PAHC - Earnings call transcript Q2 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 Q2 2020 Conference Call [Operator Instructions].

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

Richard Johnson

Thank you, operator. everyone. morning, Good the second to Health call earnings And ended Phibro December our quarter XXXX. for welcome Animal

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

section and can be found Before we you remind www.pahc.com. Tables me Web that the at the Financial Investors of begin, let earnings our site Press Release on

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

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

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

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

of income operations, We plus our Before any including unusual, we currency basis. effects get example results expense acquisition unusual a compensation I the stock-based adjusted related on adjustment results separately present to and basis in gains or income restructuring consolidated and or everyone foreign numbers, reported income, for GAAP on items. non-recurring nonoperational costs. we statement we into tax items, the tax related adjusted including pretax present the and that losses, that Other non-recurring and an remind items, exclude

with comments. some first, Jack So introductory is Bendheim here

Jack Bendheim

specialties to and that segment Core you, Thank today. Animal I'm in you MFA pleased us returned growth versus year, timing. everyone by other notwithstanding, growth double-digit quarter. as I while X% issue grew Time quarter, was and down performance driven joining of this the quite into our is thank product nutritional Dick last our the expected past Health for think

our segment for growth expect the to Animal of continue fiscal to year. I Health show this remainder

two improvement launch in strong Just of seeing international examples, are very take for OmniGen demand to in poultry we generation market. product next the dairy and of our look the imminent our advantage vaccines regions many

ahead. position turnaround have guided, the for a company years growth results. initiatives as we undertaking are ourselves we by As The our look we sales strategic producing to increasing as are

at Show integrated from presented can trial. two that our show. Just innovations at Atlanta, one Annual say examples, of pHi-Tech just world is of from I the I Poultry the major without Trade the around an in APP device returned exaggeration the vaccinations We've signing and the the

have we customers. trials a initial wells have signed months few ago, exceedingly began our first have Our already up gone and

that market additional to one poultry our beginning are very pHi-Tech enhance year. and and Asia. fiscal I'm producers clear countries pHi-Tech more understand in in to we Perhaps important, EBITDA America our as is introduced leaders of revenue that will Phibro critical confident health rollout the was is This our vaccine animal begun meaningfully South even that it technology. next in to have

into we progress pet am I foray similarly U.S. Rejensa, are our the first the market. encouraged with making by

rolling we begun have out in today than are and We clinics. Rejensa XXX more nation-wide

limit allowing are our us are expenses working we this We which distribution partner, to enter fixed as with extremely competitive our closely market.

to here. media see We and our continued I'm feedback directly enhancement are indirectly and social tremendous both receiving excited through

virus remains but headway To-date, coronavirus efforts this not the if the fever. for ahead. affected Finally, swine outbreak African on has unchecked we the vaccine months our continue make our to could against change

share We likely no will but With your update assuming results coronavirus. have delay questions expect our candidate to that, to will I significant due the agent on the some later spring this have project, on candidate forward not on And suddenly of this this to year. now initial later provide page trial it look this back to next I initial at presentation. the hand to to Dick. expect I conclusion quarter

Richard Johnson

versus lower at and Thanks, for Jack products. by driven $XXX [Technical average the of nutrition Difficulty] segment Consolidated sales and quarter X health in later segment animal X% presentation. sales offset presentation. a lower vaccine MFAs quarter were and further that by specialties year. of prices the a animal Increased performance last health selling were million than and get sales offset quarter, We'll volume decline Page by slightly I'm the looking partially same was The regarding in our details the results nutritional was increase into others. and the in decreased minerals sales more products,

of product year. by million outstanding, EPS share offset including million $X.X due current quarter investments, the per per $X.XX expenses, On debt expense $XX.X improved below per for to share that cents and by costs partially earnings same strategic quarter income $X.XX operating increased On driven increased for mix. an was gross profit, the well was as last diluted as share higher increased a net of level declined reported interest basis, from basis,

