Q3 2021 American Vanguard Corp Earnings Call
Greetings and welcome to American Vanguard's third quarter 2021 conference call at this time, all participants are in a listen only mode.
And the answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Bill cruiser Director of Investor Relations. Thank you you may begin.
Thank you very much Sherry and welcome everyone to American Vanguard's third quarter and nine month year to date earnings review our speakers today will be Mr. Eric went to mute the chairman and CEO of American Vanguard and Mr. David Johnson, the company's Chief Financial Officer.
Also assisting to answer your questions Mr. Bob <unk>, the company's Chief operating officer.
A little reminder, for those of you who may be listening by phone. This conference call is being webcast live via the news and media section of the company's website.
This approach would allow you to see the Powerpoint presentation that accompanies our commentary to.
To listen to the live webcast go to the <unk> website registered download and install any necessary audio software. If you are unable to listen to our entire call today. The conference call will be archived on the Companys website for your review at a later date.
Before beginning let's take our usual cautionary reminder, in today's call. The company May discuss forward looking information such information and statements are based on estimates and assumptions by the Companys management and are subject to various risks and uncertainties that may cause actual results to differ.
From management's current expectations.
Such factors can include weather conditions changes in regulatory policy competitive pressures and various other risks that are detailed in the company's SEC reports and filings.
All forward looking statements represent the company's best judgment as of the date of this call such information will not necessarily be updated by the company.
With that said, we turn the call over to Eric.
Thank you Bill.
Okay.
Good morning, and good afternoon to everyone.
Welcome to American Vanguard, 'twenty, 'twenty, one third quarter and nine months business update we.
We appreciate your continued support and interest in the company today I'm going to give you a quick view of our financial performance supported by commentary on market conditions, then I will turn to the global supply chain, which is the subject of strong interest to most industries.
And then ask David to cover our financial and operational matters and great detail after that I'll return with an update on our green solutions and precision application initiatives.
So at the at slide four here at the end as we ended Q2s conference call.
We presented a scorecard on how we did in the first half of 'twenty, one versus what we had given at the beginning of the year as our targets.
So I can update that now.
Through the third quarter.
And year to date through third quarter.
And so with with revenue we were at 25% through the first.
First half through three quarters, where exactly still at 25%.
With our gross profit margin, we were tracking right on the 39%.
Through three quarters last year, we had slipped a little to 38, we're still holding at 39 at this point.
Our operating expenses.
We said we would.
Maintain hope to move down slightly if we could as a percent of sales in the first half we had dropped from 35% to 34 and year to date, we're now at 33 versus <unk> 34.
Our interest expense.
As is down now at 23%.
So we're tracking certainly below 2020 and believe we will outperform our initial forecast.
On our tax rate, we were at 31% versus 23 through the first half we're now at 27 versus 20% at this point last year.
We do expect that rate to drop in the fourth quarter, and certainly to meet or exceed our mid 20%.
Range.
On on our debt to EBITDA you can see we've dropped from two and a half times two 2.1.
As we look at it now we expect to drop further in them.
Below that the two X a target that we had that we had thrown out.
And as far as net income is concerned.
Pretty much the same we were at 86% for the three quarters, where we were at 87% increase definitely a faster rate than our 25% revenue growth and our Ebitdas is moving up as we're now 39% increase from from where we were at this time last year.
So yes.
Our strong performance was across all sectors, but our domestic crop business led the way, where we benefited from a combination of factors.
Let me let me just focus first on on.
On commodity prices.
And I'll start I'll start with cotton.
And what we've done is we've measured the price.
Per pound.
This is with macro trends as of September 27th of 'twenty, and then comparing that to September 27% of 'twenty one.
Pretty dramatic increase it's about 59% increase in AR and so this this has prompted growers.
Growers to invest heavier more heavily in corn, we benefited from our corn.
And from our cotton insecticide, Byron, which had a very strong third quarter.
In addition, we've had an.
An increase in our our cotton defoliant, <unk>, which was very strong in the third quarter and we're still seeing.
Orders and we saw all orders through October.
So that's that's a big part of our of our benefit here so far.
Yeah.
Let's get this back up to.
Sure.
Oh.
So.
Soybeans.
We're at $10 21, a bushel have increased to 12 85 over that that year period, 26% increase you may recall that we have improved our soybean portfolio with several herbicides we've acquired over the last.
