607080

2001 2002 2003 2004

0%10%20%30%40%50%60%70%80%90%

Sales Value Annual growth %

Local Sales in Rand

• Budget R40m• Actual R36m• Variance R4m• Percentage -4%

Export Sales in Rand

• Budget R21m• Actual R34m• Variance R13m• Percentage +59%

0

10

20

30

40

50

60

70

80

2001 2002 2003 2004

R'0

00Domestic sales Export sales

Expense analyses

Other

4%

Marketing

5%

Depreciation

6%

R&D

6%Production

26%

Salaries

45%

Maintenance

8%

Expenses

• Budget R44m• Actual R36m• Variance R8m• Percentage +19%

Total expenses

3034

3236

0

5

10

15

20

25

30

35

40

2001 2002 2003 2004

x R

1000

000

Operating profit

• Budget R7m• Actual R20m• Variance R13m• Percentage +185%

Operating Profit

R 6.6 R 7.5

R 19.5R 20.2

29%30%

15%17%

0.0

5.0

10.0

15.0

20.0

25.0

2001 2002 2003 2004

0%

10%

20%

30%

40%

Profit Profit margin

Capital expenditure

0.2

2.51.2

17.1

0.02.04.06.08.0

10.012.014.016.018.0

2001 2002 2003 2004

x R

1000

000

Cash position

29.9

57.6

66.9 69.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

2001 2002 2003 2004

x R

1000

000

Cash on hand vs. Capital expenditure

0102030405060708090

100

2001 2002 2003 2004

R'0

00 0

00

Cash Capex

Assets

• 2003: R11.4m• 2004: R24.9m• Difference: R13.5m

Increase due to: • Building of a Small Animal Holding

Facility (R15m)• Other equipment (R1.1m) • Less Depreciation of (R2.6m)

Inventories

• 2003: R14.7m• 2004: R20.7m• Difference: R 6.0m

Increase due to: • Blue Tongue vaccines for export order

to Italy

Trade & other receivables

• 2003: R6.0m• 2004: R3.7m• Difference: R2.3m

Decrease due to: • Payment for Italy export-order was

invoiced and due in 2003, but not in 2004.

Foreign exchange assets

• 2003: R -• 2004: R0.9m• Difference: R0.9m

Increase due to: • New Accounting standard (AC133)

Cash

• 2003: R66.9m• 2004: R69.7m• Difference: R 2.8m

Increase due to: • Operational profits• Less Capital expenditure

Trade & other payables

• 2003: R3.1m• 2004: R4.6m• Difference: R1.5m

Increase due to: • Outstanding payments on the Small

Animal Holding Facility

Embedded derivatives

• 2003: R -• 2004: R3.3m• Difference: R3.3m

Increase due to: • New Accounting standard (AC 133)

Provisions

• 2003: R15.5m• 2004: R13.8m• Difference: R 1.7m

Decrease due to: • 2003 Provision for product recall was

cancelled in 2004

Liquidity Ratio

• 2003: 4.0 times• 2004: 3.7 times• Difference: 0.3 times

Industry standard: 2 times

Decrease due to: • Higher payables in 2004

Return on Assets Ratio

• 2003: 24%• 2004: 21%• Difference: 3%

Industry standard: +15%

Decrease due to: • Higher asset value in 2004

Return on Equity

• 2003: 43%• 2004: 38%• Difference: 5%

Industry standard: Must be better than Reserve Bank

ratesDecrease due to: • Provision for new accounting std

CONCLUSION:

CONCLUSION:

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