raw detail declined level. Animal as and page. partially prices nutrition on MFAs and profit and mix So dollars now specialties more mix. a as increased adjusted let's gross favorable offset to in Overall, lower decreased nutritional following million individual gross compared And in I'll product almost offset in average costs. change product segment the sales I said, by products, profit reduced and Net unfavorable volumes, than by material look more growth performance to offset profit Mineral decreased selling prior others. reduced $X volumes partially due million. was overall, X% at in vaccines volume the about gross the or health sales, adjusted year. net results at discuss the

and and million or increased future $X.X administrative, of of selling, by in we position XX%, Osprey the Operating effects growth recent or refer spending to expenses them key addition, development business. driven in strategic as investments the overall acquisition ourselves SG&A, on to as general the for projects

Our debt increased level adjusted effective tax an income for current $XXX,XXX from was XX% XX% our adjusted higher expense rate and compared quarter quarter-over-quarter net the last interest perspective, on year. tax about as to

$XXX did the Looking $X Increased sales the was net or customers X% China changes current of end to effects XXXX. by U. some the effective other due animal swine the at in fever. year. closely at million more the the make or and in purchases demand advance health almost became sales that of lower China in declined of African business, X%. In offset $X compared quarter of to increased MFAs million S. about prior than more XX, quarter, volumes million our January regulatory

the of In in for million acquisition $X.X The XX%. million an sales two the that nutritional approximately accounted increase category. were specialties or recent thirds area, in quarter, $XX growth net sales Osprey the of

We immunity productivity. the driven the our direct fed also gut timing a was of was the a health, U. dairy businesses, and volume in new organic product international optimize Provia S. in The for which poultry and partially increase the certain Prime, improved poultry markets. domestic helps in microbial microbiome that of segment in growth poultry product introduction experienced by sales offset by

from market demand sales year, last Vaccine of or million $XX.X increased and strong $X.X increased net XX% by driven international penetration. million

growth gross For sales primarily The segment, $X a initiatives the EBITDA strategic SG&A and profit. growth and by adjusted X%, costs, of million increased in the was about was the decrease to increased and million that Osprey the SG&A $XX.X of also was acquisition. or to effect offset the increase due due partially investment

And in on quarter related the $X.X that the mineral average net prices million top line a XX%. decline lower decline underlying fundamentally nutrition material was now were due looking segments, $XX.X movement other of to selling costs. with correlated at million as raw or The and our to was the sales of

We lower last with this also compared saw slightly volumes year. year

decline From sorry. in perspective, the gross a -- profit

last at personal ingredients about products. care the sales mineral the addition, declines year. reported copper were slightly of compared year. Again, or with last that overall nutrition in of $XX.X due million, to increased $XXX,XXX. that cost a was from strategic in $XX.X Segment EBITDA EBITDA costs. net for XX%. quarter products some by Performance Corporate partial a based declined was primarily $XXX,XXX products public line, $X.X $XXX,XXX increased of million declined saw volume $X.X bottom the investment company decline We over -- offset decreased million million So to expenses growth same continued in adjusted of and in initiatives increase

of million quarter term gross trailing million at EBITDA. debt our end. hand at the $XXX million debt of Looking investments XX times was adjusted ratio X.X on the total and to of at short with of a had on We sheet December balance basis, cash on end months EBITDA $XXX of capitalization, our $XX leverage adjusted

So leverage and short strong a on cash changes of had flow times. the that We cash under the a us X net a million excluding quarter. source leverage before in net generated of term month in gave basis, $XX We quarter financing just investments. in

adjusted unchanged $XXX at And our major the EBITDA we that changes full to updated At we not level key guidance. our the guidance year. to $XXX year, EBITDA of fiscal for our really full for line, million just kept million

related mineral pricing sales level, underlying the to the overall the raw costs. consolidated sales On correlated net net nutrition primarily we lower down was business brought expectations, which reflecting material in

the We range also on our Health segment. tightened Animal

but expectations. to adjusted decline prior earnings now year, share previous we earnings $X.XX year, an share the $X.XX an On expect per from improvement our from per a the full basis, for

now improved than related for the guided improvement earnings projected have per so interest is We to expectations had is less expense all and really share our to, originally -- expense. in interest we

end the prepared that's that, remarks. with my And of

So operator, please. if questions, you up it for would open

Operator

[Operator you Instructions]. Thank

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

Your line is open.

