Q2 2022 Phibro Animal Health Corp Earnings Call

Speaker 1: Good morning, my name is Chantal and I'll be your conference operator today. At this time, I would like to welcome everyone to the FIBRO Animal Health Corporation's second quarter 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star.

Good morning, My name is shantou and I'll be your conference operator today at this time I would like to welcome everyone to the Fibro Animal Health Corporation second quarter 2022 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session if you'd like to.

Ask a question. During this time you can press star followed by the number one on your telephone keypad, if you'd like to withdraw your question.

Please press star one again, thank you.

Speaker 1: Damien Vino, CFO . You may begin your conference.

Damian video CFO you may begin your conference.

Speaker 2: Thank you, Chantel. Good morning, and welcome to the Fiber Animal Health Corporation earnings call for the quarter ended December 31st, 2021, which is the second quarter of our fiscal year 2020.

Thank you Chantelle and good morning, and welcome to the fiber of Animal Health Corporation earnings call for the quarter ended December 31, 2021, which is the second quarter of our fiscal year 2022. My name is Damien <unk> and I'm, The Chief Financial Officer, Brian Ill Health Corporation I'm joined on this call today by Jack Manheim.

Speaker 2: My name is Damian Finio and I am the Chief Financial Officer of Fibro Animal Health Corporation. I'm joined on this call today by Jack Benheim, Fibro's Chairman, President and Chief Executive Officer, and Daniel Benheim, Director and Executive Vice President of Corporate Strategy.

Fiber is chairman, President and Chief Executive Officer, and Daniel Ben I Am director and executive Vice President of corporate strategy.

Speaker 2: On today's call, we'll cover financial performance for our second quarter, as well as revised financial guidance for our fiscal year ending June 30, 2022.

On today's call will cover financial performance for our second quarter as well as the revised financial guidance for our fiscal year ending June 32022 at the conclusion of our opening remarks, we will open the lines for questions I'd like to remind you that we are providing a simultaneous webcast of this call on our website <unk> dot com.

Speaker 2: At the conclusion of our opening remarks, we will open the lines for questions.

Speaker 2: I'd like to remind you that we are providing a simultaneous webcast of this call on our website PAHC.com. Also, on the investor section of our website, you will find copies of the earnings press release and the second quarter Form 10Q filed with the SEC yesterday.

Also on the investors section of our website you will find copies of the earnings press release in the second quarter Form 10-Q filed with the SEC yesterday as well as the transcript and slides discussed and presented on this call.

Speaker 2: as well as the transcript and slides discussed and presented on this call.

Speaker 2: Our remarks today will include forward-looking statements, and actual results could differ materially from those projections.

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

Speaker 2: For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statement section in our earnings press...

List and description of certain factors that could cause results to differ I refer you to the forward looking statements section in our earnings press release.

Speaker 2: Our remarks include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles or USP

Our remarks include references to certain financial measures, which were not prepared in accordance with generally accepted accounting principles or U S. GAAP I refer you to the non-GAAP financial information section in our earnings press release for a discussion of these measures.

Speaker 2: I refer you to the non-GAAP Financial Information section in our earnings press release for discussion of these measures.

Speaker 2: Reconciliations of these non-GAAP financial measures to the most directly comparable US GAAP measures are included in the financial tables that accompany the earnings press

Reconciliations of these non-GAAP financial measures to the most directly comparable U S. GAAP measures are included in the financial tables that accompany the earnings press release.

Speaker 2: We present our results on a GAAP basis and on an adjusted basis. Our adjusted results exclude acquisition-related items, unusual, non-operational or non-recurring items including stock-based compensation and restructuring costs, other income and expenses as separately reported in the consolidated statements of operations including foreign currency gains or losses net, and lastly, income tax effects related to pretax adjustments and unusual or non-recurring income tax items.

We present, our results on a GAAP basis and on an adjusted basis. Our adjusted results exclude acquisition related items unusual nonoperational or nonrecurring items, including stock based compensation and restructuring costs.

Other income and expenses are separately reported in the consolidated statements of operations, including foreign currency gains or losses, net and lastly income tax effects related to pre tax adjustments and unusual or nonrecurring income tax items.

Speaker 2: Now let me introduce our Chairman, President, and Chief Executive Officer, Jack Benheim, to share his opening remarks, which will include his perspective on FIBRO's second quarter financial performance and revised financial guidance for our Fiscal Year 2020.

