PAHC - Earnings call transcript Q2 2022 | Phibro Animal Health Corporation

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Operator

Good morning. My name is Shantel and I'll be your conference operator today. At this time, I would like to welcome everyone to the Phibro 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. you. Thank Instructions] [Operator you your CFO, may Finio, conference. begin Damian

Damian Finio

June second Director and President Chief the Phibro for XXXX. Phibro you, Bendheim, is quarter Shantel. Phibro's the Health Jack My to Corporate Financial call morning today Executive and Good today's cover the which Finio Animal XXXX call Officer; Thank name Animal by is fiscal call, and Health Vice as welcome Corporation Corporation. our financial Officer I'm December joined and Daniel of XX, On Strategy. of Damian quarter our performance ended Bendheim, I'm year the President of Chief second on and Executive well this we'll Chairman, quarter for earnings on remarks, the of a this like are the as our filed a with revised simultaneous will our press financial well we second call. to and XX-Q we of Form guidance for ending pahc.com. presented of slides website, quarter and XXXX. our release SEC remind conclusion XX, and on website, yesterday earnings for transcript questions. opening providing the copies find Investors webcast as the year as the Also our lines discussed will the open that I'd on you At you of the call this fiscal section

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

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

present non-GAAP to a of included generally the We accepted measures. financial release U.S. earnings results measures basis and adjusted GAAP. or include most our tables GAAP to information basis. prepared were on are an certain accordance Our comparable on I press the GAAP with financial discussion not that for in section financial release. U.S. references the our a measures Reconciliations press the accompany in directly measures which principles non-GAAP earnings to these remarks refer you these of financial accounting in

nonoperational compensation acquisition-related items, in exclude currency as to effects lastly, nonrecurring income costs. results operations, stock-based separately nonrecurring tax net. or Other items, pretax including of losses adjustments adjusted tax or statements And restructuring foreign Our including consolidated unusual, related and unusual income gains income and reported expenses items. and or

to Now for performance our which financial let include and me on introduce opening President perspective Executive share year financial revised remarks Bendheim, Jack our Chief a Jack? Officer, his his second Chairman, guidance Phibro's XXXX. fiscal will quarter and

Jack Bendheim

good second and had quarter. strong morning, We Thank everyone. a you, Damian

million In sales highest an history. net fact, posted X% was increase XX% quarter prior company's the over the of over the same we $XXX a year. of quarter sales, single in last of increase and This quarter the

to previous the this month of for demand course continued balance core rising it the to to positively prices we cost products the fiscal saw continue out quarter, and last play this balance and our month on to margin latter our Animal of we globally over As saw have our the to strong fiscal our we our over Notwithstanding and improve call, last business freight we each we actions, discussed where year. expect for incremental the also expect pricing of few This this last continue in segment, trend year. the performance is stronger months, raise costs. pass-through reflected steps we in Health over our do taken

improvement and in over year, quarter of Animal net of And largest over perform XX% line continued a EBITDA sales prior $XX.X the other. of quarter a in quarter prior same sales last Strong product vaccine XX%. Our to but seems same Mineral the Health, Nutrition drove the of posting X% segment, increase period also the our adjusted sales a strong top well, million, year. growth by driven over reflecting growth posted line MFAs growth XX%

equates this importantly, quarter points year to XX.X%. point EBITDA of XXXX just shy XX of and adjusted adjusted basis quarter margin second our versus More basis is margin of improvement a last a XX.X% XXX fiscal which EBITDA

Given raising our net now year first year half second year, outlook the $XXX sales net performance of remaining for of million. fiscal guidance to time. the and the million We're we a for $XXX are projecting full for sales

and on maintaining EPS by net are guidance tax million adjusted effective and of raising change X%, our We in million guidance income our about driven $XXX adjusted to adjusted adjusted diluted projected the rate. favorable EBITDA $XXX our by

and said of a it although navigate number the employees with risk. We has the quarantine. the it The created to we worst be variant in past. it, Omicron remain to that again, to challenges say need the we've to higher-than-normal having successfully unfortunately before of done continue I've Lastly, as seem optimistic COVID-XX Phibro through will variants remain scheduling situation

our financial with we and will you review come to to back Damian questions. ask me results let Now,