David Risinger

couple a questions. have of I

of you're us generation. be you First, marketplace help competitors are? to in? Who maybe this much helpful, key launching that next OmniGen OmniGen for competitive at understand Jack, if could is just How the be an competes inflection that going better it'd the to

And for Dick, growth excluding sense ex-China comment also, the quarter a Thanks China, the growth be and have MFA better you So outlook could so helpful. going very prospects that would on in very the you the could then, growth for if forward. MFA much. we comment ex-China please on if

Jack Bendheim

where has dairies, the most So were our States very cows years. in but I extremely that United product last of years of customers successful an smaller OmniGen dramatically the was talked these ago, dairies say predominant we've which XX very, or in less, think XX shifted XXX dairies as was past, in

of smaller cows. same larger diaries. to But So as it count dairy diaries it’s in is X.X from United XX about been years total States amount ago, about the million the shifted

an was successful with we successful man where very do OmniGen, to product the a So on dairy product needed It is it smaller these out. something because got dairies.

And and with see which health. physically the the so to and of saw able immune was animal, had immune of a strength health OmniGen, basically results do to the lot

some So the components XX,XXX more we head production, of it, when important product of re-manufactured which add that head a on United reformulated have content and amount other these goes now and bit you becomes more to and live, States some there’s blending milk to -- on really X,XXX XX,XXX.

the is relatively So taking new product for markets. us to it

are the same what's their bigger knew producers they dairies, needs ran we of now XXX slightly was we on with going Some when the to saw dairies different.

and it going with added and function, know works well is this now the to product which help, as they we're milk increase introducing new production. So

There's open field, level, no States wide there have is history. simple so end a competition. good of we United every competition always it's so in So

a We this we confident the very are grow to grow sales segment. we're great team business and and have going

Richard Johnson

year. number. X% over call did We expecting a the we reiterate, year if basis, it quarter question second On in are China full the sort the breakeven growth be ex second we around, MFAs MFAs a about ex other see around overall somewhere million numbers slightly probably saw to down growth. we MFA your of or X% in to a to effect, range positive just MSAs I'll China David to dollars saw we and year

of effect year. China not for of We much the VM if will any really all continue having the to overlap sales

Operator

from comes question next of Credit from Erin Your Suisse. the line Wright

Your line is open.

Erin Wright

of up A changes? docking related was that's to what China. How you can in terms on terms follow ahead dynamic big that regulatory of purchasing all just the in And the there of be to a in in next any pullback stocks? helpful. these of Thanks. guess the you would period here and dynamic color of purchasing I give terms can be in kind that anticipate describe

Jack Bendheim

sort of had China business As to this didn’t forecasted, do we we year. fiscal in expect any

registration them have which Our customers a been was old registration. distributors, to China two, map in done mode with the growth expected for as in The change we've sell markets last we've them add and old we our growth really to claim and registration been world in inventory, registration we therapeutic most from and to a successful. the many years, three mode years,

Part just aren't a was pigs was me, obviously, with give there. swine problem also your fever in and to the bear pigs was testing. to the but anybody or of aren’t us well, declining government me the answer it's around – so the so question not there African little pigs But China the move allowing with market long for

we on So slow therapeutic ability need and farms either our to go the to claim to for test would down. and show

So forward that's therapeutic going really a on where we claim. want

pigs, fever, swine felt grow make more it money price loss. though had XX% can the China to even some meanwhile, even going only you pigs pays the in But still a than pays XX%, die that the cover enough high to because so yield, than people were to with that but rather you rose

