AVD - Earnings call transcript Q1 2019 | American Vanguard Corporation

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Bill Kuser

Welcome, everyone, to American Vanguard's First Quarter 2019 Earnings Review.

Our speakers today will be Mr. Eric Wintemute, the Chairman and CEO of American Vanguard; Mr. David Johnson, the company's Chief Financial Officer; and also assisting in answering your questions, Mr. Bob Trogele, the company's Chief Operating Officer. call. our additional with that detail be in file May SEC we will discussing providing X, on this Vanguard Form the XX-Q tomorrow, will American the results

the usual differ and Now management policy, subject cautionary That to and company – before of actual and detailed management's discuss are over Such and said, on information are such are information. changes uncertainties to expectations. company. competitive cause Such in and necessarily forward-looking let's this results have SEC by to call estimates All we Eric. that take filings. other represent and been may reminder. today's the regulatory updated call, the assumptions reports date that call, current begin, company's by may In not pressures from can the statements based the of will risks we various company's statements risks be weather include information the various our best forward-looking the turn in as company's judgment factors conditions,

Eric Wintemute

everyone, welcome Thank Hello, earnings and Bill. to quarter our call. you, first

As American Vanguard. interest always, for in thank we continued you your

captain good we enabled provisions Despite drop stop the They able and during how stores we same to the were many margins. is As storms diversifying years, the managing we What note, for have regions doubt the net a we maintains ship, ship is that and States in efficiencies say doing in few a has good first that true mainly trains to and weather crew a sales, the international for heavy have over modest gross quarter. been go us X:XX improve plagued a Good but business. a overall acquisitions past hits bad. United operational through of I hard that weather. that you housekeeping know the will long. at times never The it until

expect exceed that of only top me the I'll make sales, development first our we actually lost the XXXX for for further, explain ground to will originally technology color give to and we detailed net the Allow not forecast. on our forecast then up I As but balance David our quarter, it more a overall then including inventory. over yearly year some will turn the give of to comments And analysis performance. of as analysis margins as line I gross return well sales. on

a This reported Form as net entirely due will to and, in domestic multiple in sales in whole, due rain, to was our quarterly XX-Q decline sales, down were a cases, As areas. in X%. be we snow some flooding

burn-down Southeast Similarly, insecticides. in use For South. use while in example, Northwest fumigant of the delayed was conditions herbicide Pacific pushed wet our and back use forestalled the was subsequently, granular the in planting soil

end with eroding to needs As brand flow By down demand of since quarter, an move accumulate approach conditions, from with customers in would by by for XX%. what to changing of been and conservative the to and in value were are actual we other you in supply our during thereby discounting capacity, to when call considerably. to products began customers and map slowed have meet had our Over distribution seed, recall, of The normal sales quarter, have more practices. adverse channel weather flow program, net of following, fertilizer be conditions customers several transitory out create value. maintaining we optimizing XX% our brand we Like demand; alternative which factory may distribution industry beyond the far their ever of procurement XXXX, their mindful in we years, first channel a face filled also the been prices course the to customers, reporting natural past the warehouses Consequently, field inputs. our inventory. the

program. customers prefer out and working way a We have returning themselves here. natural to is of flow Free believe markets our happening that Our what's greatly historical norms.

sales internal had domestic most Interestingly, $XX first will of down seasonal we course the our all sales of expect same over within with those that sales from forecast, date. our million XXXX up – domestic EDI for quarter or X% of XX, April materialize the were of While of as to sales XXXX. – regions our through caught

in bananas, fungicides. we from in might the on upon to Central soil overall amendments used businesses. sigatoka, on international quarter, is during adverse biorational multiple performance for a crops. use subsidiary, and an period, newly first stronger and black Greenplants citrus fungicidal oil our During American gross special a products This have we increased acquired Also largely the including insecticide of sales and chlorothalonil sales through mineral used product sales effect a our oil for due products International argenfrut, number Agrovant/Defensive, experienced expected on RedShield, sales mineral control added led sale AgriCenter, by nutritional decreased margin. copper-based one and Brazilian foliar increased U.S. With of

margins not for versus XX% same this arose XX% This improved However, was the two the case. actually Overall quarter last factors. from gross to year.

