Q2 2022 Oil-Dri Corporation of America Earnings Call
Thank you for standing by and welcome to oil dry Corporation's second quarter fiscal year 2022, Investor teleconference. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer answer session I would now like to hand, the call over to Dan Jaffee Press.
<unk> and CEO . Please go ahead.
Thank you very much welcome to our first six month teleconference. With me today, Susan Kreh CFO , Molly Vandenheuvel CEO , Chris Lamson Group, Vice President of retail and wholesale Jessica Moskowitz, Vice President and general manager of our consumer products Division, Fred Cao Vice President.
Our global sales for Amylin International Dr.
Dr Wei <unk>, Vice president of our Amlin marketing and product development.
Tony Parker Assistant General Counsel, and assistant Secretary and Leslie Garber manager of Industrial Relations Leslie will you walk us through the Safe Harbor.
Thank you Dan and welcome everyone on today's call comments may contain forward looking statements regarding the company's performance in future periods actual results in those periods may materially differ.
Our press release and in our SEC filings.
A number of important risk factors trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in oil dry stack. Thank you for joining us.
Thank you and before I turn it over to Susan I, just wanted to give some 50000 foot.
So I can tell you that no one.
It has been prepared for what we're all dealing with.
Anyone literally it goes back to the 79 and 80 for inflation, but when you factor in the global pandemic of the supply chain Crunch, that's going on labor shortage and then of war I mean this is other than that how would you like to play Mrs. Lincoln.
It's very dynamic times I'm very proud of the oil dry team as I tell them, we're being graded on a curve and we are doing very well I mean, you can go to the shelves you can see our products, yes, theres, some thinning and certain product lines, but the other guys are assuming really doing worse than we are and thats really.
Exemplified by the fact that we delivered 17% organic sales growth in the quarter.
Just a fantastic job by our team obviously, we're not keeping up with the cost increases we're getting price increases, but it's like catching a falling knife at this point in time and we're just chasing a moving target. The good news is we're in a rational market and our customers understand it and.
And we're just passing through price increases lump in right and it's going to keep happening I mean, I just don't see that as inflation abating anytime soon Susan I'm going to turn it over to you for some highlights were assuming you guys have read the Q and the K so tickets reliable.
Thanks, Dan we're going to change it up a little bit this time in order to leave more time for questions. So just a couple of key highlights Dan mentioned, the continuing cost pressure, but taking a look at the results. It was an exciting quarter during the second quarter, we see the benefit of our growth strategies coming through our financials.
A particular highlight.
And all time record second quarter for Amgen, and our animal health business.
Time record second quarter for retail and wholesale and for the company as well. So so our strategies are working and Dan mentioned, we're we're chasing that.
Yes.
So a little bit about pricing and cost. So we get a lot of questions around that we do have one major customer that has a pricing reset was based on a major economic indicators it's embedded in.
In the contract and by definition Thats backward looking.
But most of our pricing tends to be backward looking where in a rational marketplace.
And our customers don't want us to use that pricing based on forward projections, but really wanted to be factually base. So we continue to chase it because the costs continue to move and an unprecedented right now our processes are better and tighter and you see us going to market much more quickly with these cost increases and in <unk>.
We've announced several here for April 1st for our domestic cat litter business and our sports product businesses and we continue to monitor these and work them into the market as quickly as we can.
That being said I wanted to switch a little bit to capital allocation.
During the quarter, we issued a 10 year note for $25 million at an interest rate an annual interest rate of three 5%. So a nice nice rate.
We have that note.
So that we make $5 million each repayments in years six through 10, one of the primary reasons. We took out this and there is multiple reasons, but is to support our growth.
You think about our repayment schedule will be scheduled down the road that gives us time to actually make investments in our plants and other initiatives, which we're pursuing and for them to become accretive before we have to start paying back. The principal. So it was a very very opportunistic, but nice placement for us.
In the near term, we are supporting our growth through inventory bills. So if you had a chance to read our 10-K you saw that we are investing more in inventory as both prices go up and as we increase our inventory levels in order to better serve our customers. During these times when there are many disruptions in the supply chain.
We're also making investments in our plants.
Normally our our plant investment our capital spending in the plants runs in that $14 million to $16 million annual run rate.
Year to date, we've spent $10 6 million. So a run rate that's a little higher and we anticipate that run rate to continue for the second half of the year as the increase in volume.
Of our sales continues to push on.
Capacity constraints and the opportunities in some of the businesses with newer products also offers us opportunities for growth.
So that's one thing.
During the quarter. We've also continued to repurchase shares of our stock the pricing is pretty favorable right now year to date, we have done that to the tune of $6 2 million and as we've said before and will continue to say as we opportunistically repurchase our shares to offset dilution.