So their on of had they made know have saw and material end they enough they the year our the by they wrong felt six before to were of XXXX, a Chinese first customers big they get through calculation increase there months the to with and regulations. get had to inventory

done. a was It spur. a couple and of huge dollars not So was that bump, It that's a was million bump. a

Erin Wright

And if markets curious you that’d can around U.S. industry if Thanks. today species just us on U.S. then poultry, us give groups here be as give yes, in I'd an particular, markets? But stabilization the swine dairy really across color be guess update market and the we the I across you dairy stand could some you're well. where on in seeing great. at

Jack Bendheim

seeing stabilization our least hear we I are market. It the depends where feedback at from we think are in what generally, you customers.

and of think for will pressure, you're XXX, so likely And under are think the is China most making sorts you're out of larger world levels. and you out they for these looking I that protein. directly, it affects dairies, the somehow business. cows, you're a producers still money trouble of with the farm be I the if all because part of again, at there XXX in any all big protein is indirectly But around of

Operator

next the comes from of Barclays. Your question from Prasad line Balaji

line Your open. is

Balaji Prasad

of I So on coming had questions the on a to subject there. back had, couple ASF, I

by your target which into have may exports you pork that Firstly report that understand, the to XXX export you course what from based and the the perspective. I'd Phibro's from second gene at The was the the is various on IEU hear question working the to here? some timelines from on changes wanted the, XX%. you prospect, from this of to of growth? global of be see of And development ASF I markets compares love recent understand underway as also restoration the have mentioned Health how development Animal a years specifically or would any progress that secondly, re-herding specifically can you you currently seen of make your USDA, a thoughts able have increased perspective? the including able how ongoing, commercial your to on? comment recovery more. my would play And vaccines. on you Thank are and that programs to vaccine sell difference net targeting help to the a Does me USDA timeline you. epitope Can

Jack Bendheim

of talk proteins protein effect versus So and know African sort swine fever about let's just China. of overall the quality first you in dynamics of

vaccine African played sort mean that here of and So seen now, It out is effect the we've as we in as control is right swine no sit slowly. of I it there it fever have die, XX% doesn't got of they virus That necessarily pigs pigs have XX%, die. they virus, put gone missing. maybe the see of even and mean people down, get to excess the up pigs will they

going not market. the to pay pigs So I'm It overall. on new put doesn't

over to huge that the affected world in every a there all So looking sorts they're protein, market. has of China shortage of protein protein all out new buy from and

pig customers world, are the yes, around customers into seeing chicken our better. proteins fish, cattle those again, protein all all protein, we protein, So protein specifically, raising doing sales are but yes

Now U. get into But will it’s S., but that little is on I the in the tariffs bit continuation want of not better. business around I ex, clear, the get don't the a of it's the because trade and to it think clear. world, business our the getting

make answer will at some come grow will of think million million second will be be you prices is up could the currently good happily but able to there pigs, there'll no. that loss slow a be to all point time a the don't stop Chinese there growing where in the pig vaccine will be ASF I at if more question, will Can will that or take and for I only to XXX of, ever, the pigs producing some a be world It prices, at the XXX is somewhere that able point know, and developed raising your where meeting meat long the where again it economic where world in the to middle. meat be control decent price, pigs

virus on taken the are approach we our proteins what working an Island, than We've working we're what vaccine. that to attenuate USDA coming of virus. we mostly the see with and out and Home a approach we're found taken different in see not the We've

say don't but and to a you and indications, it to we're it to that some we work. think works. this know extent that work mean positive want of So going don't lot listen I our we're is if doing yet I'll saying to again, often anyone vaccine are there

in better spring, a different have but indication approach. a remarks will we and do said to as earlier late it's work by have my We I

basically this Island, The diseases it the virus looks was of is sort virus not the swine virus And the and the successful. immune were the is start plum They a could like fewer. you there on of pigs USDA to vaccinate now make making be you virus, with effective. a do African softer, starts an it update is the what it. the unable you system against they vaccines own that very whatever acting protect in pig to can attenuate initial work have will So candidate out

time So live making that’s so XXX% business are of are successful we great, people we're in have the long that protein I and think sure behind that. and

approach since injecting, vaccinating to there safer is that Our get be virus than absolutely the approach approach safer say attenuates we're and to with the a some faster it virus. markets approach which not and different logic might is our might than the

remember, So China, were huge be. in market. different that's will a there it’s XXX and everyone million again approach pigs a Hopefully

Operator

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

Your is line open.

