PAHC - Earnings call transcript Q1 2020 | Phibro Animal Health Corporation

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Phibro Animal Health Corporation’s First Quarter Financial Results Conference Call. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Richard Johnson. Please go ahead, sir.

Richard Johnson

operator. you, Thank and call, everyone the Animal Phibro Good our welcome first earnings for XXXX. quarter Health morning, to ended September

call of lines our for Bendheim, Jack results and myself Financial today questions. open Executive quarterly We’ll the the we’ll Officer. overview and Chief Richard our an provide your then Officer Johnson, On Chief are

website can So, at section Press Release earnings before that usual the Investors begin, we the Financial www.pahc.com. let be Tables as of on me our remind you found and

also on well. this replay be slides We’re website call simultaneous call, morning’s the today. of a on the later providing webcast the a will which can available also and and Today’s accessed transcript of as be website Presentation

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

list to statements the to certain could factors For description earnings forward-looking of you that Press differ, refer a cause and Release. I our section in results

U.S. also accordance remarks Accepted include section in financial in prepared references accompany will financial information or earnings our measures the were Press to discussion of comparable not certain non-GAAP to U.S. financial included these are a the that measures earnings to Release Press financial most the directly refer GAAP. Reconciliations with tables non-GAAP Our you of in today the I measures. for measures, these GAAP Generally Principles Accounting Release. which

non-recurring foreign the gains statement tax are and me everyone exclude effects and items. as adjustments we expense unusual, that to that income restructuring compensation remind of let or items, any in unusual and separately losses, present costs on numbers, operations, adjusted reported in items the lastly, adjusted an items on basis or income, nonoperational into basis. a related any such our addition results get GAAP that and and we We pretax stock-based income Before related tax acquisition non-recurring and consolidated results our present currency including other

Bendheim Jack comments. me of way, Jack. out So, with with the some let introduce that introductory

Jack Bendheim

Dick, and you who thank is on everyone joining you, us Thank the call.

XX the you so to last update be and Much call has to give this I’m morning. since our or weeks an in at happened pleased Phibro able

Our and August. to bottom-line reported as top-line previous compared we we declines the September in year, hit quarter expectations, guided largely our as

nutritional some the in key knew of of our strong loss Swine U.S. of distribution of to relatively the growth final our continuing Fever, the with and previously mentioned products We would impact to exited sales dairy business the our full agreement, excluding for that health animal due distribution to headwinds nice with overlap China agreement. was much in macroeconomic business despite core hit line, The vaccine sectors product be approximately coupled balance specialty in the with the our poultry X% African and of overcome. growth too countries, quarter the vaccine

The overall seen in have US. performance dairy, our specialties OmniGen in some growth encouraging in nutritional we our very business line the includes

dairy customers launched accelerate early us the October. our franchise set Our of table with strength doubt the OmniGen and increased steadily into the that US our nicely has has OmniGen continued benefited in the improving economics for from no quarter throughout growth This revamp to in sales and of being performance the XXXX. for the

the value revamped year. and uptake to have industry, fiscal performance this industry half product deliver ton financial a will of second high we with Our in expectations the so of dairy beginning

as available best-in-class share. it gain or have current of have poultry. sales for to strongly positive is fiscal an also important product today continues to believe Provia year the microbial, Prime DFM Prime initial our benefit will and seen direct-fed our We We Provia DFM, results

the how Biotechnics, our through Prime know that we pleased people Provia that we to the got a strong microbial the at are long-term. work numerous DFM as well both the last short on Osprey will as emerging with novel be integrating it business. our Phibro space on in the with the of in microbial Being rely As basic benefit to in I’m traditional develop was we backbone. and production opportunities, discussed technologies call, to creates Osprey really This acquisition and

begun positive, our Turning vaccine that expect enhanced of the major missed new integrators exceedingly last to worker materially we to fewer that device the lead months, as to against The our projects with to device’s we well pHi-Tech partial in with the the a self-injection. integrators two with number will device come, injection affect as the safety health with safeguard feedback USA. across has years company over better our been flock poultry have testing or recognizing injections,

meaningful the plan across our planned next producing growth part order beyond. We months. introductions the be shortly fiscal rollout poultry additional five the aggressive have will a next getting for over in with being our expect that few anticipate countries globe pHi-Tech pHi-Tech and product of year in an our commercial and We first U.S. major