Three three years.
And as such soybeans are moving up.
As a crop for us.
I think I think currently were last subject last look we were around seven 8%, but.
So it's it's looking looking positive for us in that sector.
And then corn move.
Moving from $3 79, a bushel up to 542.
With that we've seen strong performance with with Aztec and <unk> are our number one corn soil insecticides and impact.
Which is our number one.
Herbicide corn herbicide and we've we've launched two.
Two new we had the impact.
Impact Z, which was with atrazine, we've launched off now impact core versus with the Cedar core and so Nate which is impact plus crude phosphonate and all all four of these are performing well at this point.
So our R.
Our increase.
Overall.
And the.
The AG sector was up 38% for U S crop and.
So that certainly did lead the way for us.
And this is despite us having logistics issues.
For our biggest product are normally which is ours, so fumigant products.
They're large volume and certainly impacted by the <unk>.
Supply chain disruptions.
On the remaining sectors.
OHP AR continues to see.
Strong strong performance.
Particularly in the markets of.
Of the horticulture and plants and and then greenhouse activity.
Guard again.
<unk> pest market that is also recovering well.
AG Nova our Australian.
Business, which has tripled to where we were last year.
Our greenhouse, which is adding incremental new business, Mexico is performing well as our other two sectors Brazil.
And.
Central America.
Overall these combined.
To increase 17%.
Versus where they were this time last year.
So I wanted to take a second to just talk about supply chain and I was at a.
At an industry meeting.
Last week, where I was asked to talk a little bit about supply chain from a manufacturing side.
And as I was driving from our plant in Alabama to the conference.
And Memphis I was listening to the radio and the C. O O Toyota was talking about specifically the <unk>.
The Jam that's occurred in the long Beach Harbor, which is where I, where I grew up.
And he was saying that there are.
Currently 540000 containers and Youre looking at it boats here that have about 500 containers on them.
And 540000 that are sitting at the port today that have not been met.
<unk> backed up waiting to be unloaded. So that's about 100 vessels and if you go down there you can see them anchored all up and down.
The southern coast there.
And the current curve.
<unk> ability to unload at that Port is about 18000 containers a day.
So if you looked at it and said well I guess.
30 days, we would we would be able to unload those 540000.
<unk> thousand containers, which is which is true.
But the problem is the 29000, new containers are arriving each day.
So we're not going the right way and there doesn't seem to be any any real solution at the moment.
So why is this happening and I guess, we talk about maybe a perfect storm.
That's occurred we have a shift in buying patterns due to COVID-19.
People got behind they panicked on certain items.
So things shifted around some items are plentiful some or short.
As you certainly were whereas you've hit your ensures supermarkets or if you're trying to get a car.
Anything with circuit boards.
We've been operating with the same port capacity.
For years.
Yes.
Generally being able to kind of make it through but we just haven't had this bigger shift in buying patterns same thing with containers.
There's a limited number of containers.
Those containers are.
Or are being delayed as they are sitting waiting to be unloaded.
<unk> and <unk>.
In some cases the empties.
You are having trouble getting back and just did.
We had we've got products that we were we've been trying to ship to Australia, and we can't get a truck to take us.
Take it from the 20 miles from our plant down to long Beach Harbor.
If they get there they're going to wait eight hours and truckers don't particularly want to do that.
As such there is a lot of the empty containers or just winding up on residential streets throughout the harbor area as truckers are frustrated and Theyre, just dropping the trailers anywhere and moving on so it has created quite a quite a mess.
And of course, we're dealing with somewhere in that 60 to 80000, truckers short, which makes it even once those containers do get offloaded.
It gets difficult to actually move them out of the harbor.
So.
What what what's to be done how do you deal with it and I really kind of boil this down to three key factors.
First as production itself.
Got to decide if the.
Product that you're searching for whether its intermediate or or finished good is.
<unk> is going to be produced and when it's going to be produced.
And I'll talk a minute about us dependence on China, but for instance, China has shut down a number of factories for for environmental not necessarily that factor, but but production sites.
Also the government is.
Yeah.
Prioritizing in energy and certain high energy products are not getting permitted to continue for production. So that's putting a squeeze that goes across the across.
The World. So first first is can you is the product can you make that purchase order we've had products that we've ordered and they've come back and said.
