ODC - Earnings call transcript Q2 2019 | Oil-Dri Corporation of America

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Operator

Good day, ladies and gentlemen, and welcome to the Q2 2019 Oil-Dri Corporation of America Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Dan Jaffee, President and CEO. Sir, please begin.

Dan Jaffee

Hi Mark, thank you and welcome everyone to the second quarter and six-month fiscal 2019 investor teleconference. With me in the conference room here in Chicago is Mike McPherson, our Chief Development Officer; Susan Kreh, our Chief Financial Officer; Laura Scheland, our General Counsel; [Leslie Garber] who will be taking over the reins to be our Director of Investor Relations and last but not least and a big round of applause this is Reagan's last meeting as our Director of Investor Relations. good for paroled got behavior. She promoted She exclusively marketing. focus has been on to

everything thank take Reagan, you and Harbor. So for Safe please the us through

Reagan Culbertson

regarding company's uncertainties SEC periods you may today's contain differ. In future Thanks comments release number of in materially highlight comments ask Actual the and a press our that statements our periods. review those On future in we company’s investment stock. in consider affect Dan. in results our performance filings, in call, forward-looking evaluating important risk and the that factors, any evaluating performance. may trends factors and and those Oil-Dri We may

Dan Jaffee

Thank like through to you. walk I'd the us time, the to at And call quarter on six this Susan and months.

Susan Kreh

of of over second X% products for and private in we lightweight are sales quarter Sure, fiscal group experiencing $XX.X quarter million fiscal litter driven retail where up label by which increase X% love Sales demand quarter to. our the a in second XXXX. wholesale products. strong were was of the Oil-Dri our XXXX cat the Today, in in growth reported

of were Our XXXX our price see group continue quarter the performance suppliers. in with as competition down down products internationally products local X% due to Fluids' by second weakness Purification sales of compared business-to-business quarter to fiscal to

flu. Asia business also the We reductions quarter widespread African experienced the continuation driven by in swine of first our Amlan of in the impact the

adoption efficiency such on work in do year and customers piglets for back immediate the expect to NeoPrime do half Varium feed we the our around the to improve trials products industry recovery with we Asia, an not as the in world. the continue as expect to poultry, While swine in see of for some turnaround and we of

period the for of reported to same fiscal the was six million months also sales of year. the last year $XXX which first flat We

by the Our again prior sales retail in cat litter. over X% were that driven year the reported and strong group and up wholesale performance products

primarily group same X% that that quarter. talked business-to-business months I were the for reported six the first Our reasons down in products sales for the about

Our compared to $X.X loss ago. second second $X.X the quarter million quarter Oil-Dri was of year a income to net million attributable a in

I’ll For fiscal second incurred of point $X.X the enacted Cuts and quarter that one-time comparability resulting implementation XXXX was XXXX. of that of tax in of a XXXX of Tax out during million we from Act the Jobs purposes December the expense

was comparability XXXX Our fiscal the diluted second $X.XX $X.XX $X.XX charge purposes, share equated for per to the quarter in diluted loss one-time per second share. and earnings share again quarter the fiscal that tax a of quarter per of between of to compared second XXXX

shift the quarter, the gross XX% During group BXB mix higher a quarter gross last about margin XX.X% was This in to impacted same percent by that was which wholesale our we compares from through group our product our profit retail in earlier. margin year. and talked

and We fee. also customer increased and fuel, those packaging cost include and incurred manufacturing freight compliance cost cost, additional

of in cost XXXX the While and help for pricing market costs, August to both categories the took the and this we actual exceeded freight to anticipated compensate in cost incremental estimate. have these our packaging increase in

new the customer compliance effective of more are and do efficient. as manufacturing ERP of X. some litter prices becomes to As back related May reduction cost such platform year increasing we expect We the in fees cat our half

segments. about talk let's the Now operating

for were as up for the mentioned X% quarter and First earlier the X% and retail months the team I fiscal wholesale, of fiscal retail XXXX. six compared first up were XXXX and wholesale to in sales

by in for year up private quarter XXX,XXX label X.X the label second private been quarter products. lightweight the million to see segment prior this first same over in continue down litter was We in the especially Profit strong year-over-year. quarter growth after items having

quarter We months compared XXXX. first BXB quarter in on of both at to by second as same compared second segment fiscal the the impacted year-to-date were down The XXXX down the quarter the periods. the quarter being quarter look six and in periods to in advertising million lower profits fiscal X.X and was sales for the the

profitability to impacted addition lower has In the by manufacturing volumes costs. BXB increased been