So those are just some of the highlights then I'll hand, it back to you and we can open it up for questions. Yes. Thank you and first of all I want to thank people, who submitted questions in advance and so we have a bunch to go through but I encourage you if youre online Luckily.
Give us question.
Theres a field of Q&A field and if you submit your question in that field and then push the bit you should be able to quickly.
We will be able to see it right away great. So look I mean, we've only used up 10 minutes and so we're going to be able we've been listening and we will be able to dedicate the final 20 minutes to Q&A. So locally let's go through the questions that were submitted okay. So the first question was submitted by Ethan Star private Investor. It's really a two part question I'm going to read the first.
Question last quarter, you spoke very optimistically about the prospects for aniline International and said Youre shipping to major companies that are very sophisticated what kinds of results are your inland customers seeing and are you still optimistic that a tsunami is coming.
Ethan Thank you for your question.
Tsunami Im not sure Im going there just because.
There can be a forward looking comment, but I will tell you I couldnt be more happy with where we are at we are making a lot of progress we are putting on new accounts, we're getting traction and as we said we had a record quarter for Amlin I can tell you.
In the U S, which has been a focus the team we've put together as context from coast to coast with every major producer. Our claims work we have the IPP show down in Atlanta, We had all the major players into our booth that couldnt have been more positive and they all get it we lead with our play.
We finished with our <unk> and <unk>.
Hey.
As we say the.
Minerals.
By nature and the performance by design, we take the selectively mine mineral we process. It very carefully to do specific things and it really we believe we have the absolute best all natural non antibiotic.
Solution to the replacement of antibiotics and food production. So we're very excited about it couldnt be happier with where we're at at this point in time lets go to part two so part two is could you. Please explain analyst product strategy for the United States are you seeing orders already and how did Amazon's presence at high PBE Mega.
Different.
Some of that but I'd love Wade <unk>.
Take it head on.
Yes, Thank you Dan and thank you for that question.
As I mentioned, we just did our U S rollout at the <unk> show in January of this year, it's the world's largest show for poultry meat and animal food.
Even with the pandemic, we had over 20000 registered attendees normally it's about double that a thousand exhibitor exhibitors. So there was a great opportunity to demonstrate the Hamlin technology in to meet with our customers.
As Dan mentioned, we're already taking orders in United States. That's after the last six nine months of field trials with some of the largest integrators in the poultry industry.
We're also beginning to make sales in the dairy side in the U S as well as one so really cost species interest in our products. When you look at our strategy. It's really the same as we look around the world our products as Dan mentioned, our non antibiotic non pharmaceutical and they provide a range of benefits in animal production to improve.
The economic performance and doing that through helping to ensure good gastrointestinal tract health, helping to maintain the productivity the microbial ecology or being animal so have generalized benefits for the animal that promote optimum growth.
Product line in the U S. As a new branded product line that we're launching for sale here and it's been very well accepted by our customers.
Hey, wait great and you know what Fred I'd Love your perspective on the IPP from a sales perspective, I know the attendance was down but we felt the impact was actually equal or greater so I'd love to hear from you.
Yes, that's true Dan good morning, and thanks for question.
Yes, I mean, we have allowed us interest rate.
Calvin goes on Colgate Hollywood.
People come to golf balls.
Asking very specific questions that have specific interest in our products.
Okay.
I just believe that the interest level was so high even though customers that did not intensive joined the show. They just show up it just surprised us and we had a lot of interest not just North America.
Across the World South America, specifically have op people attending the show as well so that youre absolutely right.
The show was was not very well.
Which was very very busy for the entire time.
Great before we.
Often up to the next question I think I forgot to mention the start and I wanted to then our support of the boycott of Russia.
So just wanted to let you know that yes, we have suspended all shipments to Russia.
Not material in a grand scheme of things, we've never been done that much business, but we did and as a show of unity.
And trying to.
Help us a terrific situation in the Ukraine, we will be supporting that boycott lovely okay. Thanks.
Question comes from John Bair from ascend wealth advisors.
Your press release indicates higher sales for cat litter product line that is as much if not more unit volume increase rather than just a price increase if that is correct.
To what do you attribute the increased demand for your lightweight cat litter products, given your lower advertising spend.
Customer's highest market penetration I would think the stay at home get a cat or pet Sir just largely past that.
Yes. So this is Chris.
Take that question. Thanks, John .
So really it's about distribution. So we're growing distribution points of distribution actually in a market where you see this across categories, where retailers are really tightening up. So so total points of distribution as tracked by Nielsen or down in the category about our points of distribution are up.
As importantly, or maybe even more importantly, our points of distribution are up most with retailers that are winning okay. So retailers, where traffic is growing where theyre growing share themselves. So said differently, we're winning with with retailers that are winning.
Retail owners.
