ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

PRESENTATION TO THE PORTFOLIO COMMITTEE: 7 NOVEMBER 2006

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)

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

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)

GOVERNANCE REPORT

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

CORPORATE GOVERNANCE – FUNCTIONING OF BOARD AND

COMMITTEES

Annual Board Plan – considering Reporting requirements:

Quarterly Board MeetingsThree Meetings of Committees per

annumTwo Strategy Planning & Review

Sessions per annum

FUNCTIONING OF BOARD COMMITTEES

Remuneration Committee:Board approved Committee Charter3 Meetings to deal with 2005/06 matters Membership:

Dr M Madikizela (Chairperson)Adv D J MitchellMr S S M SeaneMs N D ShabalalaMs S A Bokwe (GM: Human Resource)MD, GM: Finance (by invitation)

FUNCTIONING OF BOARD COMMITTEES

Remuneration Committee Activities:Remuneration of:

DirectorsExecutivesEmployees

Performance Assessment of ExecutivesHuman Resource Matters

FUNCTIONING OF BOARD COMMITTEES

Audit Committee:Board approved Committee Charter3 Meetings to deal with 2005/06 mattersMembership:

Adv D J Mitchell (Chairperson) Dr R U Forbes Ms N D ShabalalaMr M P van Jaarsveld (GM: Finance)MD, Internal Auditor, External Auditors (by

invitation)

FUNCTIONING OF BOARD COMMITTEES

Audit Committee Activities:Effectiveness of Internal Controls

Internal AuditExternal Audit

Financial MattersManagement AccountsInvestmentsFinancial PoliciesAnnual Financial Statements and Annual Report

FUNCTIONING OF BOARD COMMITTEES

Risk Management Committee:Board approved Committee Charter3 Meetings to deal with 2005/06 mattersMembership:

Dr R U Forbes (Chairperson)Adv D J MitchellMs N D ShabalalaDr L C Makuleni (Managing Director)

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 AssessmentAnnual Risk Management PlanRisk Management – Continuous

monitoring and evaluation of Risk Management plan

FUNCTIONING OF BOARD COMMITTEES

Research and Development Committee:Board approved Committee Charter3 Meetings to deal with 2005/06 mattersMembership:

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)

FUNCTIONING OF BOARD COMMITTEES

Research and Development Committee Activities:R&D Strategy and Policy

Intellectual Property Management

Monitor and evaluate Strategic R&D Projects

OCCUPATIONAL HEALTHAND SAFETY COMMITTEE

Reports Quarterly to the Board7 Meetings to deal with 2005/06 mattersMembership:

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)

OCCUPATIONAL HEALTHAND SAFETY COMMITTEE

Committee Activities:Legal Compliance PolicyStrategy

COMPANY PERFORMANCE:2005/06

COMPANY PERFORMANCE:

FINANCIAL

OPERATIONS

RESEARCH AND DEVELOPMENT

TOTAL QUALITY MANAGEMENT

Onderstepoort Biological Products Ltd hasbecome a respected leader in its niche

market: the production and sale of animal vaccines and related

biological products.

COMPANY PERFORMANCE

FINANCIAL

Sales HistorySales compared to budget & last yearOperational Profits

COMPANY PERFORMANCE:FINANCIAL

Annual Sales History:

-

10

20

30

40

50

60

70

80

2001 2002 2003 2004 2005 2006

Total Local Export

R'm

COMPANY PERFORMANCE:FINANCIAL

Sales Income 2005/06 (Cum)

0102030405060708090

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

This Year Budget Last Year

R'm

COMPANY PERFORMANCE:FINANCIALOperating Profit (Cum)