Turning other to announced initiatives. our vaccine

with approximately We product continue first continue plan from June anticipate of on to XXXX. be our facility to Ireland that and facility vaccine manufacturing sales our to occur

African Fever we we’re months. vaccine the working few Swine past made on, the over on incremental Update progress

idea develop a with no coming We a play truly ASF for our I and for one the disease. up this will working of cure several vaccine are institutions preventive companies whether initiative devastating in and a role have to

the However, ago. the that of vaccine it markets belief a didn’t a is have XX of dollar whole. or digested financial most This series my health successful months industry on a the part impact have vaccine not as that is would animal opportunity exist financial fully for the multibillion

reach being our to later goods. fiscal to from tentatively, from the areas, the the customer, for determine plans tests sample anticipate are able better our Rejensa year. while small, continue best we more the the levels way most health are are product, canine joint is I in we Finally, seeing about encouraged significantly to purchase size run our several vets turning feedback typical with getting and this we the consumers. Perhaps new metro and share rates to than consumer Rejensa reception

their Phibro work, discussed, this headlines seen the in well not colleagues for the and areas I covered the the a are the headwinds, in great to the want as just is health to other of hard thank I Despite call. as progress animal initiatives is many be my at which who time in business.

any Dick, I that, answering presentation. forward With to of look the at the to have you end questions back you. may

Richard Johnson

Jack. Thanks,

our to then review So, for let the Q&A briefly me we’ll session. the just quarter results and get

were October quarter for about Fever – to results we with U.S. X% a animal that sales million was were $XXX quarter about declined the due year. vaccine Swine consolidated China the Our year. and health decline exited a consolidated last our in African the same arrangement in last sales overlap distribution versus

Nutrition Mineral to due a growth, prices revenues volume lower selling by driven but costs. saw lower material declined raw

million sales movements. income was Our net the per down almost for in expenses $XX change increased of of EPS That share expense reported and income. due reduced to diluted resulted quarter interest the $X.X million coupled with the SG&A foreign was in and decline line increased unfavorable in currency $X.XX with reported net and that current

adjusted the discuss results six. page, me on let And

In in more year. than The to selected items the sales, due accounted unfavorable product from declined discuss million, profit XX%, more Health entire for at total, $X.X or the level. in the mix. line Animal business adjusted individual sales segment prior the looking detail net gross I’ll compared at addition decline the reduced So, P&L, to and

strategic growth, driven Mineral of million by Nutrition SG&A inclusion Adjusted million contributed of development or to in the $X.X X%, operational profit year, the gross $X plus despite the prior future almost the projects position key investments acquisition our for increased over Osprey improvement revenues. ourselves results. lower in

net to to and million outstanding last $X.X year-over-year reported of was increased year, higher the All Adjusted Segments. levels. interest Animal debt increase the due Health over in Corporate

$X.XX in to Going compared EPS, all decline last it quarter $X.XX XX% was a the year, quarter-over-quarter. way was diluted down the that to adjusted

So the or looking more Net and unfavorable that was were XX%, due of Swine $XXX compared in international year. about million X% regions. other to drop China also and African sales to other some primarily million to ordering of in business. a the prior drop due Health more Fever Net sales closely customer and at Animal demand reduced million, declined $XX in detail or patterns $XX million, $X.X MFAs of

an poultry that and our our In were $X.X of with sales and Osprey dairy saw in was Specialties, Nutritional increase. million, million acquisition sales $XX.X increase product coupled drove the or net the growth lines XX%. volume We from what