First, manufacturing efficiency strong. our was

while bottom activity We our continued on is to factory focus discipline line. enhancing expense, reducing benefiting this factory and

XX% globe. we well XX% optimal up from which to our markets gross up domestically our in in internationally. the throughout mix the XX% products are of all to positioning products was and regions manner in This margins from Second, of XX% with speaks

Before million million for to are increase. several turning the There end drivers a the David, also want I XXXX. of discuss the this $XXX inventory. finished over to at $XXX We at presentation versus quarter

campaign which the demand. adequate $XX of ensure This Faneb year-end. few during for true shifted higher and order manufacturing supply to products periods million high Folex, we are a about in levels First, of at is than Vapam,

in Second, both Brazil. with businesses, new million new Australia including associated incremental II product this year's herbicide recently of and acquired, includes and $XX and level inventories Assure the businesses

the closures, interruptions from of earlier in to of consists and and calendar Third, million Parazone, lifetime from The expedited balance in higher procurement the chlorothalonil $X of plant are year. carrying our Abba and Chinese tariffs sources businesses. inventories light level of supply from expanding due we've China of inventory about

We about to inventories into convert these year-end. over remainder down doing will $XXX to we inventories by of million cash bring the In so, expect year. the

the For our domestically see we internationally. for balance of expect solid to and demand XXXX, products both

revised which business we'll raising $XXX adjust to $XXX are we profit allow deal of XX% for to deliver management able from fact, $XXX of to that are million revenue manufacturing or additional the million gross expenses, We million. and target range range our With XX% to XX%. an forecast If us In we acquisitions, our to full we year guidance to targeting million to product margins $XXX should XX% ratio we're in of previous mix product our $XXX that believe make range. disciplined OpEx-to-sales appropriately. million to operating performance $XXX million, of

the pursuing I about Our range will analysis David growth. are should consistent performance. remain across ask we of sustainable XX% tax other you rate deliver our With return to XX% financial his that initiatives in to give I to overview, to David? talk long-term that then all jurisdictions. will

David Johnson

everybody. Thank you, Good afternoon, Eric.

million I'm three the tomorrow. mentioned, in detail Bill included XX-Q that Everything covering more document. we to ended XXXX detailed, company's here down for were $XXX expect million As compared $XXX last Eric time just XX, in March regard sales is year. months to quarter the the Form our ending first file financial XXXX, With the for at about X%, to as this as results,

quarter prevented our ag extent, and retailers nonag and market has our lower in to XXXX. inputs. from domestic immediately delay a of in then season just to discussed, lower distribution, lesser the as wet by weather domestic that annual Eric impacts using first from As market and adverse our to starting overall Basically, sales The translates seed farmers weather farmers orders to conditions to resulted growing sales. compared the planting crop

substantially We next see during the ag expect those to sales two quarters. U.S. to one catch-up

business U.S. benefited a performance our of from We that business of the from at International Brazilian our the sales grew, we start business with that domestic business have to a fact While because our International succeeded our the in predominantly strong for domestic inclusion the a of the consider acquired transitioning year. quarter has base. suffered, business primarily

XX% the to as Furthermore, of last that regional net this performance we including change the sales XX% represented ending remains XX% strong sales for year. compared are in last quarter, quarter, first as margin time gross to compared XX% at pleased sales International year. For our mix, of this

days compared our product newly in the XX% net line to the acquired XX% activities II of expenses ended During of the that Assure of the on Brazilian This last sales addition business this final time included and year. herbicide XXXX. acquired our quarter, first we operating at

adjustments million acquired XXXX $X Offsetting continued arising expense distribution our the include to consideration those for provision we related do accruals, performance increases, in payments reduced debts expenses bad compensation expected Central businesses potential to approximately of made reflecting quarter. incentive deferred in financial overall American business. from and Our

lower for catch-up product year. likely the These the on and somewhat timing we of projects development depend Finally, in costs expenses compared to defense and product recorded product as will XXXX. – later