Sure.
You've got you've got to pay more and so we say, okay and then it's like well, we're not going to be able to ship anything.
So that's that's certainly first thing that you have got to identify are you going to be able to produce the.
The product itself. The second is on logistics, which we talked a little bit about.
But those containers that you saw that come over last year.
We're running at.
About 2500 to $3000 per container.
This year, they've picked up to $26000 per container.
And thats, just bringing them into into the to the U S. Once they're here and you've got to get it moved from there to your to your your factory.
Or your production site.
And then from that standpoint, you have got to get it delivered.
You've got this shortage of trucks.
Truckers and you've got to try to figure out how how youre going to get it and then how much youre going to pay.
So it gets to be sometimes a bidding war if you want the product to get to <unk>.
How much will you pay to do it rather than kind of standard fares.
So that kind of all boils down to maybe the most important point is let's assume you do get your goods.
You clearly need to do quick calculations to understand exactly how much those goods are costing and we're also seeing cost rises in factories is labor rages.
Wages are going up.
And so we're working with our finance team.
To look at all Skus and do an analysis and real time of what what our costs are and making sure that we.
Present, those two are our commercial.
Product managers, so that they have a vision of what their cost of goods that they are selling and so I think the company said that can go through this process.
<unk> will fare the best there is no real clear vision as to when this disruption I think we'll seize.
It will hit other areas harder than others and will be cyclical and so I think you just got to be nimble to understand where this is going.
Okay. So on the.
On the positive side.
Again, we're sitting here with with.
With six production sites here.
<unk>.
In North America.
That gives us.
The ability to.
To produce and be in a stronger position.
To handle the Destructions.
I mentioned with China about 8% of our of our portfolio is dependent on materials from China.
Few years ago, we started process of of second sourcing if we could outside of China due to due to the tariffs which were pushing up to 31%.
Second we manufacture 46% of our portfolio.
Within our six North American factories.
Having these manufacturing facilities gives us both greater independence, and the ability to respond quickly to market conditions.
Third we order goods from overseas on a comparatively sporadic basis by contrast, many of our consumer businesses are many of the consumer businesses that being computing goods clothing that sort of thing rely upon a steady stream of imported goods.
Nevertheless, we're working closely with our logistics partners to ensure that we can get goods from point a to point b.
And we're ordering goods from overseas further in advance and looking at lesser congested ports.
So that means we have been able to manage through the supply chain conditions and at this stage are optimistic that we will be able to continue to do so without material interruption.
So with that David Let me turn it over to you.
Our financial and operational analysis, Thank you Eric.
And with regard.
Pardon me with regard to our.
Filing.
I understand from my controller that we are in the file in the Q to file and so I expect that we will file within the half hour or so.
45 minutes.
And as I've mentioned in previous conference calls our industry is one that's considered critical in all jurisdictions in which we operate.
And Julien depend damage in 2020 and now throughout the nine months of 2021.
Our business our customers our suppliers are all operated without major disruption.
Throughout so.
It's been a good.
A good place to be during this difficult time.
This is <unk>.
Quarterly sales performance you can see that.
Sales have increased.
As Eric mentioned.
And says this is the third quarter of 2020.
And overall, our sales are up about $30 million to $147 million.
So about 25% increase over the prior year.
U S sales were up about 33% or $22 million and our international sales were up about 16%.
$8 million.
And because of the very strong U S performance.
Despite the strong international performance, our international sales reduced to about 40% of total sales.
At this time last year, there was about 43%.
With regard to our gross profit performance when we spoke at the end of Q2, we acknowledged that we would have some production delays, but indicated that that issue is temporarily with temporary is substantially behind us.
And during the third quarter of 2021, our production performance has been much better.
Just as we expected and that has an impact on our.
Gross margin performance and.
When I look at the crop business gross margin performance improved by about 50%.
Including the impact.
The impact of the.
The recovery of the hiccups in the factory.
Our non crop business.
<unk> had significant mix changes in 2021 in comparison to the prior year.
With some higher margin business happening earlier in the year.
In 2020 as compared to this year.
And as a result.
Margins have remained comparatively flat in the quarter.
For international sales gross margin improved as compared to the prior year and is primarily the result of the addition of businesses acquired late in 2020.