-25

-20

-15

-10

-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

COMPANY PERFORMANCE: DOMESTIC SALES & MARKETING

Building partnerships with:Provincial Departments of Veterinary

ServiceVeterinariansCommodity GroupsEmerging and Commercial Farmers

Expert panel meetingCustomer Survey

COMPANY PERFORMANCE: DOMESTIC SALES & MARKETING

SponsorshipsFemale farmer of the yearNERPOSAVA congress

Farmers’ daysExtended distribution network

Major agreements with BEE companies

COMPANY PERFORMANCE: EXPORT SALES & MARKETING

Appointment of Business Development Manager

Interacted with existing and prospective Export Clients

Developed Strategies for different Export Regions

COMPANY PERFORMANCE: EXPORT SALES & MARKETING

Attended International Conferences and presented Technical Papers

Sponsorships:FAOBotswana & Namibian Veterinary

Congresses

License Technology & Strategic Partnerships

3 Research and Development Projects on Trans-Boundary Diseases

Other Strategic Projects IP Management

COMPANY PERFORMANCE: RESEARCH AND DEVELOPMENT

Facility UpgradePhysical Infrastructure AuditFacility Upgrade Plan

Streamlining Production Processes Production Planning Processes

COMPANY PERFORMANCE: OPERATIONS

Repair and maintenance expenses

0.0

1.0

2.0

3.0

4.0

5.0

2001 2002 2003 2004 2005 2006

COMPANY PERFORMANCE: OPERATIONS

COMPANY PERFORMANCE: TOTAL QUALITY MANAGEMENT

Experimental Animals Animal Ethics Co-operation with other Government

Departments for animal housing

COMPANY PERFORMANCE: TOTAL QUALITY MANAGEMENT

Quality Assurance:Supplier Quality and BEE AuditsPlant Quality AuditsPlanning of first external ISO audit

Regulatory Office:Review of current registered product

dossiersRegistration of OBP products

Internationally

HUMAN RESOURCEREPORT: 2005/06

HUMAN RESOURCES

Employment Equity ReportHuman Resource DevelopmentHIV/ AIDSRemunerationSocial Responsibility

64%

32%

3%

1%

Black Coloured Indian White

EQUITY STATUS REPORTEMPLOYEE DISTRIBUTION BY RACE

EQUITY STATUS REPORTEMPLOYEMENT EQUITY 2005/06

0

20

40

60

80

100

120

140

African Coloured Indian Whites

Target 2005/6 Actual 2005/6

EQUITY STATUS REPORTEMPLOYEE DISTRIBUTION

BY GENDER: 2004/5 vs. 2005/6

0

20

40

60

80

100

120

Male Female

2004/05 2005/06

EQUITY STATUS REPORTSTAFF WITH DISABILITY

0

1

2

3

4

Senior

Management

Managenent Specialists Skilled Semi - skilled

HUMAN RESOURCES DEVELOPMENT

Areas of focusABETBursariesMulti-skillingIn-House Technical TrainingManagement Development Programme

TRAINING AND DEVELOPMENT

65%

32%

1%

3%

African Coloured Indian White

PERCENTAGE OF TRAINING COSTS PER OCCUPATIONAL

CATEGORY

5% 5%10%

15%

0%15%

50%

Legislators, Owners,Senior Officials &ManagersProfessionals

Technicians & AssociateProfessionals

Clerks

Service Workers & Shop& Market Sales Workers

Artisan & RelatedWorkers

Plant & MachineOperators & Assemblers

HIV/ AIDS

Launched company strategy on HIV/ AIDS

KAPB study conducted OBP’s statement of intent was signed

by the Managing Director on World Aids day in 2005

REMUNERATION

We strive to offer competitive salaries Remuneration based on performance

and scarcity of skillsSurvey market yearly as part of 3 year

agreement

RETENTION

Staff Complement: 207Labour Turnover- 3%Management Turnover – 0% 56 % of staff- employed longer than 10

yearsTurnover in staff recruited since

Corporatisation - 1%Climate Survey conducted

OBP SOCIAL RESPONSIBILITY

Take a girl child to workParticipated in Cell C take a girl child to work

OBP SOCIAL RESPONSIBILITY

Internship Programme for EngineersTwo appointed within the Company, of which one

received a better offerExperiential 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)

OBP SOCIAL RESPONSIBILITY

Tumeleng Mission (Klipgat)HospiceCrèche

Children’s homeDonated our time and money

FINANCIAL RESULTS OFFINANCIAL RESULTS OFONDERSTEPOORT BIOLOGICAL ONDERSTEPOORT BIOLOGICAL

PRODUCTS LTDPRODUCTS LTD

2005/062005/06

INDEX

Income Statement

Balance Sheet

Cash flow

INCOME STATEMENT

SalesCost of salesOther incomeOperating profit

-1020304050607080

2001

2002

2003

2004

2005

2006

Export Local

LOCAL SALES vs. EXPORT SALES (R’m)