Damian Finio

the Jack. consolidated our Mineral performance, for material quarter The ago. income increase and year reflecting XXXX. on by Animal decline stronger earnings $X.X net performance by million below net in This quarter partially volumes by increased a versus gains, operating Slide a currency full as Performance tax level and driven our and as million raw the with driven fiscal slightly share in net Consolidated diluted GAAP-based and our and The review and sales largest offset per increase was XXXX, balance by Products $X.X expense metrics quarter in income offset segment. sales XX% was foreign Nutrition, then unfavorable million, a a respectively, well segment million costs income Thanks, $X.X same increases reported segments, income. XX%, and cover ago. were revised the with by I'll prices, in improvements product offset X Health a in selling conclude of ended mix increase guidance increase XX, financial a one $XX.X December or year start over increase million sheet the same financial XX% $XXX.X key year for

Although it gain good see this foreign rates was in exchange currency to volatility continues. foreign quarter, a currency

and adjustments balances the for quarter reporting by one-offs, standard improvements of X% by average driven by results, gross a offset driven to the primarily translating increased adjusted SG&A of dollar profit intercompany is the EBITDA in our impact end partially items, including the effect gross to GAAP our profitability our quarter higher making Animal U.S. and to were SG&A the Phibro, offset Products After purposes EBITDA income movements by and and the per on second diluted selling earnings segments, prices Performance year. decline driven Mineral in Nutrition at net the share the an X%, improved improved and currency higher increase adjusted by segment. acquisition-related period. adjusted reported same incremental investments. due over foreign spend Adjusted prior profit The higher intentional For in of from volumes Health strategic

same Moving million $XXX.X X. Health to were segment on or quarter the vaccines. increase product includes performance specialties lines, segment namely for MFAs an level Net three year. nutritional prior Health which I'll financial largest other, second XX% segment, and with start our Animal $XX.X of Slide million performance quarter of versus Animal represents which our financial sales and

by or effects increase reflecting year, a continued by South $XX.X ethanol, of and segment, stronger of MFAs Processing in $XX.X million reported products from the increase. versus million the same pandemic. of $X.X quarter America, distillers other and contributed aids and the producers corn grain in demand the recovery Within Animal XX% driven the we North Health used oil million prior distillers

increased in by growth sales, X% increased or million $X.X animal $X.X nutritional improvement or and and a international of million lastly, revenues prices very net product, selling increased had And domestic well also as driven driven as Rejensa. XX% in a We companion by vaccine volumes. our specialties, strong volumes

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

Moving prices for adjusted $XX.X versus quarter material XX% adjusted an profit million, EBITDA reflects Mineral by other sales XX% average by segments million second X; same Nutrition with performance the the starting increased or of margin selling higher trace were $X.X and in the on of first an increase Slide increase year, points, of Net XX quarter of the driven prior gross the raw business derived million, or million was Nutrition. for minerals Mineral underlying higher correlated improvement movement $X.X average an with driven on of $XX.X quarter costs. to from our prices. EBITDA basis selling financial

same average ended Performance Products segment. reflect three the from of at by a prices X% and of as months a offset costs. December quarter primarily volumes, XX, our Adjusted result Net million, for prior year decrease copper-based selling $XX.X lower $X.X million delays decline EBITDA Looking XXXX, the of personal of to higher product of a shipping production partially related ingredients. care was by driven lower sales products, higher material million, in $X.X and sales

said expenses Lastly, declined EBITDA corporate X% corporate increased X%. differently, adjusted or

As driven I've is by strategic the and as in change mentioned calls, incremental previous is on the intentional expected this investments. increase

$XX metrics capitalization-related million. operating $XX flow X. was XX, million XXXX, capital million of Slide Free key XX-month of comprised flow less the for on to Turning cash period $XX December cash ending of expenditures,

prior consistent of quarter. leverage by which ratio million calculated the $XXX with gross $XXX of end was of trailing X.Xx the debt EBITDA end quarter Our of adjusted by the million total is the XX-month dividing at second