Which generate margins higher than our preexisting business.
Performed.
Anything else.
A particularly light this graph because I think it gives a quick way of visualizing the impact of factory performance has on our results and you can see that in the third quarter of 2021.
On the far right of the graph factories cost is about one 2% of net sales.
And under recovery and that compare if you look back a couple of quarters to the third quarter of 2020, you'll see that the cost amounted to two 5%.
Just a reflection of the kind of activity that the monies to record in the factory.
Third quarter.
Operating expenses increased by about 24% and net amounted to $9 million.
Our newly acquired businesses accounted for about 14% of the increase.
Freight accounted for 17%.
And then the balance was incentive compensation linked to financial performance, some legal expenses and increased marketing costs.
Overall, our opex as a percentage of sales remained steady at 53%.
Okay.
Our operating income.
Third quarter was up 112% versus last year.
In addition, we made a material adverse change in the value of to investments we've had for some time.
As Eric mentioned, our interest expense continues to.
Track about 24% below the prior year.
Our tax rate is a little higher than last year, primarily as a result of the strong.
Taxable income in comparison to prior year and.
Finally, our bottom line is about $5 5 million, which is up 88% in comparisons to prior year.
For the first nine months of 2020, while net sales were up 25% gross margins in absolute terms are up 27%.
All our main activities in the U S crop U S non crop and international contributed to this exciting performance.
Our operating expenses.
Increased primary primarily as a result of the new businesses acquired in the final quarter of 2020.
Increased performance linked to incentive compensation.
Legal costs, some increases in travel and costs associated with the volume changes such as freight and warehouse costs.
Overall operating costs were up 22% as compared to the net sales increase I mentioned, a moment ago, a 25% and operating costs compared to sales improved to 33% in 2021 as compared to 34% last year.
Interest expense is reduced by 23% as a result of cash generated over the last 12 months.
And overall, our net income has increased by 87%.
Now I'd like to turn my attention to the balance sheet as you can see from this slide during the third quarter, we increased cash generated from operations by 56% as compared to the same quarter of the prior year. Further you can see that the movements in working capital was in line with the prior year and this performance includes the <unk>.
Spanned at scope related to the businesses acquired in the fourth quarter of 2020.
Overall net cash from operations increased by 34%.
At the end of September 2021, our inventories are at about $167 million as compared to $176 million. This time last year.
After a moment, we exclude the impact of product entities acquired since December 2019, which accounted for $10 million of inventory at the end of Q3.
Our base inventory decreased by 11% from this time last year.
So we feel that we have controlled inventory well joining this phase of the company's annual cycle.
Our current inventory target for the end of the financial year remains at $155 million.
That compares with $164 million at the end of 2020.
That target is obviously dependent on a few things, including a continued low impact from the pandemic.
Whether patents and no more acquisitions this year.
With regard to liquidity under the terms of the credit facility agreement. The company uses consolidated EBITDA as defined in that agreement to determine leverage.
Consolidated EBITDA for the trailing four quarters to September 30th 2021 was $66 million as compared to $49 million.
For the full quarter to September 32020.
This tightened in conjunction with outstanding Indepth indebtedness translates to borrowing availability amounted to $95 million at the end of September 32021, as compared to $45 million at the same time last year.
As you can see from this chart, we have been controlling that well even as we went through the annual cycle and as we continue to invest in the business for the future.
Overall.
In summary, then the second the third quarter of 2021, we have increased sales by 25% and <unk>.
<unk> overall margins, we have managed operating expenses, which increased in absolute terms.
But declined when expressed as a percentage of sales our net income increased by 88%. We have a similar story for the first nine months of 2021, we increased sales by 25% gross margins by 24% operating costs have reduced when compared to net sales. Our interest expense is down and net income has improved by <unk> <unk>.
7%.
From a balance sheet perspective accounts receivables increase driven by strong sales inventories have been well controlled working capital has been held flat during the quarter and that is lower than this time last year. Despite three acquisitions in the intervening 12 months and finally, our liquidity position has improved significantly.
With that I will hand back to Harry Thank you David.
And recently quarterly.
<unk>.
Earnings calls, we've provided updated information on our two strategic growth initiatives and Green solutions and prescriptive.
Application technology.
So let me just.
Go into Green solutions.
So we mentioned last time that we have.