Now, let me introduce our chairman President and Chief Executive Officer, Jack Manheim to share his opening remarks, which will include his perspective on fiber, our second quarter financial performance and revised financial guidance for our fiscal year 2022.

Speaker 3: Jack, thank you, Damian, and good morning, everyone. We had a strong second quarter. In fact, we posted $233 million of net sales, the highest single quarter of sales in the company.

Thank you Damian and good morning, everyone. We had a strong second quarter in fact, we posted $233 million of net sales.

Highest single quarter of sales in the company's history.

Speaker 3: This was an 8% increase over the last quarter and a 13% increase over the same quarter prior year.

This was an 8% increase over last quarter, and a 13% increase over the same quarter prior year as.

Speaker 3: As we discussed on our last call, in light of the rising cost to do business over the course of the last few months, we have taken stronger steps to raise prices and pass through incremental freight costs. This is reflected in our...

As we discussed on our last call in light of the rising costs do basis over the course of last few months, we've taken strongest extra raised prices and pass through incremental freight costs.

This is reflected in our performance this last quarter.

Speaker 3: We're in our core animal health segment and we saw our margin improve each month over the previous month and we expect it to continue to play out positively over the balance of this video.

We're in a corner animal health segment, we saw our margin improve each month over the previous month and we expect it to continue to play out positively over the balance of our fiscal year.

Speaker 3: Notwithstanding our pricing actions, we saw continued strong demand for our products globally. And we expect this trend to also continue for the balance of this fiscal year.

Notwithstanding our pricing actions, we saw continued strong demand for our products globally and we expect this trend to also continue for the balance of this fiscal year.

Speaker 3: Our largest segment, Animal Health, posted sales growth of 11% over the same quarter prior year. Driven by continued strong growth in our vaccine product line.

Our largest segment segment animal health posted sales growth of 11% over the same quarter prior year.

Given our continued strong growth in our vaccine product line.

Speaker 3: But also 12% growth in the MFAs and other and minimum efficient seems to perform well posting a net sales increase over the prior quarter...

But also a 12% growth in the MFA and other.

In mineral nutrition continued to perform well posting a net sales increase over the prior quarter of 23%.

Speaker 3: Strong top line sales drove adjusted EBITDA of $29.1 million, reflecting a 2% improvement over the same quarter period. Black.

Strong top line sales drove adjusted EBITDA of $29 1 million.

Flagging, a 2% improvement over the same period quarter periods last year more importantly, this equates to a second quarter adjusted EBITDA margin of dropping 9%, which is at 200 basis point improvement versus last quarter.

Speaker 3: More importantly, this equates to a second quarter with just the EBITDA margin of 12.5%, which is a 200 basis point improvement versus last quarter.

And just 40 basis points shy of our fiscal year 2021, adjusted EBITDA margin of 12, 9%.

Speaker 3: and just 40 basis points shy of our fiscal year 2021 adjusted EBITDA margin of 12.9%.

Speaker 3: Given our first half performance and outlook for the meaning of the fiscal year,

Given our first half performance and outlook for the maintenance of the fiscal year.

Speaker 3: We are raising full year net sales guidance for a second time. We are now projecting net sales for the year of $890 to $920 million.

We are raising full year net sales guidance was second time, we are now projecting net sales for the year of $890 to $920 million.

Speaker 3: We are maintaining our adjusted EPRDOT guidance for $110 to $114 million and raising our guidance on adjusted net income and adjusted diluted EPS by about 5% driven by the favorable change in our projected adjusted effective tax.

We have made we are maintaining our adjusted EBITDA guidance of 114 million raising our guidance on adjusted net income and adjusted diluted EPS by about 5% driven by the favorable change in our projected adjusted effective tax rate.

Speaker 3: Lastly, I said it before and unfortunately need to say it again. COVID-19 variants remain a risk. The Omicron variant has created scheduling challenges.

Lastly, I've said, it before and unfortunately need to say it again COVID-19 borrowings remain at risk the Amazon Varian has created scheduling challenges.

Speaker 3: with a higher than normal number of employees having to quarantine.

With a higher than normal number of employees having to quarantine we've.

Speaker 3: We seem to be through the worst of it, though we remain optimistic the Bible will continue to navigate the situation successfully as we have done in the past. Now let me ask Damon to review our financial results.

We seem to be filled the worst of it.

We remain optimistic that fiber will continue to navigate the situations successfully as we've done in the past now let me ask David to review our financial results.

And we will come back to you with questions.