The second half of that question.
Well, we partnered with Athens questions. Okay right. So the second part is from Ethan Starr, what new business are you, adding in the cat litter area and in light of the inflationary environment to what extent do you see customers switching to lower priced brands such as cats pride of private label brands. So I think that.
So the second half of that question.
As Dan talked about to begin the call such unprecedented times.
I don't think we're prepared to say, yes, private label and value brands are going to get a huge tailwind in this market. We just don't know.
Again, if you look at the data at this point.
<unk> recent quarter would show private label and value oriented brands growing share modestly.
And then really the upper end of the market. The alternatives that are at a premium price on a per use basis or also right. So a bit of a barbell effect in the market. So we are seeing that modest growth in value.
But not to an extraordinary extent to this point.
Perfect and then just I didn't know if you wanted to add a little color to Christmas play by play a great answer, but just anything you want to.
No I think he covered it thanks okay.
Okay, great Okay great.
Next question is from John Bair. Your 10-Q references manufacturing capabilities are strained due to age of equipment availability of repair parts and may limit production capabilities to meet your product demand do you anticipate increased capex spending on new equipment. This year.
Yes. So this is Molly thanks for the question and Susan alluded to this but I really don't expect capital to increase significantly this year and partly because we've been investing in the business as required. This current year, so whether that would be.
Payers as you mentioned, but also for business growth and cost reduction.
So we'll be doing that for this last year, plus this coming year, which should keep our COO.
Capital investments relatively flat are.
Our business growth and that investment is to meet current demand, but also planned growth.
And we are seeing some inflationary pressure on parts and equipment, but we're seeing it this year. So I expect to see something similar next year.
Great. Thank you great.
The next question is also from John Bair, recognizing that avian flu has a respiratory issue rather than an intestinal issue has there been any uptick in aniline products interest due to the recent and growing number of avian flu outbreak in the United States is there any R&D focus on products to address the avian flu.
<unk>.
Yes, John Thank you for that.
So a couple of things if I could first as you appropriately indicated have been fluids. The respiratory issues. So our current product line would not be effective in treating or mitigating that condition. Our products are not absorbed by the animal and don't work systemically. So there really is no tie in or opportunity for us to benefit with AI.
In general AI has a suppress.
Suppressive effect on the market frankly really there is only the option of destroying are depopulating flocks that become infected with AI. So the net result is you do see at times the downward movement in the total number of births produced per year as poultry companies try to replace those with new hatch. So no there won't be any.
Any direct application of our products were also not a pharmaceutical company or a drug company. So we don't anticipate developing vaccines or antiviral products that would work for respiratory type diseases.
Thank you Melissa.
Okay great.
The next question is from John Bair can you speak to the progress of Amarin product sales as it relates to the U S wine market, Yeah, I mean there'll be simple.
Focusing heavily on poultry not to say, we would turn away opportunities and there may be some in other animals, but as the team we've put together in the U S as incredible.
Context reputation in poultry.
I don't know Fred you can wait my understanding it's about 40% of the opportunity is in poultry and Thats plenty big for oil dry.
To get up and running and going so we're really leaning heavily into poultry Fred any comment you have.
Yes, I would like to add something Dan yes. So.
I mean, we are progressing approaching its way out.
Sure.
But it is but at same time, we are not like we mentioned earlier, we are still doing.
Business, the other market as well.
Overlooking a slide with every market we discussed China is huge there.
As always that opportunity.
But in the U S. This question was specifically targeted to the United States.
Yes. So U S is the same light weight mission earlier do house sales in every market U S at a level of focus and poultry.
And that's a big chunk of the business opportunity for us in the coronary market sector. Since you guys at all.
I just wanted to say that we are not only focusing on Portugal.
Opportunity as well, we're trying to do.
I would say.
Targeting older policies.
<unk> primary focus.
Yeah, Okay, good well.
Thank you for the question John .
Okay. Next question is from John Bair do any of your clay deposits have associated with them, and then which might lend themselves for extraction for the EV battery market. There are several USGS Bulletin special reports that discuss lithium association and clay deposits.
So incentives question phone a friend to Dr. Mark Hooper, who has a Phd in claim mineralogy has been with us for forever.
And he answered me back Unfortunately, both our Georgia, Paul guides, and Mississippi, Illinois, calcium bentonite deposits do not contain any lithium bearing play mineral phases that would be of any conceivable economic value as they trade source of lithium metal there are some well known clay deposits in the west.
U S to contain smectite plays with a fairly high trace lithium concentration as part of their mineral structure. These are the lithium Hector rights and Seth it's located in California. However, the current technical and economic viability of such clays as a significant domestic source for this metal is very low.
Especially compared to the abundance of currently mined lithium brine salts and lithium silicate rock deposits in many parts of the world.