Michael Ryskin

to couple of up a want follow I things. on

think comments, guide. people that sort line I of walk the top about implications, you million did of on nutrition talked you dig mineral flows also Animal XX for looks XXX. guidance know, can I of commodity trim how in first the through of sort from high you from lot all the about from like, come but you market the did underlying the prices, end that to see update of and by through up XXX Health a the guide revenue It the most

for by about if prior Osprey, because to math it and million. had, the I By I'm with for my with the think Osprey So contribution notes vaccines is $XX specifically had curious only million my specialties year. do that more I $X.X in was quarter, anything nutritional about

that that as where's Osprey as where is, the the or in, coming much so of is thought is numbers? question in is is first quite you And contributing not delta that sort

Richard Johnson

sense, make know, You is Dick. numbers Mike? This all your

that lot year. nutritional variety outside in order our we've you the patterns the factors. those trimmed some may are of their have well. vaccine talked seeing growth just be for and are product we Animal specialties terms we a talked We've about a top we're about expectations Health own. in to products strongest China think I customer dairy. think I later in where in going themselves end are into But specialties. say, would holding doing Yes, know, of then nutritional area expectations, see. you continue Osprey all those the reverse are know, of followed number And poultry I by going to We'll really MFAs otherwise of the

I the that you So little know, not more guidance But a you think sales to you know, modification a huge gives color. overall.

Michael Ryskin

talked the is animal up as SG&A the companion year or well product, similar consistently for follow then sort investment The a you in ASF investment and including I the Delta year And of line of XXXX, you vaccine. know P&L. R&D, lot both the force on sales the on that an R&D about mean, in fiscal

pretty You the SG&A guidance X still trim XX meaningfully to by million.

is that R&D coming spend of flexible sales sort because Just lowered there mineral or expectations is that the take can line. where you is curious out of on extra force nutrition, spend from,

get a to comes better trying Just sense the of in Delta where there.

Richard Johnson

think I places. in comes trimming the two

of necessarily these factors investments driven the can't we timing spend that are, strategic of the timing. lot Some exactly by a the control is of

is, initiatives the of strategic been out business some than it’s initially This also specifically the segment. our longer extended base these is a expenses, spend the we around really fanned is the spend not reduced We've of maybe bulk on expected. for minerals. expectation they'll these operating So animal it’s just little has

really when about you're spending, about in changes health fundamentally you're so in talking talking the animal business. And changes

Michael Ryskin

and how of Can how next focus years? of of moving OmniGen of one in a would I ASF direction sort continued of progression see animal, attention, sort about along lines companion expansion. lot then you third lot the one you that you talk that's last couple And product vaccine, the you're innovation terms that, trending, update into. an the give about of talk the gotten us you of sort that's say in feedback a there, for me, is

Richard Johnson

I'll meaningful not we answer. out two Yes, We're at you it this The and still I with optimistic the is to trends really small, question. And a color. give you are answers. point of to break think you turn to number give open go don't that, I'll they're in what we're over where for to still Jack numbers and I P&L this saying. will more them the know,

Jack Bendheim

there So clinics. successfully into XXX product in States. vet Rejensa, we XX,XXX gotten United And are clinics have one

more We every are clinics adding week.

spending So money. we're still

I very the of see are is for optimistic. mean social is we We feedback product mean sort customers unpaid really product. I great from the a on media exciting.