So our now for sheet at our and flow XXXX. let’s take balance a look cash fiscal

the BXB shift the by we in of cost not first half both incremental impacted from retail the just wholesale also talked by of and that mix mentioned earlier. channels to were During that only the year but about we

higher implementation inventory receivables drove and levels. In ERP addition, to our

X.X finished beginning increased of primarily inventory year fiscal packaging. the the million Our in from and goods

this result of Some planning. but moved a the we we system ERP the costs as system increased now as build earlier, using to impacted have some from of make-to-stock where mentioned inventory new make-to-order capabilities some our I

serve order So better the some second to we've of built customers stocks our year. safety in during half the

new levels levels. will I stock that platform, safety As we to in we powerful this more down efficient anticipate bring more become normal using

We the also year. saw receivables of of increase X.X an in the half million in first

the compared led a stronger delay our customers. our in drove addition to sales processing invoices larger new several are outstanding over day In of payments that to from last January up, the in our month ERP receivables X up same of sales in in of Challenges which July period. have to days year

these you. over as we of that backlog it issues month in as with am the cash the processing that, strong of And systems. again reported we through experienced result in included to a not the were generated to collection turn of inventory Although back I February working switch of results, going XXXX

Dan Jaffee

Great, up to everyone we important and first remind ask please it question I it. to thank the open then before your to I want the of go most Mark queue. you just end appreciate Susan,

question back will a number make we you time and so bring chance at one to question then Just sure if least permits everyone then for has two. ask

Mark the lines. So let's up open

Operator

Investor. Starr, Our Private Instructions] the line comes [Operator a first from question Ethan of

open sir. now is line Your

Ethan Starr

thank the years never with to lengthen over calls. Relations you she I my though in her ask getting even first Reg to I help for succeeded Before just conference Investor want all the question, and

Dan Jaffee

though. tried She

Ethan Starr

presentation be really the Okay good, private the starting by industry are in Indonesia? word well Indonesia as the I some to sell first mentioned a prison subsidiary guess to my parole that you - point. Vietnam or in quarter way is feed mention antibiotics Anyway there I want last you also question, into up eliminating understanding okay. think And set is going don’t believe I I at

Dan Jaffee

is So, a question? there

Ethan Starr

Are you. starting asked sell in Indonesia? I to Well, Yes. you

Dan Jaffee

fiscal At this the do to next or No. right it's discussing currently year. that time? not or timing this year fiscal We're whether

Ethan Starr

have subsidiary you But a Okay. set up?

Dan Jaffee

yes. Correct,

Operator

Performance Robert the from Center the Smith of Investors. of And our next question comes line

now Your is line open.

Robert Smith

with ask and wanted conversion the on I since to color altered how what's the just your and Yes, some trials? Amlan been of about happening trialing - you've rate the process approach,

Dan Jaffee

the You're product Varium about talking antibiotic like alternatives new or…?

Robert Smith

Yes, sure.