That we have.
<unk> grown our.
Our technology on the Green solutions.
And and.
We have now.
And see that we've got 100 different products and our expanding portfolio.
So in this slide we breakout the functional categories of our offerings.
As you can see it's a balanced range of solutions with a strong emphasis on <unk> bio stimulants.
<unk>.
Bio pesticides and micro macro nutrients.
These products allow us to offer not only our traditional crop protection kind of defensive products, but beneficial plant nutrition and soil health amendments as well and so we've developed quite a balanced and growing portfolio.
Yes.
So green solutions says posted steady recent growth as seen on this slide.
For Q3, we increased.
About $10 million.
26% increase from from Q2.
And I think most of a good portion of that growth anyway was attributed to increased sales and in Latam, Brazil, India and Australia.
Year to date, our revenues that are.
Just 27 million and for the full year.
We're upping our forecast from the 30 to 35 range, we're now thinking somewhere in that 35% to 37 range.
Of that.
About $10 million.
It's coming from from Latam, which is our largest so far.
So when you look through.
What we're what we're focusing on and keeping.
Keeping our eyes on the targets of what we're trying to do an expansion.
We've got registrations underway in Latam.
The Columbia business has been transitioned over completed and working well.
Got a pipeline building for their distribution in Europe and Africa.
We've got our U S.
Uh huh.
Group.
Looked at opportunities now for for some significant increases in 'twenty two.
Part of that as a result of the.
500 baht trials, we mentioned last time that we were doing in 'twenty, one, which which are basically looking to benefits in the 'twenty two period.
We've also link this with our Sim past.
Files, where we're introducing invigorate, which again is nitrogen fixation product that debt.
It looks extremely promising.
We've got.
Turf and ornamental our trials are near completion at this point.
We've got large scale customer.
Customer.
Demo plants that were.
We're doing again looking for a pickup for next year.
With.
With inbound Sam Guard, we mentioned before our bio herbicide.
Products that we are.
Looking for both consumer.
And professional.
Asked us on our way to potentially developing for agricultural use. This is significant given various decision to exit the consumer market through <unk>.
At least domestically sure Scott.
With roundup, the kind of leading.
Herbicide in that space, So we see demand.
<unk> solutions strong.
I think we're well positioned there.
Green plants, which we acquired as part of Agro centre in the latter part of 2017, we knew we had some strong strong.
Some strong products with which to expand.
But it has taken us a while to work that into our other areas.
Recently move product into China.
Onvia and we've got other areas.
Down in Australia, where we think we've got some strong.
Strong growth potential.
<unk>, which is a consortium.
In Belgium that we became part of.
Six seven years ago, maybe David.
And we've got really our first product that's come out of that its a bio.
Fungicide that.
Called Fintech originally developed in Europe for grapes.
We'll try this on grapes.
And but we've seen some very strong activity in almonds, and we received our registration in California recently.
There's over $1 million.
Acres of almonds in California, and we think we've got a nice fit.
For for our bio treatment.
For tanker of particular.
This means that patients all of them and we're also doing testing in bananas.
Central America that also is looking promising and we're hoping to get registrations there as well.
So I guess, what we're saying here.
It's a modest change.
Just that.
We're looking kind of moving the needle a few million dollars up in 'twenty, one on our target to which basically we're looking to double that in the next couple of years.
And then double that in the next couple of years as well so it's an aggressive aggressive growth, but given all the all the.
The products that we have and the development work, we're doing the high demand for solutions in that space.
Currently we're feeling.
Our forecast is looking good.
Shifting over to to some past.
<unk>.
Okay.
Again.
You guys have seen how this graph.
Graphic demonstrates how the system works during our last call we updated our forecast.
For Sim pass through 25 at this point that forecast remains unchanged.
What we did do since since our last call as we talked about that we were going to be reaching out to progressive retailers.
Two.
To then focus on their precision farmers.
That shift to prescription application of.
Crop inputs.
And so.
Sure.
With this we've identified.
Number of retailers that fit this we've got over a dozen retailers. So far that have entered into agreements for distribution. This impasse with us.
We expect that that number to double over the next few months and we've identified I think.
There is 2006 here, mostly in the Midwest, but also we've got the five retailers.
In the south.
So I guess one question is whats what's in it for for a retailer.
Yes.