So if listening to call is little dog, has trouble, anyone bit has arthritic a trouble. a some this which old

go I think sight go the to buy some and product.

money spending it if and still continues that money we're might continues more this we be, next year. So on it’s the that trend continues spend we'll on,

I think generally that's a choice.

that no want I We of got -- it. to haven't one but asked question, get ahead

and So companion think and we'll product I significant our X,XXX number be over proper is a X,XXX that X,XXX looking get we good or clinics. or animal will to next in will numbers when product and a year be expand

money vaccines our our will and give we’re spoke about well-accepted the in spending facility spending it's now at to in money, doing months new up we're against Shemesh is that The capacity get we're because Dick markets up earlier sell facility. we're and Sligo products running, really to capacity multiple well which budding the where still us right XX Beit away, more, are

had Pro looking OmniGen just last launched, launch a good. think big meeting we month we I and

if the goes product success about why to the whenever, analyst not We an spending a growth spending is EBITDA spend don't money big expect up. crazy know, money from this money people thing looking thing then there. numbers is is you And or were won't

a it great potential and it's we'll reality, is money. if successful continue in But spending

and are all all serious here. So these products you the for all, we're wasting These not and me these of products know many boondoggles where opportunities are around where, company. of serious none money are any these that -- products we're

the remain about of the company. excited say the and we opportunity about product would new I So

Operator

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

Your line open. is

David Westenberg

been So pretty be so already answered, mine mine of most have short. will

So know very input susceptible first Mineral prices. Nutrition it's the to on business, I

the to can between maintaining us What the just maintaining of gross Now, maintaining? as you're out and prices down. I'm in figure if up gross objective distinction trying remind the two you margin go profit? if is you're or terms

Richard Johnson

David, every to we we have unit the in terms for of sort mineral we on of looking and the One traditional are in handle, a business. base objectives. business, talk two tons we profit is make

we're ton. know looking per ex-dollars you make So to

paid whether, So cetera. handle, get on blending, we to money for the amount is selling sourcing, prices every a we make certain the add, we or et is which warehousing, want higher tone value logistics, lower, of and

We also are differentiated, and the over therefore into business, in time to some seeing continue adding higher success margin and higher early add we're more and products value-added that. minerals

against and but year we've to the seeing materials, frankly, bite against last because materials China against not expectation, much expectations, our of been so these come We've some of from some our raw have the been tariffs the raw of tariff. of many subject XX%

So costs depending on the competitive situation in through. some those cases, to pass we've not been able

we've been something been dealing lately. with So that's

David Westenberg

one vaccination maybe portfolio have looks those of pHi-Tech effect. like kind the that it So of products back device, a could onto

on that, to speaking and us Thank it of be from a could I just is then device. the overall And my peak sales sorts case? is contribute how So see maybe that of not pHi-Tech at kind on can terms portfolio vaccines, look to and Embrex and comps that you it the other look any it at ramp? Are you. generally of all for and we Zoetis? that's just effect things businesses? I halo there mean, this in one sales mean questions. And those better where sales have of of could but

Jack Bendheim

finger a this The on machine, in and pull fact to other is the very what birds this what power thing words, get is the a was first in, not main with is who of the your doing makes we're the what so to finger are forth. much back of replace so at of why just will job, on. just device temperature getting not. battery the grower, right vaccine it's put in going and the of resources, market amount but week. powered not last at poultry That powerful human that, type information think the producer addition I In from percentage machine the very exciting show the it we what's and on the you terms protecting that's very, are that so know, vaccines be

So full to grow thing. we of don't go through have the this used as that vaccines range

it's I went many, they use that probably lease had They case. competition. many through to ago So the is right but try made years no neutral. vaccines. you it, started to They equipment mean the it control the have the they vaccine longer now

the even are But with then they not eventually build starting they end anyone building of will our those around look in producers else's then you poultry enhances kinds look don't we we’re will vaccine. you relationships know, So like world you at know there, solid relationships I at that's vaccines think relationships our and the important. and

Operator

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

Richard Johnson

We talk We'll appreciate questions. quarter. Thank now. your everyone again listening and thank you you next and for bye

Operator

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

You may now disconnect.

Phibro Animal Health (PAHC) 4 Feb 202020 Q2 Earnings call transcript