Speaker 2: Thanks, Jack. I'll start with consolidated financial performance on slide 4 and then cover segment level performance, key balance sheet metrics and conclude with a review of our revised financial guidance for the full fiscal year 2020.

Thanks, Jack I'll start with consolidated financial performance on Slide four and then cover segment level performance key balance sheet metrics and conclude with a review of our revised financial guidance for the full fiscal year 2022.

Speaker 2: Consolidated net sales for the quarter ended December 31st, 2021, for $232.7 million.

Consolidated net sales for the quarter ended December 31, 2021 were $232 $7 million, reflecting a $26 6 million or 13% increase over the same quarter one year ago.

Speaker 2: reflecting a 26.6 million or 13% increase over the same quarter one year ago.

Speaker 2: This increase was driven by improvements in our largest segments, animal health and mineral nutrition, offset slightly by a $0.6 million sales decline in our performance product.

This increase was driven by improvements in our largest segments animal health and mineral nutrition offset slightly by $1 6 million sales decline in our performance products segment.

Speaker 2: Gap-based net income and diluted earnings per share increased 36% and 34% respectively versus the same quarter a year ago. The net income increase was driven by stronger volumes and selling prices, partially offset by increases in raw material costs and unfavorable product mix, as well as a $4.8 million increase in foreign currency gains offset by a $2.8 million increase in income tax expense reported below operating income. For more information, please visit kvoptim Romantic.org

GAAP based net income and diluted earnings per share increased 36% and 34% respectively versus the same quarter a year ago. The net income increase was driven by stronger volumes and selling prices, partially offset by increases in raw material costs and unfavorable product mix as well as a $4 8 million increase in foreign currency.

Gains offset by a $2 $8 million increase in income tax expense reported below operating income. Although it was good to see a foreign currency gain this quarter volatility in foreign currency exchange rates continues for fibro. The impact is primarily driven by the effect of translating intercompany balances to the U S dollar for reporting purposes at the end of it.

Speaker 2: Although it was good to see a foreign currency gain this quarter, volatility in foreign currency exchange rates continues. For FIBRO, the impact is primarily driven by the effect of translating intercompany balances to the US dollar for reporting purposes at the end of a reporting period.

Reporting period.

Speaker 2: After making our standard adjustments to GAP results, including acquisition-related items, foreign currency movements, and one-offs, second quarter adjusted EBITDA improved 2% over the same quarter prior year. The adjusted EBITDA improvements were driven by higher gross profit in our animal health and mineral nutrition segments, offset by higher SG&A, and a decline in the profitability of our performance products.

After making our standard adjustments to GAAP results, including acquisition related items foreign currency movements, and one off second quarter adjusted EBITDA improved 2% over the same quarter prior year. The adjusted EBITDA improvements were driven by higher gross profit in our animal health and mineral nutrition segments offset by higher SG&A and a decline in the <unk>.

The ability of our performance products segment, adjusted net income and adjusted diluted earnings per share improved 9% driven by higher gross profit from an increase in volumes and average selling prices, partially offset by increased SG&A due to the intentional incremental spend on strategic investments.

Speaker 2: adjusted net income and adjusted diluted earnings per share improved 9%, driven by higher gross profit from an increase in volumes and average selling prices, partially offset by increased SG&A due to the intentional incremental spend on strategic investments.

Speaker 2: Moving to segment level financial performance on slide five, I'll start with second quarter financial performance for our largest segment, Animal Health, which includes three product lines, namely MFA is another, nutritional specialties and vaca...

Moving to segment level financial performance on slide five I'll start with second quarter financial performance for our largest segment animal health, which includes three product lines, namely MSA is another nutritional specialties and vaccines.

Speaker 2: Net sales of our animal health segment were $150.9 million, which represents an increase of $14.7 million or 11% versus the same quarter prior year. Within the animal health segment, we reported a $10.1 million or 12% increase in MFAs and other versus the same quarter prior year, driven by stronger demand in North and South America reflecting continued recovery from the effects of the pandemic.

Net sales of our animal health segment were $150 9 million, which represents an increase of $14 $7 million or 11% versus the same quarter. Prior year within the animal health segment, we reported a $10 1 million or 12% increase in MSA is another versus the same quarter prior year driven by stronger.

Man in North and South America, reflecting continued recovery from the effects of the pandemic processing AIDS used by producers of ethanol distillers corn oil and distillers grain products contributed $3 $5 million of the $10 $1 million increase.