In we million $XXX of XX, investments and had liquidity, This million $XXX revolving available includes short-term of credit. XXXX. of terms and $XX and December at cash available million unused

our taken by sales inception. a the the second in financial strong performance. the adjust the And anticipate several lastly, further of June or beginning reported to second through single our quarterly subject That call, paid reminder, revolving what a In quarter posted available to fiscal Jack margin costs. and the opening earlier resulting on the the and $X.X our credit year-end actions This million a As aggregate. accessibility improvement from quarter impacts financial since performance, for dividend we've freight encouraging my actions. positive remarks because stated on in and pass to highest the agreement. of limitations strong is is of XX $X.XX per concludes demand consistent loan the price leverage quarters, evidence ratio we reinforce We quarter we summary with through in products driven further these outlined incremental share of of past

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

shy earlier, mentioned year and XX our point basis it we just for second from the I fiscal was what As adjusted basis points XXXX. quarter XXX increase the reflected realized a margin of first EBITDA quarter in

$XXX are we project, realized improvements growth full on guidance to the from top guidance expected X% million revised our another continue, we've to the guidance $XXX million line the full what from range. year million. adjusted and of This sales our way, Given guide the EBITDA and and represents $XX year. $XXX last $XXX the an realized in about prior for million, Said up of both high we increase our of to raising fiscal by coupled margins million low to with end of

maintaining an second $XX half two years. adjusted projected what $XX or of in a $XXX fiscal bringing second first the our million delivered reported adjusted half, margins back over $XX terms XXXX. above projected In million EBITDA, adjusted half in to year year range improvement line the of which the $XX for roughly million in million guidance in $XX fiscal adjusted our margin EBITDA the $XXX business in perspective, From EBITDA million of the reflects of first implies of prior an full EBITDA the are with million to to half, million the EBITDA adjusted we the

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

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

from to the first communicated; stronger to effective which, please last to $XXX increase million an as the of fiscal is XX% $XX.X $XXX in half follows: an is very which if from XX% communicated; the unchanged increase our guidance; as which which remarks. XX% and million in sales Overall, adjusted of million, second net $XX.X year improvement opening to from EBITDA our million second year. last is which the $X.XX share increase $XXX income million an million to last even from guidance is said, That of in are full to an $XX.X earnings you $X.XX and million to questions. revised summary, projecting concludes an million net to fiscal XX% Shantel, per of guidance to for So $XXX out our quarter, diluted prior from $XX.X $XXX $XXX XXXX the previous adjusted I to the is an adjusted guidance; was the $X.XX $X.XX tax million rate of strong adjusted full for year. I's half and we Jack lines a solid could open close million assumed

Operator

[Operator first with Instructions] from Wright question Morgan comes Our Erin Stanley.

open. Your line is

Erin Wright

Great, to the how you quarter? speak competitors the any compared the or able Or are in What's pushback? feedback embedded price seeing in to there? strategy out the were everyone. expectations so And Thanks. does to of year? Hi And a the thank increases what's your you your the from magnitude perspective? customer Can strategy the you of much. for balance your take you

Jack Bendheim

the Let first, Erin. half me second take

something I saw think X%. this was that morning I up inflation

where in seeing prices. So we're living a is everyone higher time

And price so on than the increases would in pushback time. be Everyone's it going. a seeing in they're it wherever normal less are

not increase about. able exact But have not say, to prices. will raise -- would I'm our and costs if the it's inflation so go up, again. continues prices It's because our will we we're amount, talk over we've And we been and -- going to to to I

Erin Wright

you that with the the dynamic speak And But how XX of to groups if pricing globally and and be macro a may species Okay. progressing trends demand are that over groups from then trends could across excluding months? subsiding? some Thanks. better which species perspective, volume positioned dynamics hopefully here like next

Jack Bendheim

great That's a broad question.

seeing has much BCs I [ph] in markets We all are most mean, as are demand come in all markets. and still across not with COVID. we But Far deal species. other seeing pretty Clearly, America, with North strong in we demand of major hit the South East back the and rapidly are in demand high as some that America in the markets. in somewhere markets increase

Erin Wright

expectations the one Okay. that embedded $X.X And is MFA sneak to here quick category, was the The in just for that or continues it one, benefit I the if of could year? in. something million balance

Daniel Bendheim

specifically the the is that ethanol? for And talking about sales

Erin Wright

Yes.

