ECO Animal Health: performance in H1 FY27 hurt by China challenges

Down 12% at 83.8p (£64m) - Trading Update and Notice of Interim Results

ECO Animal Health Group, a global animal health company developing and marketing branded veterinary products to improve livestock productivity and welfare, has posted a trading update for the six months ended 30 September 2026. It tells us:

• Trading in the first half of the current financial year was in-line with the Board’s expectations and as outlined in the Company’s Annual Results for FY26 announced in July 2026.

• Revenue growth of 6% has been achieved over the prior-year period excluding China, with revenue growth of greater than 50% in South and South East Asia.

• In China, low pork prices resulting from an excess of supply have led to producer losses and a consequent reduction in expenditure on animal health products. As a result, ECO expects to report a significant reduction in revenues from its China and Japan geographical segment which will result in half-year Group revenues of £33 million (H1 FY26: £39 million).

• Despite the reduction in revenues, the Company expects to report a further improvement in gross margins to c.52% for the period (H1 FY26: 49.6%) which, together with continued cost control, will result in adjusted EBITDA of c.£3.0 million, consistent with the first half of the prior year (H1 FY26: £3.0 million).

• Earnings per share is expected to be strongly favourable compared with the prior year due to the exclusion of the minority interest in the China segment.

• Cash as at 30 September 2026 was £24 million, in line with the Board’s expectations.

“As previously announced, trading in the first half of the year has been impacted by a pronounced trough in the pork cycle in China. However, a strong performance in other regions and our continued efforts improving gross margins are expected to deliver half year adjusted EBITDA in-line with the prior year, with market conditions expected to improve during H2. With the continued ramp-up of ECOVAXXIN® MS sales in the EU and further progress expected across our portfolio of innovative new products, ECO remains well positioned for our next phase of growth.”

In terms of the full-year outlook, it says:

• The Board expects that adjusted EBITDA will be broadly in line with market consensus.

• Earnings per share is also expected to be broadly in-line with market consensus.

• Whilst the Board expects an improvement in China in H2, full-year revenue for the China and Japan segment is likely to be less than half of FY26 (FY26 revenue here was £24.1 million).

• Weaker trading in China is expected to result in a shortfall in group revenue compared to market consensus.

Note that it provides this market consensus: As at 5 November 2026, the market consensus for revenue and adjusted EBITDA for the year ending 31 March 2027 was £89.6m and £8.5m respectively. Market consensus for earnings per share was understood to be 3.30p.

Ed S’s view:

We previously had ECO Animal Health on an AMBER/GREEN rating. After this update, however, I think it’s appropriate to take it down a notch to AMBER.

The company is clearly experiencing some major challenges in China. This is an issue because the China and Japan segment is responsible for a large chunk of its revenue as the table below from FY26 results shows:

The company explains that national pork wholesale prices in China have taken a hit recently leading to lower levels of sow breeding. It adds that a reduction in supply will provide a foundation for an expected recovery in prices in 2027 and that its revenue prospects in China should improve.

“China’s national pork wholesale price declined steadily through the spring, reaching a low of approximately 14.3–14.5 CNY/kg in late June early July, before recovering to 16.40 CNY/kg by mid-September on festival pork meat stocking. This recovery has since partially unwound, reaching 15.49 CNY/kg in the week to 1 November (approximately 6% below the September peak and 13.8% lower year on year). The supply side is now adjusting quickly to these lower prices. The breeding sow herd fell 10.7% year-on-year to 36.0 million head at the end of September, indicating a material reduction in future supply and providing a foundation for an expected recovery in prices in 2027.”

In the near term though, the challenges in China are going to hurt its financial performance. It now expects group revenue of £33 million for the first half of FY27 versus £39 million in H1 FY26.

Meanwhile, it says that the weaker trading in China is expected to result in a shortfall in full-year FY27 group revenue compared to market consensus. The market was expecting £89.6 million here.

On the plus side, it says that gross margins are expected to continue to increase, which combined with continued cost discipline, is expected to mitigate the impact of lower revenues. It also says that it expects FY27 adjusted EBITDA and EPS to be ‘broadly in-line’ with market consensus, so the update is not a complete disaster.

One other positive from the update worth highlighting was growth in South and South East Asia. Here, it experienced year-on-year revenue growth of greater than 50%.

Overall, though, I see too many negatives to keep the stock on AMBER/GREEN:

• FY27 revenue is going to miss expectations due to the China issues.

• FY27 revenue is likely to be below the figure in FY24 so there’s little top-line growth here at the moment.

• The stock looks quite expensive – the forward-looking P/E ratio is 24 using the current EPS estimate of 3.51p.

• The technicals are becoming ugly – the stock is now below its 50-day and 200-day moving averages.

• The StockRank is trending down – it was 98 in April but is now 86 (and will probably fall further).

So, I’m going to take EAH down to AMBER.