$XXX,XXX last X%. of distribution group, sales was decline product we with year. loss October exclude compared $XX.X ago, that sales domestic all Vaccine the other or a the year In a vaccine of arrangement X% million were from of that increased net If

product by to investments said I the specialties developments. $XX.X decline profit to which sales we increased, driven unfavorable as in costs. declined, being $XX million a gross segment, the continued mix Gross XX%, was For the SG&A gross and contributor growth about really to SG&A lower to strategic improvement. some and make that million in product down or with adjusted by sales due drove initiatives as profit was increased volumes addition profit EBITDA decline, nutritional

net at volume $XX.X $X.X looking saw prices. quarter, average lower million sales now million X%, And declined other our growth or selling of to Nutrition, in due the segments, although Mineral

minerals Our underlying with costs. selling the directly business the raw material in movement of are correlated prices

about million, higher the gross driven business. products EBITDA that of increased almost sales driven adjusted were over year, the about prior Segment Performance in increase ingredients. sales $XX million $X the million personal volumes in in increased of $X a net care $X.X and quarter was million by profit the by

over on expenses initiatives increase as primarily increase increased due Corporate well quarter, company costs. public an was of last million $XXX,XXX of the spending were $X.X as year, in strategic that to again

at now And looking capitalization.

cash short the times Osprey acquisition million end of quarter. cash leverage quarter, in $XX and before to the We adjusted completed $XX total before and had the ratio end at of purchase at term reflected the on used we of The higher we quarter activities, for was ratio $XX million of price balance EBITDA leverage the gross million Osprey Our acquisition. X.X the the in including sheet financing quarter. investments debt the

the presentation guidance, initially our It that We like our adjusted in adjusted release, guidance financial guidance your included EBITDA, here XX, in year for have income adjusted press XXXX and net sales, XX, year the full fiscal this ending for expectations included items at net for our share. that was net guidance XXXX. income convenience. Looking we June reaffirmed per August repeated and

conclusion line remarks. for questions. you. you’d the if So please Operator, of Thank that’s open prepared the my

Operator

Your Instructions] Credit Erin question of from the [Operator first Suisse. line comes Wright from

Your line open. is

Haley Christofides

on Hi, thanks Erin question. morning. This is this for for Haley the

Brazil? U.S.? you ASF from Thank offsets you. other starting in you First I or geographies the was from characterize in And wondering, demand of impact how terms to MFA the demand or trends the current the would are in like see U.S. increased

Jack Bendheim

Thank you for that.

are I animal people the weight. seeing mean, on a and now of lots we’ve we think world, I choices of time is that animals in a – healthier said more protein could – production the shortage around affecting obviously long protein healthy get to for including and as their puts keep China to do the U.S.

stronger both with as the as So we purpose. same across demand are the seeing seeing specialties markets we’re strong demand think for nutritional MFAs, vaccines world, in well some and I the for

overall I a it’s of the out be think good in China. time protein to So business

Haley Christofides

Great, trends some characterize dairy you stabilization? bit market; seeing you thank you. could the the a across also, And little are current

Jack Bendheim

world We’ve think and declines business the U.S. of a dairy least few are have I our business in sell stabilization at So seeing minutes prices, the the the I into increasing, our slight we ago, presentation OmniGen and stopped. or other we that typically prices dairy market in seen the as across increases said

think is think I so in it’s And been a protein seeing the I – affected that. smaller U.S. hard fewer directly well and China, again, producers a by dairy milk and that’s say as we’re it it’s but lot closing to of is indirectly stabilizing.

are and growth in sector. seeing in that we States So our the stabilization some for business

Haley Christofides

Thank you Okay, much. that’s so helpful.

Operator

next Your Stanley. of line question comes Morgan David Risinger from from the

is open. Your line

David Risinger

very Thanks much.