net the of Our the share prior expense borrowing to Overall, and first, share net was performance, net which XXXX which million $XXX,XXX million as of this to Interest decrease I higher mainly to and related. and release, understanding or our XX% this $X.XX business From the have by to are same quarter $X.X its increased by the income year. further driven million year. rate. XX%, for income per debt quarter amortization, just late $X.X tax the a perspective, relative period-over-period in increase X% LIBOR, increased $X.XX last as In rate reduced EBITDA, with acquisition increased and factory period XXXX in interest for million. payments time last we impacted earnings to reported issues to as time expense performance. investors' the largely difference in between first in $X.X effort early compared ended financial the EBITDA by my the both result ended or which by The as in The acquisitions decreased $XX.X key is and reduced Whereas, financial at consistent XX%, follows: the quarter support compared quarter an average the the is of year. described. at as per due income

planning under-absorption activity, demand with by our approach XXXX. improved a as of follow and three the strong factory in to compared start XX, to making XXXX, balancing factory continued the year, In ended forecasts March recovery overhead inventory approximately manufacturing months of last $XXX,XXX disciplined levels. costs a to We our

inventory. Second,

we on approximately taken are we balance – the During the forecast quarter, inventory $XX our bringing approximately the associated to manage the reflects and million risks of taking increased battles tariff million. businesses. strong and actions we and year of see in China. inventory $XX products This for see logistics includes acquired continued by sales the increase supply recently The with with also

balance As may sales be Eric our December of expectations and upbeat on of that focused mentioned, down any to the are during balance remain the we by year. approximately year, plus we million acquisitions the of the getting the $XXX XXXX, for completed impact inventory XX, about

first to under the Third, our liquidity. driven as million the $XXX stood credit the XXXX. the the three lines last $XX with time months compared availability At quarter, difference first of last was is first Indebtedness the as March of nine million XX, of this regard to compared as XXXX. $XX million end of XXXX the to during $XX on million spent year. $XXX quarter months acquisitions The million of at end XXXX at of and by

balance We that and, driving the we on business balance during focused continue of our first of sheet lower the mentioned, business. year. when at as to the to Eric moderately quarter now regionally as accretive acquisitions demonstrated domestic are looking In say in are our borrowings recorded can the slower conditions XXXX, monitoring summary, diversified more market carefully sales improve we the contemplate we and have the of strength

of our foothold a In and increase biggest business, International the will margin the Brazil, addition, importance sales which in achieved performance. we hand have an have world's manufacturing Further, first is I strong giving despite us market. to agricultural acquisition key in strategic With back to that, completed gross a we the Eric.

Eric Wintemute

David. you, Thank

of our system Development Turning schedule. on technology. now application continues precision SIMPAS to

for our us demonstrate prescriptive season enable to an both nematicide we insecticide, some customers These simultaneous During line efforts to prescriptions value of of future and the and with to up were micronutrient SIMPAS. generate planting and of to XXXX, for to the use. application agronomists create the support data working proposition major will

our for with with combination to inputs. so for delivery beta limited SmartFill peer users' Additionally, In technology, fill can we we'll reloading choice are distribution and out mark will retail be at-plant tracking working prototypes the maximize proprietary SIMPAS XXXX, that technology a this the in SmartCartridge of containers. testing portfolio campaign. granular liquid through we we product companies RFID products product Further, the

be testing RFID liquid and tracking and granular also both will and We the for system the refining products application prescriptive simultaneously.

the our synchronizing software expect container regional on geopositioning collaboration We stations facilitate cartridge the of dashboards continue planting efficient, installing first the that to superior SIMPAS system be refilling cost-effective in we system the with usage. Further, Trimble will their with manufacturers. SIMPAS major

technology our on of industry the this are to Annual April, in by market In the of performance retail to demand SIMPAS development of detailed short, from are crop on account X. for Protection midst the technology. SIMPAS retailers who Environmental network as for of technology on advance protection environmental plans ag. a ability conducting inputs showing conclusion, footprint. growers' resiliency We in to to with sort Meeting channel report are presented commercial seasonal Vantage it adverse of collaborating in and with Shareholders to use is We – Trimble's our conditions Agency. while we pricing SIMPAS multiyear peers States. regulators, and is assessments the for this business forecast wants precision financial In experts agency see partners In our This marketing at improves the United plan optimizing we plan determine the June to that just

expecting all, line if sales sales first during businesses most, International are the Further, the growing that recoup to the net Thus, continue balance of to and not of we're our to our should exceed overall lost over expect we We so quarter. top prior do XXXX. guidance.