Uh huh.
Sorry about that.
So these retail partners can can provide a grinding and prescription software capabilities needed for targeting this impasse inputs of crop protection plant nutrition and.
The soil health fertility enhancements.
With this on the ground template some past can dispense.
And deposit ingredients that will give the grower maximum yield minimum cost elevated return on investment and beneficial environmental outcomes.
Precision AG services helped build a strong bond between the grower in the retailer, creating a long term business loyalty.
Kind of one final point that I want to make as we showed this slide.
Before about about.
The attention of the ultimate.
Software data retention.
Thats part of Sim past, which allows concrete documentation through.
Through MBR.
Beneficial agricultural treatment practices as.
And as we pointed out in the emerging carbon credit market the ability to authoritatively validate such beneficial practices can facilitate securing financial compensation that could substantially offset the investment outlay and adopting technologies such as Sim pass.
So we.
We are working with USDA on sharing this technology, which they were.
Very excited about.
<unk> asked us or invited us to apply for a grant.
Which is under the agricultural innovation center for program of USDA.
We did get the grant in.
At the end of September.
This decision, making process is somewhere in that two to eight months. So we expect a decision by Q2 of 'twenty two.
But this is.
This grant that we submitted is for nitrogen reduction by using this impasse ultimate system decrease in the use of synthetic fertilizer and in its place applying soil health products.
So ultimately gives the carbon credit program, a way to verify measure and validate what the grower is doing to qualify for the credits when linked to the permanent ledger Cinches blockchain Ultimate makes an immutable record of every.
Thing that was applied to the field by volume and by location.
As I've mentioned before we know no one else in our industry that has climate friendly technology as comprehensive of some past ultimate system, particularly when used to dispense our green solutions.
So let me let me end.
These comments by letting somebody else have the last word.
This quote is from Jason or who's the owner of or farms.
Iowa and.
<unk>.
Happy to user.
<unk>.
For the last year or two with Sim pass and so is his words are the opportunities are endless I can foresee in the future dozens of Sim fast supply solutions being applied in this way. This is going to change the way we producers look at in furrow application.
So with that like to open it up to any questions you may have.
Sure.
Thank you Andy we'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.
Our first question is from Gerry Sweeney with Roth Capital Partners. Please proceed.
Good afternoon, and thank you for.
Thank you for taking my call.
Sure.
Eric.
You went through the supply chain I actually learned a little bit about the.
Unloading and loading or unloading of vessels.
The speed at which it's done.
Out of ships coming in but.
As we look forward to 2022.
Do you foresee any issues with maintaining our profitability or do you expect.
Your multiple.
King.
Relationships as well as factories et cetera to be able to manage demand and everything going forward.
Yeah again, I think the key to that is.
So far at least domestically we haven't had.
Real pushback.
Putting forward increases, but it is so dynamic that unless our our commercial team knows where their costs are and generally we have inventories. So when we know what the cost is kind of going forward or what is happening in real time, we're not we're not at the point now where we're manufacturing.
<unk>.
Just the order and in fact are our customers are placing orders.
Kind of in advance and so we are.
We're trying to trying to stay ahead of the game, but the key is to truly understand what our costs are and I think if we if we can do that.
And get that information we can discuss.
Where we need to be with our with our products. So I think if that was your question about are we going to be able to pass through increased supply.
That will be the key for that.
As far as disruption I mean, we definitely saw a disruption in our soil fumigant I mentioned.
But this is.
This is we produced about 12 million gallons, a year and so rail and trucking that through.
Through all over the United States, Mexico, Australia, Central America, Mexico, and Mexico.
It's quite a quite a logistic logistic issue and you can think about if there's 12 12 million gallons of product being produced we've got.
A similar amount of raw materials coming in and.
And we have seen disruptions in.
And trains.
And getting getting getting those raw materials and on a timely fashion potentially particularly when we get into crunch time, which we saw third quarter I think about <unk>.
70% of our volume happens probably between August and November and so it puts quite a strain and even though we've got we've got a fair amount of storage around.
The demand the demand was high.
So I don't know if that was your question and then and then as far as other other products, where we meet.
Our whole team meets.
Every month and we talk about.
And all of the issues and if there's something that comes up in between we do but we got about 2000.
29, or maybe 30 of our people somewhere in that range.