Is at any Fever for please, to Dick. is, notable and have But higher I questions level? spreading you talk degree? first beyond China it you about African two could a quick Swine So Jack

with into bit for MFA outside Thanks Phibro the December of second, that will then the a color and touched And not? little respect so issues on that know customer whether China, to continue could ordering you you the quarter more on provide you much. or issues just

Jack Bendheim

Yes, sure. David. Hi

very, Fever of sort been has, know you some always It’s for in reported very would It’s of Korea; the it’s way that African read jumped to we’ve countries already the most hard of of, has the borders Swine it’s other world contain damage responses good of Fever, Far in well limiting prevalent that the biosecurity as the been say an part I mean in So, African Swine Vietnam. the the East using in but Fever. reported effective in world. African Swine and I South in been

Spain years in in seen Eastern but we’ve in that been ago; It’s been crisis Europe, you it’s China. the see

So so are the yes, the we far think going while seen we it’s to moving, in effect. it I has effect don’t that least China, not at had have see

think unbelievable that is Swine I China just but the effect. – and of of people China China’s didn’t amount in that pigs pigs, had in the also that raise this etcetera have fact and country So the the is and African unique, also because to the etcetera, of it’s gone want missing economic the the Fever and then has if China in consumer world world biggest biggest and pork

article; Smithfield, talking talking Journal how changed. believe There was in was about they’ve an yesterday it about I the

You has how know and their up a to smiling gone are they all China. exporting lot

think a lot I health of of U.S. companies animal for companies. for So true it’s to true be a lot it’s going and

exactly business. as on more time a question Again, get per get want of together. to possible, pound, didn’t understand many these money healthy many ways raise years, in you’re you animals you it. more you kilo, keep long a animals discussions when money over are animals them MFA there doing many as and And now getting from as our know your per – sick, when know sick I business, your you

we for them antibiotics, use pre-antibiotics; them as vaccine. some going to preventive with of we are it’s to have specialties be some be in going antibiotics, use and a going of have a it’s treatment antibiotics, Some some to nutritional

producer So animals. animals of a get your to your healthy you want to there’s the are of if and a whole want if range you keep solutions most you today,

necessarily So it’s not just MFAs.

Richard Johnson

to add we wouldn’t no, to just expect more carry on specifically David, Yes little this a David, question your forward.

this don’t quarter. our this forward described show forecasts to Our rest of the was Jack This as in carrying year. it,

David Risinger

you. thank Great,

Richard Johnson

welcome. You’re

Operator

Your G. the next line question from Kevin comes from Kedra Research. of

is line open. Your

Kevin Kedra

going? the Thanks other we see talked and for could taking how’s any you Maybe other for how first, start the excitement give your what that Can out of Prime Osprey on and insight pipeline about Provia and the questions. to things some when you the looks with like acquisition? to products us Osprey coming that

off to opportunity you’ve about we a that secondly, the to on back very something then contributor that to as these of the product And it year that see start a in an of year it’s kind trials. of good alluded Rejensa or could initial Should half we become revenue? next thinking really where starts kind in to be

Jack Bendheim

first. Rejensa take I’ll

we I we are should up. being think year contributor building Rejensa and slowly a see next

we channels trying said, trialing, product we’re best to I As are the the the to vets find discover introducing to and the vet. or get to

on this have a along and following but I seeing that with think next of be numbers some us quarter, the successes meaningful journey, this a you in product quarter and we’ll the year. we’re could fiscal will the successes, bring So sort small next

a what, to a capacity On going Osprey, early. got What ability busy their think is are I of produce. I sort bit little can with it’s We of almost tell to installing, just of we their you too doubling business. involved be

over as business sales working that out, have the is But were as production sales to about it. sort product growth, running took of very feelings of growth and of sell our they before but when well initiatives. on we can you So initiatives, both full you them we’re the got strong, sort