Speaker 2: Processing aids used by producers of ethanol, distillers corn oil, and distillers grain products contributed $3.5 million of the $10.1 million in

We also had a $9 million or 3% growth in nutritional specialties, driven by increased selling prices and volumes as well as increased revenues of our companion animal product Rosetta.

Speaker 2: We also had a $0.9 million or 3% growth in nutritional specialties driven by increased selling prices and volumes, as well as increased revenues of our companion animal product, Regen.

Speaker 2: And lastly, a very strong $3.6 million or 20% improvement in vaccine net sales driven by increased domestic and international volume.

And lastly, a very strong $3 $6 million or 20% improvement in vaccine net sales driven by increased domestic and international volumes.

Speaker 2: In terms of profitability for the animal health segment, adjusted EBITDA was $33.7 million, a modest increase of 1% over the same quarter prior year, driven by higher gross profits and offset partially by an increase in SG&A expenses.

In terms of profitability for the animal Health segment, adjusted EBITDA was $33 $7 million, a modest increase of 1% over the same quarter prior year, driven by higher gross profits and offset partially by an increase in SG&A expenses.

Speaker 2: Moving on to second quarter financial performance for our other business segments on slide six, starting with mineral nutrition, net sales for the first quarter were $66.7 million, an increase of 12.5 million or 23% versus the same quarter prior year driven by higher average selling prices of trace minerals correlated with the movement of the underlying raw material you

Moving on our second quarter financial performance for our other business segments on slide six starting with mineral nutrition net sales for the first quarter were $66 $7 million, an increase of $12 5 million or 23% versus the same quarter prior year, driven by higher average selling prices of trace minerals correlated with the <unk>.

<unk> of the underlying raw material costs.

Speaker 2: Mineral nutrition adjusted EBITDA was $5.5 million, an increase of $1.3 million or 32%, and reflects an improvement in adjusted EBITDA margin of 60 basis points driven by increased gross profit derived from the higher average selling price.

Interim nutrition, adjusted EBITDA was $5 $5 million, an increase of $1 3 million or 32% and reflects an improvement in adjusted EBITDA margin of 60 basis points driven by increased gross profit derived from the higher average selling prices.

Speaker 2: Looking at our performance product segment, net sales of 15.1 million for the three months ended December 31, 2021, reflected a decline of 4% from the same quarter prior year as a result of lower average selling prices and lower volumes primarily related to shipping delays in copper-based products partially offset by higher sales of personal care product ingredients.

Looking at our performance products segment net sales of $15 1 million for the three months ended December 31, 2021 reflect a decline of 4% from the same quarter. Prior year as a result of lower average selling prices and lower volumes primarily related to shipping delays in copper based products, partially offset by <unk> <unk>.

Higher sales of personal care product ingredients adjusted EBITDA was $1 3 million a decrease of <unk> $9 million driven by higher raw material and production costs.

Speaker 2: adjusted EBITDA was $1.3 million, a decrease of $0.9 million, driven by higher raw material and production.

Speaker 2: Lastly, corporate adjusted EBITDA declined 2% or said differently, corporate expenses increased 2%. As I've mentioned on previous calls, this is intentional and expected as the change is driven by the incremental increase in strategic investment.

Lastly, corporate adjusted EBIT declined, 2% or said differently corporate expenses increased 2% as I've mentioned on previous calls this is intentional and expected as the changes driven by the incremental increase in strategic investments.

Speaker 2: Turning to key capitalization-related metrics on slide 7, free cash flow for the 12-month period ending December 31, 2021, comprised of $44 million of operating cash flow, less $30 million of capital expenditures, less $14 million of capital expenditures.

Turning to key capitalization related metrics on slide seven free cash flow for the 12 month period, ending December 31, 2021 comprised of $44 million of operating cash flow less $30 million of capital expenditures was $14 million, our gross leverage ratio calculated by them.

Speaker 2: Our gross leverage ratio calculated by dividing total debt of 401 million dollars by trailing 12 months adjusted EBITDA of 107 million dollars was 3.8 times at the end of the second quarter which is consistent with the end of the prior.

<unk> total debt of $401 million by trailing 12 months adjusted EBITDA of $107 million was three eight times at the end of the second quarter, which is consistent with the end of the prior quarter.

Speaker 2: In terms of liquidity, we had $235 million available at December 31, 2021. This includes cash and short-term investments of $95 million and $140 million of unused and available revolving credit. As a reminder, the accessibility of available revolving credit is subject to leverage ratio limitations outlined in the loan agreement.