will and us strengthen inventory the focus we and, enable maximizing to our addition, increase This, on balance our in by sheet bring down in efficiency will our while generate factory cash capacity flow. In maintain turn, process, year-end. reducing debt, borrowing

at we are when will And XXXX, this growth. about poised Annual Meeting I Shareholders our for again you speak further Beyond more June. tell this we

be Adam? happy have. questions any answer we'd Now may to you

Operator

comes Sheehan Ladies our question Thank Instructions] Our will gentlemen, session. first be from we [Operator Jim Q&A line SunTrust. you. now conducting from the and of

live. now You’re

Peter Osterland

Good afternoon. Osterland This is Jim. for Pete on

with province, chemicals expect to difficulty Just a inspections at of safety experiencing in the on could are that of do couple impact import with China? week, And you after questions news that do be you increasing materials explosion plant increasing the could the or procuring then any from raw at the China, the tariffs with this you Jiangsu recent experience the end have? of what kind expect

Eric Wintemute

think, they down. DuPont away regard We've shut is bought shape have then we with from are us difficulty Bromacil, are, brought picked the in key that incident are product from And – concern good we mentioned experiencing that I pretty having think and we we that and product acquisition we're in does currently we which supply, one Adama. to XX have again, about that later products with from So and Bayer. there. product a three kilometers The up from we is

the working We If that's cost than impact could have term, position, products on would but dependent With same goes of heavily have it at of we're in lower regard on, alternate sources our are particularly, the today to most in us the are on one be. short are the ways. a replacement currently that China. cost enacted, that two product not potentially we're kind tariffs, we have term. Longer and they that probably we

it's with the XX%. much boat same we maybe everybody pretty have, than less what for do think in else. I But we're

duties to pass those be expected forward. to would we be able So

Peter Osterland

you. Thank

Operator

of Our from comes Kapsch the Loop line next Capital Chris Markets. from question

now You’re live.

Chris Kapsch

Yes. Good afternoon.

I globally, ask more on sort an work focused years. I forget commercialize as addressable wanted think, you product be a over where metrics focus So I at of think what some are some to measuring you point up this about maybe you – the about talk that I point targeting of that don't to but can it and what consultancy going might divulge where a expert I in you're coming if to next – of was is of at commercialization? where know TAM point, an if know that revenues. And one applicable you're of success can the if acreage and frame you actually, you – market. it few you're progress sort sort where think planning your or viewed SIMPAS. was you to At you months, Eric, appropriate had, maybe a in and terms technology do I of – on the the

Eric Wintemute

Yes.

I sugar six So initially SmartBox the we're soybeans crops, in Brazil. but sugarcane, in current markets, there are potatoes but started say, been doing a is mean, And and and the I'll we lesser now Australia We also focused to this system. in in then corn, beets degree. cotton the Canada. We've on, and just U.S., predominantly then utilizing

kind be in for So was. that will question Can Chris, your speak, usage. I'm other line, those missed be of SIMPAS kind of to I trying it? to markets you we'd think if next so the – repeat, what

Chris Kapsch

as progress? is applicable. – And and think way tracking could the disclosing in the far terms in is, crop we can so any but Well, that shows as acreage up market not sort just expect if interested that you revenue, of might start frame metric the total of much technology would be addressable commercialization where like what what profitability you there's you and

Eric Wintemute

gallons – In SIMPAS. don't I many So from not our have – longer payload is the courses, would drones, idea take turf, the there to the able acres can they talking with be term, about do of smaller benefit X.X that of acreage, up too I think. a to where of are product, and we're being team of see of use there use SIMPAS golf a

– pretty total is mind-boggling. I uses, So the acreage think, in are

of a of far – we metrics, of if we I – for or prescription treatable biological, insecticide XX% micronutrient as move treated yes, treated used – were up. As add all we acres, would by that amounted and will XX% in acres And acres. about, the as a think nutrient the for and talk rest going those kind for an it, forward, on nematicide and for we of on if XX%

an So higher prescription a less for if we even accurate it input though each likely acre would than individual could acre, to treatment itself be be look be. a full way number, for the is the would

So and again, system, treated answer well your to we're of through we I in about that's would measure acres think, question metrics, the probably SIMPAS the talk how progressing.

