Q1 2021 Phibro Animal Health Corp Earnings Call

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I would now like to hand, the conference over to your Speaker today, Richard Johnson Chief Financial Officer. Thank you. Please go ahead Sir.

Thank you operator goodmorning everyone. Thank you for joining us today and welcome to the fiber level health earnings call for our first quarter ended September 30th 2020.

On the call today, or Jack Benny our Chief Executive Officer myself and gave me in any of our incoming Chief Financial Officer will provide an overview of our quarterly results and our guidance for our December quarter, and then we'll open the lines for your questions.

Before we begin let me remind you that the earnings press release and financial tables can be found on the investors section of our website at Phd Dot Com. We're also providing the simultaneous webcast at this morning's call, which can also can be accessed on the website.

Today's presentation slides and a replay a transcript of the call will be available on the website later today.

Ah remarks today will include forward looking statements an actual results could differ materially from those projections.

What additional 70 approvals.

On the Internet by a side, we know that the industry recognized.

Cause it appreciates fibers commitment to safety and designs and a willingness and take the necessary action to keep products available for their use.

Finally, we continue to grow our regenerative business, even though we on Kathryn.

Leave a momentum will continue but our optimism is stomach tempered by the fact that the world is clearly dealing with a new way to call in and some economies arm obsession with.

The policy demanded U S and Europe will remain relatively.

Healthy, but we are seeing signs of some developing countries are experiencing and will hold name recovery.

And strengthen internal controls.

Lastly, I hope to have the opportunity to meet some of you, albeit virtually in the not too distant future.

Now, let me hand, the call back over to deck deck.

Well. Thank you Jack good. Thank you David So first lets review the results for our first quarter ended in September.

Our consolidated sales were $195 million for the quarter that was an increase of $5.5 million or 3% compared to.

Strong sales growth and reflected a favorable product mix as well as favorable.

Production costs and plus it somewhat unfavorable mix in our quarter a year ago.

Looking at adjusted gross profit by segment animal health.

Increased due to sales growth favorable product mix and favorable production costs, which were primarily driven by favorable foreign currency movements.

General.

Attrition gross profit decline due to unfavorable production costs.

This or 4%.

Coupled with favorable timing of certain customer orders.

In the nutritional specialty products category net sales.

The $32.6 million grew better than two points better than $2 million or 7% year over year.

During the quarter, we experienced international growth of dairy products, while domestic sales were roughly comparable to the prior year.

In the vaccine areas net sales were up $17 million, an increase of close to a million dollars or 4% driven by international demand for our poultry vaccines.

That all resulted in adjusted EBITDA for the segment of $30 million for the quarter, an increase of $5 million or 20% over the prior year. The overall sales growth and related gross profit increases were partially offset by increased SGN HSN.

And then looking at our other segments.

Mineral nutrition net sales were slightly.

The prior year as we continue to invest in strategic initiatives for future growth.

Looking at capitalization.

Our gross leverage ratio of debt to trailing 12 EBITDA.

Was 3.7 times at September Thirtyth 2020.

We had.

92 million of cash and short term investments on the balance sheet at quarter end.

And for the September quarter, we used $6 million of cash before financing.

Excluding the changes in short term investments.

And finally, we we did pay and we'll pay another routine quarterly dividend paid one in September and have declared a.

So thank you for the question to Africa swine fever remains a major threat.

Two growing pigs, they're as of as of this discussion.

No successful African swine fever vaccine, so it's a significant market.

And significant opportunity.

And we continue to spend money on developing.

A vaccine for ethics, a slight fever.

Hi, Thanks for taking the question personal I think.

Thank you again and wish you well on your retirement and appreciate all the work you've done with fibril over the years and look.

Look forward to working with gaming going forward. So.

So first you mentioned some favorable timing benefiting the NFV business was just wondering putting any sort of sizing around that and whether that was something we should think about as pull forward from fiscal Q2 or kind of more of a one off type event and then secondly, a.

You mentioned, a your pet strategy.

You know you've kind of dipped your toes in that market mentioned that you may have more things to talk about going forward, but can you at least give us a sense of.

If you're looking at that as kind of a purely.

External opportunity for expansion through business development or are there things that you you're working on in house.

That will allow you to.

To get a stronger footprint in that market.

So let me take companion animal for Us and he is as we.

Slightly discussed on these calls.