In terms of liquidity, we had $235 million available at December 31, 2021. This includes cash and short term investments of $95 million and $140 million of unused and available revolving credit as a reminder, the accessibility of available revolving credit is subject to leverage ratio limitations.

<unk> outlined in the loan agreement.

Speaker 2: And lastly, consistent with the past several quarters, we paid a quarterly dividend of $0.12 per share, or $4.9 million in excise

And lastly, consistent with the past several quarters, we paid a quarterly dividend of <unk> 12 per share or $4 $9 million in aggregate.

Speaker 2: That concludes my opening remarks on the second quarter financial performance. In summary and to further reinforce what Jack stated earlier on the call, we posted strong second quarter financial performance driven by the highest sales reported in a single quarter since our inception. This is encouraging evidence of the strong demand for our products and the beginning of the positive impacts resulting from actions we've taken to adjust price and pass through incremental freight.

That concludes my opening remarks on the second quarter financial performance in summary, and to further reinforced with Jack stated earlier on the call. We posted strong second quarter financial performance driven by the highest sales reported in a single quarter. Since our inception. This is encouraging evidence of the strong demand for our products in the beginning of the positive impact.

Resulting from actions, we've taken to adjust price and pass through incremental freight costs. We anticipate further margin improvement through our fiscal year end June 30, because of these actions.

Speaker 2: We anticipate further margin improvement through our fiscal year end June 30th because of these actions.

Speaker 2: Before I close, however, I would like to share how we're thinking about the second half of our fiscal year and our second raise to full year guidance. Please turn to slide eight.

Before I close however, I would like to share how we're thinking about the second half of our fiscal year and our second raise the full year guidance. Please turn to slide eight.

Speaker 2: As I mentioned earlier, our adjusted EBITDA margin for the second quarter reflected a 200 basis point increase from the first quarter, and it was just 40 basis points shy of what we realized in fiscal year 2021. Given the top line growth, we've realized and what we project, coupled with the improvements in adjusted EBITDA margins realized and expected to continue, we are raising full year sales guidance by $30 million on both the low and high end of the range.

As I mentioned earlier, our adjusted EBITDA margin for the second quarter reflected a 200 basis point increase from the first quarter and it was just 40 basis points shy of what we realized in fiscal year 2021, given the top line growth, we realized and what we project coupled with the improvements in adjusted EBITDA margins realized and expected to continue.

We are raising full year sales guidance by $30 million on both the low and high end of the range.

Speaker 2: said another way, from our last guide of $860 to $890 million up to our revised guidance of $890 to $920 million.

Said another way from our last guide of $860 million to $890 million up to our revised guidance of $890 million to $920 million. This.

Speaker 2: This represents an increase of about 3% from our prior guidance for the full fiscal year.

This represents an increase of about 3% from our prior guidance for the full fiscal year.

Speaker 2: In terms of adjusted EBITDA, with $52 million reported in the first half, we are maintaining our adjusted EBITDA guidance of $110 to $114 million for the full year, which implies a projected adjusted EBITDA in the range of $58 to $62 million in the second half of our fiscal year 2022.

In terms of adjusted EBITDA with $52 million reported in the first half we are maintaining our adjusted EBITDA guidance of $110 million to $114 million for the full year, which implies a projected adjusted EBITDA in the range of $58 million to $62 million in the second half of our fiscal year 2022.

Speaker 2: From an adjusted EBITDA margin perspective, the $58 to $62 million of projected second half adjusted EBITDA reflects an improvement over the first half, bringing margins roughly back in line or above what the business delivered in the prior two fiscal years.

On an adjusted EBITDA margin perspective, the $58 million to $62 million of projected second half adjusted EBITDA reflects an improvement over the first half bringing margins roughly back in line or above what the business delivered in the prior two fiscal years.

Speaker 2: Lastly, we are raising guidance on adjusted net income and adjusted diluted earnings per share, given a favorable change to our projected adjusted effective tax rate, driven by a shift in jurisdictional mix of taxable earnings.

Lastly, we are raising guidance on adjusted net income and adjusted diluted earnings per share given a favorable change to our projected adjusted effective tax rate driven by a shift in jurisdictional mix of taxable earnings.

Given what I mentioned earlier about the positive impacts, resulting from actions, we've taken and our projected strong second half performance. We are confident that the current momentum of the business can deliver this revised guidance.

Speaker 2: Given what I mentioned earlier about the positive impacts resulting from actions we've taken and our projected strong second half performance, we are confident that the current momentum of the business can deliver this revised guide.