Great answer Mark.
He is available for parties and bar Mitzvahs, if you need entertainment.
If it goes very very non teasing you Mark you know I love hearing from you, but the Holy Cow do you know your stuff. Thank you for your answer great. Thank you.
Next question comes from Laurence Richard P. F. I have seen a product name pretty Kitty advertise lately that purports to track the health of caster changing color based on the color of the litter. After the cat litter box have you heard of this product and does oil do I have any reaction to it. So yes, we've heard a bit I'll take part of this if you guys want to jump in.
Ken we've worked on and indicate a liver for years. The problem is the cost of using that product all year round for what could be a very specific.
Time sensitive problem.
It really the cost is greater than the benefit if you look at I think it is retailing for 24 99 at Walmart you compare that to our opening Cps Jog then they both provide about the same volume of material, which I think is at 648, but Jessica you can confirm that so youre talking and it's almost <unk>.
The cost and so at the end of the year you'd be spending.
Hundreds, maybe even a thousand dollars more to try and figure out of your cat had a urinary tract infection youre better off if the cat.
As an issue taken them to the vet. So we just have never seen that it's worthwhile from a cost benefit standpoint to put those kind of indicators in a litter every single day, it's very expensive it would be like taking a health test every day, even when you feel good.
There is no point to doing it so not a fan as you can tell very expensive Jessica I don't know if you have any comments.
Yes, I can build on that I mean, I think like you.
Very much consistent with what you said, Dan as we evaluate innovation, obviously, we need to continue to look at the size of the market and the overall appeal with consumers and we always keep a false dawn.
The reason that we see but at the same time need to make sure that it's strategic for oil dry and aligns with our long term strategy of pursuing lightweight. So yeah I would just echo what Dan said and obviously continue to see these things in and market than Q2, looking for future opportunities and where we can grow and that's it.
Thank you. Our next question comes from Ethan Star how is the cat litter business in Canada doing and what are the growth opportunities in the United States are you, adding new customers for cat litter that you had not previously sold too.
So litter in Canada is doing great actually top lines slightly ahead of the really strong growth in the U S.
And it's a lightweight market, where we're the leading share brand up there.
That's lease product is gone lightweight across the board and so we're.
Very well positioned, particularly with our private label business to grow.
And we're seeing that growth today second half of the question.
As I mentioned earlier I think we've really the.
The majority of our growth in the U S.
<unk> from.
Distribution growth at existing customers that said, we have a few tests at various customers that are performing well, we're expanding distribution.
Going forward based on those tests performed well as we're optimistic about that.
Okay, Great we don't have any more questions.
Good question, and then I'll answer it.
So.
We've mentioned this before but renewable diesel starting to hit in the U S, which is another demand source for our bleaching Earth, which is great. But what is happening is demand is going to exceed supply in a hurry.
And so whether we get the renewable diesel business or just continue to support AVM and cargill on the fluids purification side.
Neither way, there's a lot of incremental demand coming in the U S for our bleaching Earth, which is great and so we're going to continue to play Moneyball like we've always done where we will we will lean into those customers.
Our long term partners, where we can make an acceptable margin and supply them with the value. They need to then purify whatever whatever fuel oil theyre purifying.
And so it's really an exciting time for Bruce Stacy in his division.
The edible oil business grows by two 3% a year, usually with with population, but now when you layer in this renewable diesel.
It's really exciting so so we're definitely looking to.
Two.
Play money ball as this thing starts to hit.
Well good well listen thank you guys I love the format I. Appreciate your questions. You can tell we have a lot of optimism for our business, we're not happy with the margins. Obviously I mean, we are chasing a moving target.
And we're going to keep doing it I would just tell you. The good news is it's a rational market, we're able to get price increases we're trying to work closely with our partners. So that they can get there if the consumer then get the retails up if there would be to be they can pass those along and so.
But it doesn't seem like it's abating, either every month I read it in every month of CPI and the PPI keep setting record levels dating back to $82 80 180. So this is this.
The first time thing in 40 years so.
These are dynamic times, but I'm very proud of the oil dry team I appreciate our long term loyal investors.
And again, we're continuing to generate cash and do well there and so.
Were a value stock with a growth potential which doesn't happen all that often but certainly we're definitely focused on the value side and protecting that dividend and then hopefully getting a big chunk of organic growth on top of it would be fantastic.
I think we will close by just saying I think we referenced it in the news release, but we did buy back shares let us to open window. The window will open again and at this stock price and at this dividend yield and the cash that we got sitting earning not a whole lot in our bank.
We'd be crazy not to be continuing our stock repurchase program. So I'm sure that we will be opportunistic there.
So thank you everybody, we'll talk to you again in three months.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
Sure.