Chris Kapsch

suppliers know – would peer one one terms I you for licensing have of relationship Eric, have that. helping you if like partners agreement – channel that if of – And and are anything SIMPAS. the to formal some or the have then there's form just validation launch. herbicide last some on insecticide, But relationship, in some the – you presumably, a adoption, don't obviously it's

that? do the chemical to be is role point Just are in – you're system? have you intend SIMPAS And suppliers to of that would how crop peer materials approach – starting we would used in that go supplying where at sort a enlist a

Eric Wintemute

So yes, correct. you're

We to with are line working products. up peers

treating XXX% treat that We treated look for originally the wouldn't position incremental economic have think as it of to standpoint, as this be acre. I they reasons acres sales. from at if their they

apply by able And at allows be around specifically product the be seed expanded practice will current plant. seed of can that incremental a – for time it There or treatment to increase. there's being us in so certainly

maybe getting that been and largely the on see a said, be doing so to inputs we've be, from in being we current incremental plant. that system, treated think treating insecticides platform if with being us are to able that cannibalization, call a aren't there That prescriptive last this kind to will point, to be a for I some, as crops currently in will it's I'll through for it, SmartBox acres going for of probably manner multiple people do fashion. – particular crops our with much So increase offering XX the multiple at our years – you shift that, of but will, vantage time this bigger

Operator

Instructions] of Thank Partners. Our you. from next Capital line Joseph comes the Roth Reagor question [Operator from

live. now You’re

Joseph Reagor

minor breakout this your Hi, appears is have A format things. guys. guess Are the the breakdown of reporting going normal taking bit Or in one, new forward? Thanks for the Q? the first with going questions. changed format I get to a of we kind to of couple sales. the

David Johnson

Are about sales? and domestic talking international the you

Joseph Reagor

and like insecticides… Yes. Usually, get we herbicide

David Johnson

That in the is Yes. Q.

Joseph Reagor

for margin of can did? kind turned Is guys color Great. Okay. Also, some suggested be as out standpoint. of you wasn't your there. maintained there as a good margin be there product-to-mix it didn't you how I'll peers guys to the going had look of that give to – any you strong from additional yours

Eric Wintemute

have Well, program of delayed, by our base. and need we'll and until tried flow driven we kind to out actually they natural planting mentioned the product bottom again probably do, this line the we're customers top is wait go that which to if warehouses recognizes than to farm season that line full more we've

happened, in focus on products. our sent I and think on it. focus some But to big year's lower-margin dollars, top all the were don't line gross again, quarter is the those Parazone, sales which that's our So first margin are part team There last message like we sales. of of a

a much does we it lower at to gross sell So have as to margin with. mean as doesn't dollars us more margin product higher for work if it

Joseph Reagor

Okay. Shifting sheet. bit to the a Fair balance gears enough.

quarter need repaying With you out a comfortable you to do that be again? looking quarter, still guys the Or bandwidth acquisitions? the before that you'd you debt do during feel of there make you have think enough increasing debt

Eric Wintemute

the we us going maybe had level looking at the acquisitions us process. were six to five up would bank that but backing the I at us, looked but XX XX our felt will we've to that go, ranges, worth participating the make not think we and we that to in, more wound we're to the we they've we blockbuster we those Well, When that if EBITDAs multiple to to we working where pay acquisitions we always syndicate. were sense, something. again, have And that tend the get in – have they have past from acquisitions that have had us. they're feel of come and in – we – fortunate to certainly always availability And some credit these on we assure continued entertained we relationship up were a and in available more – to it's borrowing – are with be give will to that unions happy make of step and long-standing than banks some –

if don't I So David, have... you know,

David Johnson

No.

banks, We always have a relationship with They very how closely informed supported them I things us. the are have great of and keep going.

position that be as to I think arise. So a to contemplate they continue good we in acquisitions

Joseph Reagor

Okay, guys. thanks

Operator

back closing. you. for Thank the floor this to Ladies at no time. over to further and like are turn management I'd in queue gentlemen, there questions

Eric Wintemute

for will Okay. we Well, the Shareholders' to on which thank for us our call, you and join in call, X. again, encourage once Right. Meeting opportunity us June next be our very Correct? much joining – to you

very good Okay. and Thank evening. you much,

American Vanguard (AVD) 10 May 192019 Q1 Earnings call transcript