Kevin Kedra

thanks. Okay,

Operator

of comes from Bank of Michael question the next Your America. Ryskin from line

line Your open. is

Michael Ryskin

start touched want the where I talked of you the products for highlighted to guys. these, some on a next-generation question the – about few taking of dairy ask the on to new for industry. but you want OmniGen Thanks I

pieces this distribution lot last versus about reduction year in How the of between China talked second a are in about. contribution. agreement January and that year you moving just starting the You guide the here; the talked there’s half thinking MFA looking the fiscal meaningful we

is of is the in as often you of year, else half look mostly year? pacing products online through move the something from that coming these terms to built-in the know new or we there the coming As second you

Richard Johnson

the and know you other second are some products lot that a acceptance things. various even that our to think DFM. I be I the vaccines, We’ve product we’ve to contributor so more geographically refreshed the growth geographies, got, category half accelerating of going are new year, products good we’re got to a it MFA – Yes, in Mike, you know in you we’ve got know having and where major limit sales just got expanding the our that wouldn’t of in and traditional there’s we’ve OmniGen

half. be the second repositioned, OmniGen The will a contributor in refreshed definitely

I It’s think iPhone be it’ll but... or to ramp time. – it something products, like will all over not going like the that, next-generation

Jack Bendheim

you So to a don’t your it to hold bag we’re telling ear. and buy

Michael Ryskin

I’ll keep mind. the in that

Jack Bendheim

I it advantage definitely a of either. other it mean kids your of on won’t lot the it is, time – And will have screen

Richard Johnson

think, lot I of were this and know business changed the well, of business very years. about successful The of well. the has market dairies. often the very substantially; very smaller at dairy we the couple dairy economics this we’ve last the business dairies spoken with OmniGen small know We over we a closed has

in moved, to these The The X and to have haven’t number have stayed the of States cows United moved last steady these cows pretty needed years. cows dairies come up. have larger the disappeared. The over cows we

I now. think we know larger So up that that’s but in more be product what a needed and product, would to people done come we’ve with the dairies the these meaningful

brand this a We to market customers. in new gone have a know the We we’re from product new these farms So get like very market. and it’s concept to know small brand larger well. trying not farms. or the a taking People into

and it reformulate. a we to the do while get It tests to you So are us took took behind the university value the them giving more a background tests and while and know us. us get

the is We as to time it’s launch are comfortable XXXX. very and we said, early going be

Michael Ryskin

right that And the MFA States, shift that’s as around some Great, perhaps of broader in dairy those more helpful. and industry segment internationally than actually well. the the in lines, along to the some United

lot a to this also know product you tied the them declines volumes, mix. saw with You some margin but gross was quarter, in then of the

new of the over you these products more year out forward, be with the have going offset price to able potentially? to and to volume coming able of course you little pressure being are bit take a going As that some

Richard Johnson

the were and of for our in they for rest our see the is year from improve to Definitely, where guidance the expectations margins year QX.

prices, that It’s but product it’s not that differentiated these products. with new will come the introductions, price from about customer more your to margin think value going just taking improvement providing of product mix. and in raising out sense I

Jack Bendheim

we expect margins our Yes, to increase.

Richard Johnson

Yes, right, right.

Michael Ryskin

one last one I may. And if Great!

means? On sheet about talk the you slightly be know opportunity higher companion Osprey bolt-on and you How assets the balance of to you up from going or through the up organic debt there’s some you Could business your forward? highlighted level to an leverage the the leverage acquisition. and livestock either markets sort would lever high animal willing if to an in came

Richard Johnson

to market. assets the as they look So on and I we come are the at think market we in

and there’s very comfortable we’re opportunity at an right. can but up lever think we buy that I will high if leverage, not we

right but buy we’re just we debt at use going will the add could capacity, the So to asset debt if price. not overpay an available and we

Michael Ryskin

Great, thanks so much.