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Thank you for standing by and welcome to oil dry Corporation's second quarter fiscal year 2022, Investor teleconference. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer answer session I would now like to hand, the call over to Dan Jaffee.
President and CEO . Please go ahead.
Thank you very much welcome to our first six month teleconference. With me today are Susan Kreh CFO , Molly Vandenheuvel, Oh, Chris Lamson Group, Vice President of retail and wholesale Jessica Moskowitz, Vice President and general manager of our consumer products Division, Fred Cao Vice President.
For our global sales for Amylin International Dr. Wade <unk>, Vice President of our Amlin marketing and product development Ah Tony Parker Assistant General Counsel, and assistant Secretary and Leslie Garber manager of Industrial Relations Leslie will you walk us through the Safe Harbor, Thank you Dan and welcome everyone.
On today's call comments may contain forward looking statements regarding the company's performance in future periods actual results in those periods may materially differ in our press release and in our SEC filings, we highlight a number of important risk factors trends and uncertainties that may affect our future performance.
Ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in oil dry dock. Thank you for joining us.
Thank you and before I turn it over to Susan I just wanted to give some 50000 foot comments I can tell you no one.
He has been prepared for what we're all dealing with.
Anyone literally it goes back to the 79 and 80 for inflation, but when you factor in the global pandemic of the supply chain Crunch Thats going on labor shortage and then of war I mean this is other than that how would you like to play Mrs. Lincoln.
It's very dynamic times I'm very proud of the oil dry team as I tell them, we're being graded on a curve and we are doing very well I mean, you can go onto the shelves you can see our products. Yes, there is some thinning and certain product lines, but the other guys are seemingly doing worse than we are and thats really exemplified by the fact.
We delivered 17% organic sales growth in the quarter.
Yeah.
A fantastic job by our team obviously, we're not keeping up with the cost increases we're getting price increases, but it's like catching a falling knife at this point in time and we're just chasing a moving target. The good news is we're in a rational market.
And our customers understand it.
And.
And we're just passing through price increases left and right and it's going to keep happening I mean, I, just don't see that as inflation abating anytime soon.
Susan I'm going to turn it over to you for some highlights were assuming you guys have read the Q and the K So take us through the island.
Thanks, Dan we're going to change it up a little bit this time in order to leave more time for questions. So just a couple of key highlights Dan mentioned, the continuing cost pressure, but <unk>.
Taking a look at the results it was an exciting quarter during the second quarter, we see the benefit of our growth strategies coming through our financials.
Particular highlight was an all time record second quarter for Amlin, our animal health business.
And an all time record second quarter for retail and wholesale and for the company as well. So so our strategies are working and Dan mentioned.
We're chasing the car.
So a little bit about pricing and costs, we get a lot of questions around that we do have one major customer that has a pricing reset was based on a major economic indicators thats embedded in in the contract and by definition Thats backward looking.
But most of our pricing tends to be backward looking where in a rational marketplace.
And our customers don't want us to use that pricing based on forward projection, but really wanted to be factually base. So we continue to chase that because the costs continue to move and an unprecedented right now our processes are better and tighter and you see us going to market much more quickly with these cost increases and in fact.
We've announced several here for April 1st for our domestic cat litter business and our sports product businesses and we continue to monitor these and work them into the market as quickly as we can.
That being said I wanted to switch a little bit to capital allocation.
During the quarter, we issued a 10 year note for $25 million.
At an interest rate an annual interest rate of three 5%, so a nice nice rate.
We have that note set so that we make $5 million each repayments in years six through 10, one of the primary reasons. We took out this and there's multiple reasons, but is to support our growth. So if you think about our repayment schedule will be scheduled down the road that gives us time to actually make investments in our plants and.
And other initiatives, which we're pursuing and for them to become accretive before we have to start paying back. The principal. So it was a very very opportunistic, but nice placement for us.
In the near term, we're supporting our growth through inventory build so if you had a chance to read our 10-K you saw that we're investing more in inventory as both prices go up and as we increase our inventory levels in order to better serve our customers. During these times when there are many disruptions in the supply chain.
We're also making investments in our plants.
Normally our our plant investment our capital spending in the plants runs in that 14% to $16 million annual run rate.
Year to date, we've spent $10 6 million. So a run rate that's a little higher and we anticipate that run rate to continue for the second half of the year as the increase in volume.
<unk> of our sales continues to push on <unk>.
Passive the constraints and the opportunities in some of the businesses with newer products also offers us opportunities for growth.
So that's one thing.
During the quarter. We've also continued to repurchase shares of our stock the pricing is pretty favorable right now a year to date, we have done that to the tune of $6 2 million and as we've said before and we will continue to say as we opportunistically repurchase our shares to offset dilution.