Speaker 2: So in summary, our revised fiscal year 2022 guidance is as follows.

In summary, our revised fiscal year 2022 guidance is as follows net sales of $890 million to $920 million, which is an increase from the $860 million to $890 million last communicated.

Speaker 2: Net sales of 890 million to 920 million, which is an increase from the 860 to 890 million last communicated. Adjusted EBITDA of 110 to 114 million dollars, which as I said was unchanged from previous guidance.

Adjusted EBITDA of $110 million to $114 million, which as I said was unchanged from the previous guidance.

Speaker 2: Adjusted net income of $52.8 to $56.4 million, which is an increase from the $50.7 to $53.3 million last communicated.

Adjusted net income of 52, 8% to $56 $4 million, which is an increase from the 57% to $53 $3 million last communicated.

Speaker 2: adjusted diluted earnings per share of $1.30 to $1.39, which is an increase from the $1.25 to $1.32 in our last guidance, and an adjusted effective tax rate of 26% to 27%, which is an improvement.

Adjusted diluted earnings per share of $1 30 to $1 39, which is an increase from the $1 25 to $1 32.

And our last guidance and an adjusted effective tax rate of 26% to 27%, which is an improvement.

Speaker 2: from the 29% to 31% assumed in our prior guidance for the full fiscal year.

From the 29% to 31% assumed in our prior guidance for the full fiscal year.

Speaker 2: Overall, a strong second quarter, very solid first half, and we are projecting an even stronger second half to close out the full year.

Overall, our strong second quarter very solid first half and we are projecting an even stronger second half to close out the full year.

Speaker 2: That concludes Jack and I's opening remarks. Chantelle, if you could please open the lines for...

That concludes Japanize opening remarks, Chantel, if you could please open the lines for questions.

Speaker 1: At this time I would like to remind everyone in order to ask a question press star then the number one on your telephone keypad Our first question comes from Erin Wright with Morgan Stanley . Your line is open.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Our first question comes from Erin Wright with Morgan Stanley . Your line is open.

Speaker 4: Great, thanks so much. Can you speak to the magnitude of the price increases you were able to take in the quarter and what's what's embedded in your expectations for the balance of the year and and are you seeing any pushback or what's the feedback from a customer perspective and and how is this how does the strategy or your strategy compare to your competitors out there? Thanks. Let me take the second half first Aaron.

Great. Thanks, so much.

Can you speak to the magnitude of the price increases you were able to take in the quarter in which what's embedded in your expectations for the balance of the year.

And any pushback or what's the feedback from the customer perspective.

And how does it how does the strategy or your strategy compare to your competitors out there.

Let me take the second half first Erin.

Sure.

I think I saw this morning.

Speaker 3: something that inflation was up 7%.

Something that.

Inflation was up 7%.

Speaker 3: So we're living in a time where everyone's seeing higher prices.

So we're living in a time, where everyone's paying higher prices.

Speaker 3: And so the pushback on price increases are less than would be in a normal time.

So the pushback on price increases are less than we'd be in a normal time.

Speaker 3: everyone's seeing it in wherever they're going and so we've been able to increase our prices.

Everyone seeing it wherever they are going in.

So we've been able to increase our prices.

Okay.

Speaker 3: I would say it's not over because if inflation continues and our costs go up, we will have to and we will raise prices again. But to the exact amount we're not going to talk.

I would say, it's not over because as inflation continues and our costs go up we will have to and we will raise prices again.

The exact amount.

Good to talk about.

Speaker 4: Okay, and then excluding the pricing dynamics from a volume perspective, how are trends and demand trends progressing here with like Omicron dynamics and hopefully some of that subsiding, but if you could speak to that across species groups globally and which species groups may be better positioned over the next 12 months. Thanks.

Okay, and then excluding the pricing dynamics from a volume perspective.

How are trends in demand change progressing here with like all my Prime dynamics and hopefully some of that is subsiding.

But if you could speak to that across species groups globally in which species groups, maybe better positioned over the next 12 months. Thanks.

And Greg Great question.

Speaker 3: a very great broad question. We are seeing strong demand in all species and in pretty much all markets.

We are seeing strong demand in all species and in pretty much all markets I mean, some of the market that is still.

Speaker 3: some of the markets that are still a high hit with COVID.

On slide eight with Covid.