Globally on each each month to kind of walk through it.
Okay.
Yeah.
Actually.
More than my question, which is actually first because I appreciate that.
Then the other question was just on acquisitions.
Hi, I was focusing a little bit on clean solutions, you have a 100 different products that you outlined.
As you look at the playing field opportunities.
Opportunities Youre looking at is there anything that.
Youre looking at in terms of <unk>.
<unk> solutions opportunities are places that you feel as though that you would want to.
Add to that portfolio or do you still remain.
Opportunistic on opportunities across the board.
Well I think we're seeing more opportunities than we have.
Historically, I mean, the industry has been consolidating and theres a lot of shifting going on.
We.
Obviously look for bargains like what we did with the greenhouse.
We've got.
We've laid.
Lot of a lot of foundation.
To this point.
And I think I think we're now looking at it put in a number of these solutions through Sim pass.
We have our products like our soil fumigant.
Basically kind of Sterilizes of soil, we now have the opportunity to come back and introduce.
Beneficial's into the soil.
And then promotes uptake.
Various neutral nutrients so.
Yes.
Our team and Bob heads it up so I don't know if you want to comment on that Bob as far as.
Are we looking.
Opportunistically or strategically I think the answer is yes to both but go ahead, yes, hi, Jerry Hey.
Bob How're you doing.
Good good thank you yes.
Of course always.
But anyway those into.
Selling side that.
We are interested in acquisitions.
The EU would be a target as far as regionally.
Simply because of all the environmental headwinds where chemistry in Europe.
It'd be a good good place maybe to invest if the price was right.
But we're actually very much into a lot of licensing in discussions distribution agreements, because we have such a great team and footprint to market.
And a green solutions.
Then we acquired a microbial library from.
The greenhouse acquisition. So we're looking at how do we develop further but.
Last but not least I would say there we are looking for a strategic partnerships. When you combine the green solutions with with some past there are areas around the globe, where we don't have a structural footprint.
So we're.
Talking to some folks about that so there's lots there to do besides acquisitions.
I think we'll continue to take.
Advantage of those opportunities.
Okay great.
Very helpful. That's it for me I appreciate it thank you.
Sure.
Our next question is from Chris connect with loop capital markets. Please proceed.
Hi, good afternoon, thanks for taking my questions.
And focused on the Green solutions portfolio, given that it's an important growth vector for the company just curious about your confidence in that.
Those numbers that you have for $23 25.
In other words are those something.
That should be considered as guidance or projections or are those more aspirational in nature.
Okay.
Well at this point.
This is this is our best estimate of where we're going to be in.
We've.
If we think we're going to be missing at some point again, we'll make that adjustment I think.
We felt we could we can get to the to the 70 and the $1 40 based on what we currently have in our portfolio. There is no acquisitions that we're putting on top of that.
And the fact that were are up a few million dollars. We think we believe this year versus what we had originally put out just kind of brings a little more confidence that we can get there.
Okay, and just in that upside that you referenced.
What was the driver of that just out of curiosity.
So different product lines or one specifically.
No. It was it was a variety and I think we said that.
Our central American piece.
Was the strongest.
We did have we did have.
A truckload of product Green plants product go into China are greenhouse people when they looked at it and they saw us as great. An immediately went out and got got truckload order for product.
India is.
Performing well.
So I think it's a collective effort I think I may have mentioned, we had our we had our meeting with our team. The first part of <unk> 19. After we acquired the Brazilian business in and the biggest enthusiasm for the bio products was outside the United States, but United States is now.
Now picking up I mean, when you when our guys go into and to make their sales calls nowadays.
If they have mentioned anything about bio <unk> pop up because there's kind of mandates in.
Throughout most of our customers that they need to look at bio solutions in a totally different way. So I think the willingness for people to two.
To get into the space and.
Try different products that maybe haven't been tried before.
I think kind of bleeding as to why we said thats.
The second fastest growing segment in.
In crop inputs today.
Got it and.
Out of curiosity do you have a sense for what percentage of that growth that you're sort of forecasting from green solutions that you believe will come from your end bands Central Io technologies.
Right. So so we're not kind of giving a percentage I would I would say.
Obviously, we've got it.
Movement.
We're looking to get beyond the minimum royalty space.
We're not getting specific targets as to as to where thats going to be but.