Operator

[Operator from David comes line from Securities. next the Your question of Westerberg Instructions] Guggenheim

is Your open. line

David Westerberg

the taking for questions. thanks Hi,

It’s So interesting dollar a multi-billion the market. hear to African Swine on a vaccine. question Fever

regulators of rather about sizing talk that versus So of market average getting than of terms later? of to you price the like maybe in and product that some of be think how vaccine, that vaccine you out the accommodating sooner reach kind can the a do would

Jack Bendheim

a is throwing not So, question. always I’m great as everyone that does. that out

they that are people doesn’t it in of excess gotten talking are and in the XX% mean pigs an China, African all that Fever. gone have Swine the of So

come not herd, you die very other a money if – basically to kill to happens the within then pigs cull you and raise pigs have and then you pigs and you four that X,XXX all going you, go and you have find and very, you And that if it, know spend it’s authorities If growing again. not back they will virulent XX you’re gets days. are and

more XXX So it subsequently XXX consumes grows means China has million about standing million a which and year, or pigs. approximately less pigs of herd a

math, raises million just are the XX%, advanced I XXX do So pigs The pigs. about million because that you altogether that’s the number missing. pick if rest XXX know of you world can’t

by main important. So own. to pork this solve food And be something basics. the that They pigs, on China. it’s importing cannot solved is in protein China It’s their pigs. is in every extremely just and it have It’s the

So in approach successful unusual, approach using our is we quite our coming vaccine, thing are virus this because and if as source. on the is the up with a not

we if think would very successful, I If and vaccine. are successful, our we that’s a safe big if. again, a product, it So be are

you here, is for government States and the That them. such United there many of USDA that, the the be on and a like green hurdles. was protect going you over even catastrophe cooperative, of that pigs and there No a not to very different to and cooperative, at give can light be a would or because go with this catastrophe would will in if something would animals disease through market be sort XX% if be the the it force Chinese the and than the would help something the control all

You’d do the vaccine. only to have with

and at the vaccine to come the price animal, Look you animal. was you the of an XX% killing would Historically, the control that at great. of if market you disease pricing? that the have it the So value end is people

you to much pig you is so won’t of XX% been. like take every I That’s China, so at can Now $XX, pigs $XX billion you into $XXX, $X a be the vaccinate its times that’s China, a do just go XXX $XX. had simple, current and higher that it’s in historically year. which if value than But math, pig, value million in pig the of would a

So huge a let’s everything and things market. discount all is else, these it

And a companies this for a than thing lot I it’s it’s but in of simple. and years. that’s This we as a why, science lot obviously been China. is of on It’s is companies the earlier, lot complicated, sophisticated today XXX more a said working and This is virus around are very not been.

We afraid in continue we’re to make until some much progress. up but going But I of still pig. the get I’m I know, Again, it’s the to air. ultimate the we proof it’s be, there, eating very optimistic, the is in think don’t –

David Westerberg

was color. really I really That it. appreciate great

So confident down us then year. rebounding dairy, of you. on just slightly maybe Can part we’re with portfolio? was ASF. of a what’s talking you about poultry Thank about terms feel there a How high poultry. level high talking I last your that level all on of we’re in you are give It with you maybe in can the going species?

Jack Bendheim

And be so is vaccines this you year. but markets quite new for question Far the all in we seem East have is is our introducing that U.S. and in markets, market and of and know Again, successful. that to Russia biggest we’re us quite poultry again, strong Brazil the some the

our is of within that. business in rotates. strong it stronger herds You is are some or the But herds, poultry and some out overall business

when they in we is in increase nutritional and go And product, have poultry which their strong antibiotic-free then poultry. people unusual this vaccines

successful and nutritional well. U.S. We product, we which other have acceptance and good very, markets it has it in some as a call Magni-Phi, introducing the we’re in in very now Brazil very

for about talk raising we we know I So Thank you poultry, never it. should.

David Westerberg

Thank you.

Operator

time. further this no call Johnson. questions to over I’ll at Mr. turn the are There back

Richard Johnson

you again Alright, Bye and now. thank listening our next everyone, call. we we’ll on quarterly for for talk your time and

Operator

today’s call. concludes conference This

You disconnect. may now

Phibro Animal Health (PAHC) 8 Nov 192020 Q1 Earnings call transcript