OBP reports financial decline, seeks efficiency with new freeze-drier

Onderstepoort Biological Products recently briefed the Portfolio Committee on Agriculture on its financial and operational performance, highlighting significant shortfalls and promising improvements in production efficiency.

OBP reports financial decline, seeks efficiency with new freeze-drier
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Profits at Onderstepoort Biological Products (OBP), the state-owned veterinary vaccine producer, fell from R231 million in 2023/24 to R186 million in 2024/25, with a projected shortfall of R100 million. Out of 21 performance targets, it achieved only 13.

Interim OBP CEO Dr Jacob Modumo reported that the organisation met just one of five targets under OBP’s Financial Sustainability Programme:

However, the target to increase sales revenue to R305 million fell short by around R102 million, reaching R202,9 million, with lead times in packaging cited as a major constraint.

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Other performance indicators also fell short of expectations. OBP planned to submit three new products to the Registrar of Act 36 of 1957 but managed only one due to incomplete data caused by the unavailability of animal facilities.

Its earnings before interest, taxes, depreciation and amortisation margin reached only 3%, compared with the 6% target, and sales of the top 20 vaccines dropped by 24%, despite a goal to increase sales by 10%.

The Continuous Improvement Programme delivered mixed results. Three of seven targets were met: production efficiency reached 93,7% (against the 85% target), progress on good manufacturing practices (GMP) exceeded expectations, and more than 50% of the six-year Capital Expenditure Plan was completed.

However, implementation of the approved Enterprise Architecture Plan for ICT fell short by 66% due to insufficient funding, the finalisation of the GMP programme was delayed by the slow appointment of specialist advisers, and inventory sell-through in distribution remained constrained by extended packaging lead times.

Despite these challenges, OBP achieved all its customer service and governance targets. Customer satisfaction improved to 78%, all complaints were resolved, 90% of the organisation’s top 20 customers were retained, and 2 652 farmers were trained, exceeding the target of 2 500.

In addition, 10 new distribution channels were established, and 25 media platforms were used to disseminate information, surpassing the target of 22.

Staff training and engagement initiatives also exceeded expectations, achieving 140% of the annual training target, and governance workshops held to strengthen ethical practices.

Modumo assured the committee that all of OBP’s vaccines were available at the time of the presentation.

In response to questions about packaging and diluent shortages, he noted that the organisation had faced similar issues in 2023 due to water supply constraints. He explained that the unavailability of diluent directly affected the packaging of vaccines such as African horse sickness (AHS) and bluetongue.

The AHS vaccine, for instance, comprised four vials, each containing two doses, and packaging was conducted manually at OBP, with each vial requiring its own diluent.

The diluent shortage affected operations in September and October 2024, and OBP worked through November and December to resolve the backlog. With backorders of 3 000 AHS and 1 000 bluetongue units, the workload was substantial, according to Modumo.

He added that OBP had since procured pre-packaged products and new equipment to improve packing efficiency ahead of seasonal demand in the current financial year to reduce pressure.

Modumo also said that the addition of a freeze-drier, with a capacity of 50 000 vials per cycle, would significantly improve OBP’s revenue and give it a competitive advantage.

The upgraded freeze-drier would also enable full use of OBP’s automated packing machine, purchased in 2018/19 but previously underutilised due to low production volumes. Trial batches were scheduled to begin in December, with the first commercial batch expected in March 2026.

Responding to concerns and questions about leadership vacancies, OBP Chairperson Prof Peaceful Mabeta confirmed that the CEO recruitment process was under way and that the CFO position remained open after initial applications failed to meet expectations.

The organisation was also working to fill vacant corporate services and chief scientific officer positions.

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