But as you as you've mentioned in your in your report.
It is straight.
Straight margin as well.
But.
I think I don't think we're being.
Any way aggressive on that on that level.
Hey, Eric it's excluding the margin benefit from those royalty that you just referenced.
Do you have a sense for.
So the Green solutions bucket, if you will excluding and van.
Judy.
Those be margin accretive to the overall company or do they come currently with lower than corporate average margin again, excluding the benefit from the <unk> royalty structure.
Yes, I think across the portfolio, we're particularly since these are.
These are used.
Also well outside of the United States I think the bio products for them represent kind of the higher end if I'm if I'm correct. Bob that's correct. So the greenhouse of course for a basic manufacturer.
Green plants were also basic.
Those are very good accretive margin areas of course, we'd like to grow those.
At a higher rate.
Ed.
We also get good.
<unk> licenses.
Uh huh.
Possibilities from for those who want to market for example through surpass in future or want to market through our.
Direct to market organization in Central America Agri.
Agri Center.
So we're in a very good position to get good trading margins also.
Yes.
Again since the.
The products are not.
Not all household.
<unk>.
Tried and proven there's not and many of them are differentiated.
And so I think the.
The margins are higher because there is.
A higher degree of.
<unk> effort that goes into them as far as the <unk>.
Trials that you have to do you've got to be able to prove that they work in and with that comes.
Okay comes higher margins and so I think thats kind of I mean this is this is I won't say, it's new because it's been around for quite a while but.
It hasnt gathered strength like this until more recently.
So I think at least for now in the foreseeable future.
It's not so much you just sitting on this generic they're all the same theres a lot of uniqueness to this performance.
Sure.
As differentiator bowls.
Yeah.
Okay, and then I had a question just on the core business.
And also given your comments about supply chain mature.
Disruptive across most industrial markets. These days, but so are there just the strength of your core business in terms of sale are there any instances where you think.
That your relatively lower exposure to sourcing from China, We're giving you a domestic manufacturing or just your proactive management of the on the.
All of the challenges as led to any instances of share gains or outsized demand.
For your products or is this really just a function of a healthy AG market healthy commodity prices.
Farmers and farmers are growers feeling pretty good. Thank you.
Yeah. So I do think it's a combination of both.
I think I think.
Certainly we're seeing from our customers.
One side being.
The markets look strong we wanted to.
We want to make sure we can secure.
Secure product lines, but also.
There's a lot of products that are short right now and so.
Our customers are wanting to make sure they've got.
They've got products that that one are available.
And two can fit into a space and potentially.
Replace products that are not I would say certainly within R. R.
<unk> herbicide lines is there is there is some real shortages that are occurring and herbicides were seeing some big upticks.
And our herbicide business and these are.
Some of the more <unk>.
Which products that.
That maybe haven't had.
The resistance develop.
Or.
Products are.
<unk> besides prices are going up dramatically and some of the some of the.
Bigger herbicides, just because of lack of supply.
It opens the door for us to step in.
And take a take a much stronger role so.
Soybean prices certainly help but the.
Some of the boost that we're getting is definitely because we're replacing other other harder to get or higher price products.
So if I could just follow up on that last point Eric Thanks.
So you referenced a couple of herbicides were.
More.
<unk> got teams impact the impact plus Boston eight.
So just to be clear the strength for those products.
As you think it is a function of.
Resistance to <unk>.
Sure.
One trick pony herbicides or is it a function of just.
A surge in prices <unk> lack of availability for those sort of.
Mainstream herbicide. Thank you.
It's more of the latter.
What we're seeing.
Concerns over over getting getting products.
That will work.
And so we're we're benefiting.
The supply tightness of some of the other other herbicides.
Thank you.
As a reminder, this star one on your telephone keypad. If you would like to ask a question. We will just pause for a brief moment to see if there's any final questions.
As there are no more questions I would like to turn the conference back over to Eric for closing comments.
Okay. Thank you Sherry and thank you everyone for joining us today.
Again, its our pleasure to report on the quarter.
And we're looking we're looking positive as we go into fourth quarter and things seem teed up well for the 'twenty two season.
So.
And we'll keep you updated and.
Next call we're out a little ways until probably the first week of March.
So okay, but again, thank you for <unk>.
Joining us and have a good evening.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Yeah.
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