So those are just some of the highlights and then I'll hand, it back to you and we can open it up for questions. Yes. Thank you and first of all I want to thank people, who submitted questions in advance and so we have a bunch to go through but I encourage you if youre online Leslie how do they give us question.
Theres a field of Q&A field and if you submit your question in that field and then push the bit you should be able to quickly submit it and we'll be able to see it right away great. So look I mean, we've only used up 10 minutes and so we're going to be able we've been listening and we will be able to dedicate the final 20 minutes to Q&A.
Leslie let's go through the questions that were submitted okay. So the first question was submitted by Ethan Starr a private investor It's really a two part question I'm going to read the first question last quarter, you spoke very optimistically about the prospects for aniline International and said Youre shipping to major companies that are very sophisticated what kinds of results are your inland customers.
Seeing and are you still optimistic that a tsunami is coming.
Ethan Thank you for your question.
Tsunami Im not sure Im going there just because.
That can be a forward looking comment, but I will tell you I couldnt be more happy with where we are at we are making a lot of progress we are putting on new accounts, we're getting traction and as we said we had a record quarter for Amlin I can tell you.
In the U S, which has been a focus the team we've put together as context from coast to coast with every major producer. Our claims work we had the IPP show down in Atlanta, We had all the major players into our booth that couldnt have been more positive and they all get it we lead with our play.
We finished with our clay and I don't play.
As we say the minerals.
By nature, and then performance by design, we take the selectively mine mineral we process. It very carefully to do specific things and it really we believe we have the absolute best all natural non antibiotic.
Solution to the replacement of antibiotics and food production. So we're very excited about it couldnt be happier with where we're at at this point in time lets go to part two so part two is could you. Please explain analyst product strategy for the United States are you seeing orders already and how did Amazon presence at an IPP Mega <unk>.
Yeah, and I covered some of that but I'd love Wade <unk>.
Take it head on.
Yes, Thank you Dan and thank you for that question.
Dan mentioned, we just did our U S rollout at the <unk> show in January of this year.
The world's largest show for poultry meat and animal food.
Even with the pandemic, we had over 20000 registered attendees normally it's about double that a thousand exhibitor exhibitors. So there was a great opportunity to demonstrate the Hamlin technology and to meet with our customers as Dan mentioned, we're already taking orders in the United States. That's after the last six nine months of field trials with.
Some of the largest integrators in the poultry industry.
We're also beginning to make sales in the dairy side in the U S as well as one so really cost species interest in our products. When you look at our strategy. It's really the same as we look around the world our products as Dan mentioned, our non antibiotic non pharmaceutical and they provide a range of benefits in animal production to improve.
The economic performance and doing that through helping to ensure good gastrointestinal tract health, helping to maintain the productivity. The microbial ecology of animals. So have generalized benefits for the animal that promote optimum growth our product line in the U S. As a new branded product line that we're launching.
The for sale here and it's been very well accepted by our customers.
Great and you know what.
I'd Love your perspective on the IPP from a sales perspective, I know the attendance was down but we felt the impact was actually equal or greater so I'd love to hear from you.
Yes, that's true Dan.
And thanks for your question.
Yes, I mean, we have allowed us interest rate.
Wisconsin goes on Colgate, However, we got a lot of.
People come to golf balls.
Asking very specific questions that has specific interests on our product.
I just believe that the interest level was so high even though customers that did not intend to join the show. They just show up it just surprised us and we had a lot of interest not just north.
North America across.
Across the world.
Specifically about people attending the show as well so you're absolutely right.
<unk> was not very well.
It was very very busy for the entire time.
Great Hey, and before we open it up to the next question I think I forgot to mention at the start and I wanted to then our support of the boycott of Russia.
So just wanted to let you know that yes, we have suspended all shipments to Russia.
Not material in a grand scheme of things, we've never been done that much business, but we did and as a show of unity.
And trying to.
Help us a terrific situation in the Ukraine, we will be supporting that boycott lovely. Okay. Thanks. The next question comes from John Bair from ascend wealth advisors.
Your press release indicates higher sales for cat litter product line that is as much if not more unit volume increase rather than just a price increase if that is correct.
To what do you attribute the increased demand for your lightweight cat litter products, given your lower advertising spend new customers high market penetration I would think the stay at home get a cat or pet searches largely past us.
Yes. So this is Chris.
I'll take that question. Thanks, John .
So really it's about distribution. So we're growing distribution points of distribution actually in a market where you see this across categories, where retailers are really tightening up. So so total points of distribution as tracked by Nielsen or down in the category about our points of distribution are up.
As importantly, or maybe even more importantly, our points of distribution are up most with retailers that are winning okay. So retailers, where traffic is growing where theyre growing share themselves. So said differently, we're winning with with retailers that are winning or they were in the game retailers.
Sure.