Speaker 3: Clearly, demand has not come back as rapidly as in other markets. But in the major markets we deal with in North America, South America, as someone in the Far East, we are seeing demand increase across all.

Clearly demand has not come back as rapidly as in other markets, but in the major markets, we deal with GM in North America South America.

It's somewhere in the far east we are seeing demand increase across all species.

Speaker 4: Okay, and just one quick one if I could sneak it in. The $3.5 million benefit to the MFA category, is that something that continues here or what's embedded in expectations for the balance of the year?

Okay, and just one quick one if I could sneak in under $3 5 million benefit to the MSA category is that something that continues here, what's embedded in expectations for the balance of the year.

Hey, Erin is that typically talking about the sales for the ethanol yes, yes.

Speaker 5: Hey Erin, is that typically talking about the sales for the ethanol? Yes, yes.

Speaker 5: So, I mean, the ethanol sales are products that are sales for either the co-products that they produce or for ethanol itself using products that typically we sell to animal health. So, that's an ongoing business and that's a business that has continued to strengthen year over year and it's an international business for us and one that we continue to see bright horizons for.

The ethanol.

Sales of our products that are sales for either of the co products that they produce offer ethanol itself using products that typically we felt about animal health.

That's an ongoing business and Thats a business that has continued to strengthen year over year.

The international business for Us and one that we continue to see.

Bright horizons.

Okay alright, thank you.

Speaker 1: Again, if you would like to ask a question, press star then number one on your telephone keypad. Our next question comes from Michael Rizkin with Bank of America.

Again, if you would like to ask a question Press Star then the number one on your telephone keypad. Our next question comes from Michael Riskin with Bank of America. Your.

Your line is open.

Speaker 6: Great, thanks for taking the question. Jack, I want to ask first on some recent news we've seen in this space. The bird flu, the avian flu outbreaks in the United States. I think just yesterday it was detected in a commercial portia operation, first time in a couple of years.

Great. Thanks for taking the question.

Jack I wanted to ask first on some recent news we've seen in the space.

Bird food the avian flu outbreak in the United States.

Just yesterday it was detected in our commercial <unk> operation first time in a couple of years.

We've gotten a lot of questions on this and given you have relatively high poultry exposure I'm just wondering if you could characterize the risk.

Speaker 6: We've gotten a lot of questions on this and given you have relatively high poultry exposure, I'm just wondering if you could characterize the risk.

Speaker 6: still very early, but sort of walk us through the various scenarios and...

Honestly still very early but sort of walk us through the various scenarios and how you think that could play out over the rest of the year.

So.

Speaker 3: Avian influenza is a big risk to the poultry industry.

<unk> is a big risk to the poultry industry.

Speaker 3: So, and the response to it, I mean, how it affects us really depends on the countries. The US is, is always well-prepared for any outbreaks because we have a really good virus security. We have good protocols of what you do when you've detected it.

So and the response to it I mean, how it affects us really depends on the country. The U S is.

Always well prepared for any outbreaks because we have really good buyer security we have good protocols of what you're doing rejected it.

Like you are doing to certain cleaned out the area around it to minimize.

Speaker 3: like you do to sort of clean out the area around it to minimize what will happen. Some other countries in the world are not as good. So it is out there. It is over so far it has not had a big impact.

What will happen so many countries of the world not as good.

So it is out there it is.

So far it has not had a big impact on the business.

Okay. Okay.

Speaker 6: Okay, okay. And then follow up question on MECADOX. Last month you noted that there's going to be a public hearing with the FDA in mid-March. Obviously MECADOX has been sort of an issue for a number of years now.

And then.

Follow up question on Mecca Docs last month, you noted that there is going to be a public hearing with the FDA in mid March obviously, <unk> has been sort of an issue for a number of years now.

Speaker 6: talk about any recent dialogue with the agencies of what are your expectations what's your outlook going into the hearing

Can you talk about any recent dialogue with the agency sort of what are your expectations of whats your outlook going into the year end.

Well I think the dialogue is the fact that the agency published.

Speaker 3: Well, I think the dialogue is the fact that the agency published

Speaker 3: this public hearing, sort of focusing on areas that we're quite comfortable with, focusing on areas of looking for the safety of this product, which has been on the market, as you know, for over 40 years.

This public hearing sort of focusing on areas that were quite comfortable with and focusing on areas of.

Looking for the safety of this product, which has been on the market as you know for over 40 years.

Speaker 3: is used by over 90% of the peak producers in the United States in nurseries and is an extremely important product.

Which is used by over 90%.