Damian Finio

I self-using that continue they So ongoing horizons great animal has that strengthen are us health, typically ethanol and produce that's the that sales coproducts we that for. products the And it's or for are ethanol continue throughout an that mean, business. sales for to business year-over-year to products we either an sell see for a that's and international business one

Erin Wright

right. Okay, all Thank you.

Operator

[Operator Instructions] America. of comes with Bank question Ryskin from Our Michael next

open. line Your is

Michael Ryskin

given Great. in detected years. space. recent operation want just first The avian in we've to Thanks still couple And port flu, exposure, early play some just for I of how bird have I could you the very on through out a States, I'm Jack, the United scenarios characterize news the outbreaks first Obviously, questions various if a rest questions. the walk flu of the wondering sort commercial year? the of ask to this. relatively We've us seen of the and in think was lot on you it risk. time that the taking gotten yesterday, you over poultry but think a in high

Jack Bendheim

industry. big a is influenza avian to poultry risk the So

always it how affects us, have it, outbreaks on So biosecurity. U.S. mean -- prepared the good we I any response a the because well to really depends country. The and is for really

sort you the minimize protocols to out it, happen. We what around you area will like when do clean have of you do to what of good detected it

the good. are world other not countries of as Some

impact had a big is it out It so So the business. far has there. on not is

Michael Ryskin

a noted your the Mecadox. your of to of agency for be Obviously, about And month, outlook you what's sort now. on a question Mecadox public years mid-March. going And there's sort in Last into follow-up Okay. hearing? going then the with are dialogue with that FDA an recent you hearing number talk of a what the issue Can any expectations? been has

Jack Bendheim

that fact on for I that quite this product focusing published think of public of is on the areas sort comfortable the focusing areas dialogue hearing the safety this we're of looking agency for the is which on the the years in been extremely producers market, the important product. XX States, feed over know, is has nurseries over an XX% used which with of in as United by we and

are sort other use The of Mecadox important the the carbadox of interesting use thing antibiotics less is humans. allows that to or lot a producers for

where has people it, product dynamic of the so market, are clash. But and it's sort consumer much in human agency to years." amount XX we're entering time agency spent this of, the effort been feel, some get an people in this the and try reduce country the are let's who around in "Hey, off So there animal that for that's antibiotics and used to a so much and in call the

agency of appreciative where hearing. goes. you And government we this for -- up know as the public know, the and we're never of So, looking but sort opening

Michael Ryskin

great. if one, I just just make one Okay, earlier. I to a to asked could want I sure Erin it get And right. squeeze last in something follow-up

On it those and we're at it some of to in and to sort historical to still inflation a the in Is back you've go rolled the careful -- future point are that to freight be nature. assuming price a of normalizes call price going safe to that assume going the little a pricing? increases increases therefore, been in somewhat lot sort surcharges bit that back of temporary is past, out

Jack Bendheim

that will price of we raw seen in We've increases. increases. read, We've of increases. and and things seen produce And often the we reads of those we've been past, a the shortage hit also sort the the States labor. get drivers And sell. rolled in and seen not -- along Everyone you majority we products about about been of increases. range said one we We've pass price So we've that with as and what price of back. are GreatStar's shortage material labor freight United knows

see So easily not everyone as surcharge in which abnormal those many on, to it's industry, industries, are pass go them. seeing prices long to freight you in can those our some costs as up,

costs back prices your to go prices then both. the away down, So thing The main back trucking goes on increase costs of yes, if our will increased is price don't a but yes, then will we've and go down. that done go cover

Michael Ryskin

great. Okay, so really that's Thank much.

Operator

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

Damian Finio

Great. and everybody Thank you, who Shantel today's call. thank you, joined

appreciate we Phibro your always, Health As questions time, Animal interest in attention, and Corporation.

always, free website, and or our reach Have day to via a further stay the to Jack, safe. myself feel please As should out any Investors rest of Donny to of have you continue section your or directly questions. great

Operator

This call. today's concludes conference

now You may disconnect.

Phibro Animal Health (PAHC) 10 Feb 222022 Q2 Earnings call transcript