We find ourselves in a unique position in the companion animal business unique position is no we're not in the business when compared to all of our competitors.

Were heavily in that business and in life sales forces and.

Ah you know big R&D and.

That.

I will not but what we find and we've seen an increase in basis.

Is that people come to us with new ideas, because they basically places to go.

So you know one we felt that that was presented so I think it's it's moving successfully we're hitting our targets.

Albeit not by getting into more clinics, because as Dick said earlier.

You know, we're having problems or.

Getting into new clinics, because a couple of it but there were you Wanna level is higher than we had expected.

And we're starting to work and time to invest in new products and new opportunities I would say I mentioned that will bode well discuss it further maybe in the months ahead, but there are many opportunities for us.

Hi to take products and that had been developed on the outside and bring it to market and that's a very exciting opportunity for us it's hard to quantify yet, especially when the only market in one product, but this is a real opportunity for Farnborough.

As far as the interface a lot of it has to do with timing a lot of it has to do with.

No different products around the world, but that business is continuing yeah, we're shifting some of the antibiotics.

I would say almost a 100% into therapeutics, that's been a major shift for us.

But the the demand I mean animals remain.

Yeah.

Sounds like that carrier and you know that one of the best ways to solve that problem I too am essays Atlanta materials.

Great. Thanks.

Yeah and on the on the timing question you had Kevin.

It didn't it wasn't a huge now for maybe a couple of million dollars, we called it out.

Just because it it did affect Uh huh.

Perhaps a little bit about it.

It's baked into what we told you we expected for our December quarter.

Again, if you would like to ask a question Press Star then the number one on your telephone keypad.

The next question comes from Derek The Brown of Bank of America. Your line is open.

Hi, good morning in for Mike Today, Microscan today, Hey, a couple of points can you talk a little bit about the F.

S. DNA spend.

Obviously, you're expanding the sales force now with that can you talk a little bit more about operating expenses and how you see that playing out.

Well I think as as again, we said if a couple of quarters.

Notwithstanding the fact that as you.

The industries, where we have been selling into every challenge and we've you know face a bunch of different heads.

With swine fever in China.

And.

And market disruptions.

We continue to work on developing.

Various products in various product lines and that will all sort of you know.

No products really being sold and all that sort of hesitant about but in the bucket of S. DNA. So it's not only expansion of salesforce and expansion of technical ability.

It's in investing in developing a range of products and as we have spoken about some the vaccine.

Device to M.B.S., and so engine prowess, ACA et cetera, et cetera, and that's the reason is feeling.

Got it thanks for clarifying and sort of how are you looking at FX trends for.

December quarter.

[noise] Dick.

Yeah, I'd say, we're we're looking at them to be right.

Roughly where they've been in recent months not no.

Not a lot of turbulence, but.

Nothing no major changes from the current status.

Thanks, and could you talk about the pace of recovery by species, I mean anything dramatically different in poultry versus cattle and dairy.

So this was just let's just talk about the U.S.. So I would say the poultry industry are sort of return to be covered level [noise].

I think pretty much a dairy industry has also leave time.

I mean, the swine industry still has some bottlenecks mainly.

There was one big plan.

Im sorry, your plans on Smithfield, there's still not operating at full capacity its operating it.

On what we hear a 70, 80% capacity, so that's still causing some disruption in the North Carolina area, but.

But in the rest of the country people have lunch a management Kobe and have brought.

The slaughter rates back to again to where they were pretty confident.

Got it and I guess that was there any inventory build bunny customers. This quarter you saw some inventory drawdown last quarter.

No I you know I think.

When when covered first hit back in March.

And there was a lot of disruptions and transportation.

Transportation.

People you know try to put in more inventory once the war is going to happen in the shipping with it that's exactly.

He now people have been managing really well. These last few months last many months.

So we don't we're not seeing any any inventory increases.

Out of the norm.

Great. Thank you very much.

[noise] again, if you would like to ask a question Press Star then the number one on your telephone keypad.

There are no further questions at this time I will now return the call to our presenters for final comments.

Well excellent. Thank you very much and thank.

Thank you to everyone for your calling words, either on the call today or a notes I have received up it's it's been a real pleasure working for Fibrocaps and.

Hi, Yes, I wish you all the best as we move forward and I. Thank everyone very much. So we will talk to you again in 90 days and we talk about our December results. So thank you very much and this at the end of the call. Thank you bye now.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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Oh I'm sorry.

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