The peak reduces the United States and territories.

And it's an extremely important products.

Speaker 3: The other sort of interesting thing is the use of Mecadox or Carbinox allows the producers to use a lot less antibiotics. They're important for you, men.

Sort of interesting thing.

Is the use of Mechel.

Carbon off.

That allows the producers to use a lot less antibiotics that are important for humans.

Speaker 3: So we're sort of in an interesting dynamic where there are some people in the agency who feel, hey, let's get this product off the market. It's been around for 45 years. But the agency and people in this country and the consumers has spent so much time and so much effort.

So we're sort of in an interesting dynamic where the S&P believe agency, who feel hey, let's get this product off the market has been around for 45 years, but the agency and people in this country and the consumer has spent so much time and so much effort to try to reduce the amount of.

Speaker 3: try to reduce the amount of, call it human antibiotics that are used in animals. And that's a clash. So we're appreciative of the agency sort of opening up and looking for this public hearing.

<unk> of human antibiotics are used in animal and that the clash. So we appreciate it with the agency sort of opening up and looking into this public hearing.

Hi.

But as you know we never know what.

Speaker 3: But as you know, you never know where the government goes.

We have the government goes.

Speaker 6: Okay, great. If I could squeeze in one last one, just a follow up to something Aaron just asked earlier, I want to make sure I get it right. On the price increases in the past, you've sort of been careful to call out that a lot of it is freight surcharges and therefore somewhat temporary in nature. Is it still safe to assume that assuming at some point in the future inflation normalizes a little bit that those price increases are going to be rolled back and we're going to go back to sort of a historical price?

Okay.

Great and then if I could squeeze in one last one just a follow up to something.

Aaron just asked earlier I want to make sure I get it right.

The price increases in the past you've sort of been careful to call out that a lot of it is freight surcharges and therefore somewhat temporary in nature is it still safe to assume that assuming at some point in the future inflation normalizes a little bit.

But those price increases are going to be rolled back and we're going to go back to sort of a historical pricing.

So we've been.

Speaker 3: So, you know, we've been, you know, as we said off in the past, we produce the majority of products we sell.

We said you often in the past we produce the majority of products we sell.

And we've been.

Speaker 3: And we've been sort of hit with a range of price increases.

Sort of a hit with a range of price increases.

Speaker 3: You know, everyone knows, everyone reads about the shortage of labor. We've been seeing labor price increases. We've seen raw material price increases.

Everyone knows that one reads about the shortage of labor, we have been seeing labor price increases we've seen raw material price increases.

And those are things that we pass along and that will not get rolled back. We've also seen in the <unk>.

Speaker 3: And those are things that we pass along and that will not get rolled back. We've also seen, and you read, great stories about the shortage of drivers in the United States and, you know, freight increases. So in our industry, in many industries,

Great sorry about the shortage of drivers the United States.

In our freight increases so in our industry in many industries.

Speaker 3: It's not abnormal, so she's got to go to free surgery.

It's not abnormal to see some nikola freight surcharge.

Speaker 3: Which as long as those costs are up, you easily can pass those prices on. Everyone's seen them. So yes, if prices of trucking goes back down, then yes, those prices will go back down, but our costs will go down.

As long as those cost of Ralph you easily can pass those prices on <unk> feed them. So yes, if prices of trucking goes back down then yes, those prices will go back and but our costs will go down.

Speaker 3: The main thing on a price increase is to cover your increased costs that don't go away. And we've done both.

Main thing.

Price increase if the coverage increased costs that don't go away.

And we've done we've done both.

Okay. Okay.

Great. Thanks, so much I appreciate that.

Speaker 1: There are no further questions at this time. Damian, I turn the call back over to you.

There are no further questions at this time, Damian I turn the call back over to you.

Alright, Thank you Chantelle and thank you everybody who joined today's call as always we appreciate your time attention and questions and interest in fiber of animal Health Corporation as always feel free to reach out to Jack Donnie or myself directly or via the investors section of our website should you have any further questions have a great rest of your day and please continue to stay safe.

Speaker 2: All right, thank you, Chantal, and thank you everybody who joined today's call. As always, we appreciate your time, attention, questions, and interest in Fibro Animal Health Corporation. As always, feel free to reach out to Jack, Donny, or myself directly or via the investors section of our website should you have any further questions. Have a great rest of your day and please continue to stay.

Speaker 1: This concludes today's conference call. You may now disconnect.

This concludes today's conference call you may now disconnect.

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