44%

26%

36%

6% 7%-4%

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

2001 2002 2003 2004 2005 2006

-10%

0%

10%

20%

30%

40%

50%

ANNUAL SALES GROWTH: (RAND MILLION)

18%

15%

-6%

12%

0%

31%

-5.0

10.015.0

20.025.030.0

35.040.0

45.050.0

2001 2002 2003 2004 2005 2006

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

LOCAL SALES &ANNUAL GROWTH (YEAR ON YEAR)

EXPORT SALES &ANNUAL GROWTH (YEAR ON YEAR)

-36%

14%0%

131%

62%

303%

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2001 2002 2003 2004 2005 2006

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

COST OF SALES

2004/05: R41.2m2005/06: R40.4mDecrease: R0.8m

Improved production technology & quality implemented in the Viral Production Unit.

OPERATING INCOME

2004/05: R6.8m2005/06: R3.3mDecrease: R3.5m

R 6.6 R 7.5

R 20.2R 14.1

R 5.1

R 19.5 7%

19%

29%29%

15%17%

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006

0%

10%

20%

30%

40%

Profit Margin

OPERATING PROFIT vs. MARGIN

0

10

20

30

40

50

60

70

80

2002 2003 2004 2005 2006

Sales Total costs

SALES vs. TOTAL COSTS

0%

10%

20%

30%

40%

50%

60%

2003 2004 2005 2006

COS Overheads Linear (COS) Linear (Overheads)

COS AND OVERHEADS AS A % OF SALES

INCREASE IN COST OF SALES

Depreciation: R1.1mProduction cost: R1.7mLabour: R3.0mProduct losses: (-R2.2m)Stock movement: (-R4.4m)

INCREASE IN OVERHEAD EXPENSES

R&D: R2.1mStaff cost R4.8mMarketing: R1.4mElectricity: R0.7mBad debt: (-R6.1m)

BEE PROCUREMENT

OBP’s new Procurement Policy established end of 2004

Policy based on:PPPF Act (Act No 5 of 2000)AgriBEE ( BBBEE Framework for Agriculture) July 2004DTI BEE Strategy (July 2004)

OBP BEE Procurement:2004/05 = 48%2005/06 = 56%

BALANCE SHEET

PPE (Fixed Assets)InventoryTrade receivablesCashTrade payablesProvisions

PROPERTY PLANT & EQUIPMENT

2004/05: R29.0m2005/06: R88.0mIncrease: R60.0m

Acquisitions: +R65.5mDepreciation: -R5.5m

Transfer of land and buildings to OBP R53.6mPlant & equipment: R11.9m

INVENTORY

2004/05: R13.1m2005/06: R12.5mDecrease: R0.6m

TRADE RECEIVABLES

2004/05: R5.7m2003/04: R8.9mIncrease: R3.2m

CASH

2004/05: R77.4m2003/04: R80.7mIncrease: R3.3m

Increase due to operational cash flow.Cash invested in three major banks.Cash is retained for upgrade of the facilities

TRADE PAYABLES

2004/05: R5.8m2003/04: R9.5mIncrease: R3.7m

CASH FLOW

Cash position of OBP

OBP’s Liquidity

80.777.4

69.766.9

57.6

29.9

0

10

2030

40

50

6070

80

90

2001 2002 2003 2004 2005 2006

CASH POSITION

R 0

R 50

R 100

R 150

R 200

R 250

2004 2005 2006

Liab.

Cash

Invent

Debtor

Fixed A

ASSETS vs. LIABILITIES

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

CONCLUSION CHALLENGES / OPPORTUNITIES:

Growing the Company: Domestic market International markets

International Strategic Partners Funding for Upgrade

CONCLUSION CHALLENGES / OPPORTUNITIES:

Improve Product Line: New / improved products New technology

GMP / ISO accreditation Intellectual Property management

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