The second half of that question.
When we partner with <unk> question, Okay right. So the second part is from Ethan Starr, what new business are you, adding in the cat litter area and in light of the inflationary environment to what extent do you see customers switching to lower priced brands, such as cats pride of private label brands.
I think the.
To the second half of that question.
As Dan talked about to begin the call such unprecedented times.
I don't think we're prepared to say, yes, private label and value brands are going to get a huge tailwind in this market. We just don't know.
Again, if you look at the data at this point.
Recent quarter would show private label and value oriented brands growing share modestly.
And then really the upper end of the market. The alternatives that are at a premium price on a per use basis or also right. So a bit of a barbell effect in the market. So we are seeing that modest growth in value, but not to an extraordinary extent at this point.
Perfect and then just I didn't know if you wanted to add a little color to Christmas play by play a great answer, but just got it anything you want to.
No I think he covered it thanks okay.
Okay, great Okay great.
Next question is from John Bair. Your 10-Q references manufacturing capabilities are strained due to age of equipment availability of repair parts and may limit production capabilities to meet your product demand do you anticipate increased capex spending on new equipment. This year.
Yes. So this is molly thanks for the question and Susan alluded to this but but I really don't expect capital to increase significantly this year and partly because we've been investing in the business as required. This current year, so whether that'd be rich.
Repairs as you mentioned, but also for business growth and cost reduction.
So we'll be doing that for this last year, plus this coming year, which should keep our cash.
Capital investments relatively flat are.
Our business growth and that investment is to meet current demand, but also planned growth.
And we are seeing some inflationary pressures on parts and equipment, but we're seeing it this year. So I expect to see something similar next year.
Great. Thank you great.
The next question is also from John Bair, recognizing that avian flu has a respiratory issue rather than an intestinal issue has there been any uptick in aniline products interest due to the recent and growing number of avian flu outbreak in the United States is there any R&D focus on products to address the avian flu.
<unk>.
Yes, John Thank you for that.
So a couple of things if I could first as you appropriately indicated had been so it is a respiratory issues. So our current product line would not be effective in treating or mitigating that condition. Our products are not absorbed by the animal and don't work systemically. So there really is no tie in or opportunity for us to benefit with AI.
In general AI has a suppress.
Suppressive effect on the market frankly really there is only the option of destroying are depopulating flocks that become infected with AI. So the net result is you do see at times the downward movement in the total number of birds produced per year as poultry companies try to replace those with new hatch. So no there won't be any.
Any direct application of our products were also not a pharmaceutical company or a drug company. So we don't anticipate developing vaccines or antiviral products that would work for respiratory type diseases.
Thank you Melissa.
Okay great.
The next question is from John Bair can you speak to the progress of Amarin product sales as it relates to the U S wine market, Yeah, I mean there'll be simple.
Focusing heavily on poultry not to say, we would turn away opportunities and there may be some in other animals, but as the team we've put together in the U S as incredible.
Context reputation in poultry.
I don't know Fred you can wait my understanding it's about 40% of the opportunity is in poultry and Thats plenty big for oil dry to get up and running and going so we're really leaning heavily into poultry Fred any comment you have.
Yes, I would like to add something Dan yes. So.
We also progressing approaching <unk>.
Our operator, but it is but at same time, we are not like we mentioned earlier, we are still doing.
The other market as well.
Overlooking a slide on that every market, we discuss China.
There.
It's always opportunity but.
But in the U S. This question was specifically targeted to the United States.
Yes. So U S is the same light weight mentioned earlier, we do house the wholesales in the slide every market USA.
Our focus in poultry.
And that's a big chunk of the business opportunity for us in the poultry market sectors in the U S at all.
I just wanted to say that we are not only focusing on Paul Jay now that you've got the opportunity as well we are trying to do.
I would say the theory that targeting <unk>.
<unk> primary focus.
Okay, good well thank.
Thank you for the question John .
Okay. Next question is from John Bair do any of your clay deposits have associated lithium and language might lend themselves for extraction for the EV battery market. There are several U S. G. S Bulletin special reports that discuss lithium association and clay deposits.
Census question phone a friend to Dr. Mark Hooper, who has a Phd in claim mineralogy has been with us for forever.
He answered me back Unfortunately, both our Georgia, Paul guides, and Mississippi, Illinois, calcium bentonite deposits do not contain any lithium bearing play mineral phases that would be of any conceivable economic value as a trade source of lithium metal there are some well known clay deposits in the west.
U S to contain smectite clays with a fairly high trace lithium concentration as part of their mineral structure. These are the lithium Hector rights and Seth it's located in California. However, the current technical and economic viability of such clays as a significant domestic source for this metal is very low.
Especially compared to the abundance of currently mined lithium brine salts and lithium silicate rock deposits in many parts of the world.
Great answer Mark.
He is available for parties and bar Mitzvahs, if you need entertainment.
If it does is very very no I'm teasing you Mark you know I love hearing from you, but the Holy cow the <unk> stuff. Thank you for your answer.
Thank you.
Next question comes from Laurence Richard TFS, I have been a product named pretty Katie advertise lately that purports to track the health of caster changing color based on the color of the litter. After the cat litter box have you heard of this product and does oil do I have any reaction to it. So yes, we have heard of it I'll take part of this if you guys want to jump in.
Ken we've worked on an indicator of liver for years. The problem is the cost of using that product all year round for what could be a very specific.
Time sensitive problem.
It really the cause is greater than the benefit if you look at I think it is retailing for 24 99 at Walmart you compare that to our opening Cps Jog then they both provide about the same volume of material, which I think is at 648, but Jessica you can confirm that so youre talking and it's almost <unk>.
On the cost and so at the end of the year you'd be spending.
Hundreds, maybe even a thousand dollars more to try and figure out of your cat had a urinary tract infection youre better off if the cat.
As an issue take them to the vet. So we just have never seen that it's worthwhile from a cost benefit standpoint to put those kind of indicators in a litter every single day, it's very expensive it would be like taking a health test every day, even when you feel good.
There is no point to doing it so not a fan as you can tell very expensive Jessica do you have any comments.
Yes, I can build on that I mean, I think very much consistent with what you said, Dan as we evaluate innovation, obviously, we need to continue to look at the size of the market and the overall appeal with consumers and we always keep a false on innovation that we see but at the same time need to make sure that it's strategic for oil dry and aligned with our.
Long term strategy of pursuing lightweight so yeah, I would just echo what Dan said and obviously continue to see these things in and market. Then Q&A, you look and see for future opportunities and where we can grow and that's it.
Thank you great. Our next question comes from Ethan Star how is the cat litter business in Canada doing and what are the growth opportunities in the United States are you, adding new customers for cat litter that you had not previously sold too.
So litter in Canada is doing great actually top line slightly ahead of the really strong growth in the U S.
And at the highway market, where we're the leading share brand up there.
That lease product is gone lightweight across the board and to work very well.
Position, particularly with our private label business to grow.
And we're seeing that growth today second half of the question.
As I mentioned earlier I think we've really the.
The majority of our growth in the U S.
From dish.
Distribution growth at existing customers that said, we have a few tests at various customers that are performing well, we're expanding distribution.
Going forward based on those tests performed well as we're optimistic about that.
Okay, Great we don't have any more questions.
Ask your question and then I'll answer it.
So.
We've mentioned this before but renewable diesel starting to hit in the U S, which is another demand source for our bleaching Earth, which is great. But what is happening is demand is going to exceed supply in a hurry.
And so whether we get the renewable diesel business or just continue to support AVM and cargill on the fluids purification side.
Either way there is a lot of incremental demand coming in the U S for our bleaching Earth, which is great and so we're going to continue to play money ball like we've always done where we will we will lean into those customers.
Our long term partners, where we can make an acceptable margin and supply them with the value. They need to then purified whatever whatever fuel oil purifying.
And so it's really an exciting time for Bruce Stacy in his division.
The edible oil business grows by two 3% a year, usually with par with population, but now when you layer in this renewable diesel.
It's really exciting so so we're definitely looking to.
Two.
Play Moneyball as this thing starts to hit.
Well good well listen thank you guys I love the format I. Appreciate your questions. You can tell we have a lot of optimism for our business, we're not happy with the margins, obviously I mean, we're chasing a moving target.
And we're going to keep doing it I would just tell you. The good news is it's a rational market, we're able to get price increases we're trying to work closely with our partners. So that they can get there if that.
<unk> they can get the retails up if there would be to be they can pass those along and.
So.
But it doesn't seem like it's abating, either every month I read it and every month, the CPI and the PPI keep setting record levels dating back to $82 80 180. So this is the first time thing in 40 years. So.
These are dynamic times, but I'm very proud of the oil dry team I appreciate our long term loyal investors.
And again, we're continuing to generate cash and do well there and so.
Were a value stock with a growth potential which doesn't happen all that often but certainly we're definitely focused on the value side and protecting that dividend and then hopefully getting a big chunk of organic growth on top of it would be fantastic.
I think we will close by just saying I think we referenced it in the news release, but we did buy back shares let us to open window. The window will open again and at this stock price and at this dividend yield and the cash that we got sitting earning not a whole lot in our bank.
We'd be crazy not to be continuing our stock repurchase program. So I'm sure that we will be.
Opportunistic there. So thank you everybody, we'll talk to you again in three months.
This concludes today's conference call. Thank you for participating you may now disconnect.