Dan Jaffee

in ability the in The or benefit. It's conversion performance producers Varium will the that companies to also to resources in be the different the essential probiotics. that antibiotics product a times success And rate more product. or like for additives. not has alternatives continued eliminate spend they're It'll replace oils to than three very feed seeing other the high. use favorable just We're been trial of showing but not two using. Typically,

very been successful. it's overall So,

Robert Smith

usually? the trailing long process How is

Dan Jaffee

Probably - slow. very nine months

research into scale do research a it farm houses it production then their again often or at there. from and a from will methodical typically one at they'll So operation, times two they slowly a and process very a take repeat farm, then small a chicken trial up

Operator

of Wealth And John of Advisors. question comes Bair next our Ascend from the line

open. line now Your is

John Bair

granularity quite for I'd calls the awhile, higher I these in saying your participated release. not Having in to like the earnings can't of information resist I appreciate and

operational question to system you when be down. it involved do ongoing wind So, down on that trend feel it's will costs of fully kind and is operational to the looks with regards that's be and and kind like my trending you anticipate that the essentially that? costs going Do ERP of the

Susan Kreh

Yes, got continue year-over-year. opportunities still to technology. trend down to it we there But will enhance the some

the expend we on first-half, second-half capital. as year almost opposed turned to of the to last So to as opposed everything spent it in

the a we forward from flatter run are comparisons right in look enhance year. look will at us, or at little and what bit. whether rest technology to we now then down year-over-year the this perspective, other ahead rate maybe the of where we So year rate want least opportunities for as fiscal stay run a ramp at of now a we'll that probably move But near rate

Operator

the on And we'll to follow-up questions. move

Our first follow-up comes from Mr. Starr. Ethan

Your now open. line is

Ethan Starr

else nothing going fiscal have you're diseases to themselves mentioned the Yes, that new I'm in for XXXX. those the there work wondering, launching products things products new issues will initially or out to last are there on? to works quarter competing totally couple already or are for be you a which that tackling of they market in And exists

Dan Jaffee

exist products in dollar They approaches to new multi-billion that the industry. and are new diseases

Ethan Starr

they already They So dealing - there products there your of view have are different out the yourself? different just or diseases approaches? don't approach with have or

Dan Jaffee

battle approaches same to Different the problem.

Operator

question next comes Investors. Smith the Center of from Robert our Performance And

open. Your line is now

Robert Smith

Yes, my first so question. to circling back

kind these a do or at the products like a not I'm where Amlan, but it's planning and long-term or a have five must essentially stick years, function, whether of your year off do see future have in you you're planning planning if function, three there any the you is take five way plan? You years sure hockey three you looking - something foreseeable foresee this

Dan Jaffee

let's indication, But in hoping seeing new mycotoxin That's next continue, We'll rate months. binders. say, we're XX yes, the X a we much than products our better products the rate our higher much growth if in traditional what for. new ramp in are to of the we're have a

So, now. that's the expectation right

Robert Smith

year have you plan? do And five or a three year

Dan Jaffee

Yes.

Robert Smith

one, or three five? Which

Dan Jaffee

Five.

Operator

Ascend from follow-up We a question have of Advisors. Wealth Bair John

now line open. Your is

John Bair

little of Kind away tag can more fines continue elaborate It on the is or is was regards question again, you that a that? a than to this that something ERP, bit go would first. anticipate second compliance of aspect a little with quarter in And lower you clarify to on does like a look that eventually? or that will trend the bit that

Dan Jaffee

second ever is above will sort that's quarter, going companies. dramatically the the not sort time. go product would not those able certain that were level just all in it went all to up go away way I'm then to But, baseline to I it the to never - say consumer because cut set, clear of the not that bar it's start We so have yes, trend sure as going of quarter continue pickups. we because beyond do know, a improve zero, it realistic. first they're and but we're accrue But and into you're our of You and pricing to it'll in north one-time the of

John Bair

you about for involve? they define can me ignorant that what kind those, being forgive what or of involves Well,

Dan Jaffee

to all it's you general Yes, when is promise late, you. too their upon Sure. the in from gets they around a accounts randomly be centers if different show truck Because rules. I date. the time have different gets of arrive say you; time were trying there window, everybody suppliers fine outside if it adjusting and manage they complete the and to the just up too mean early, at the all it it product they're and But would going fine If way just distribution agreed chaos. sort of

We So but during second percentage we ordinarily to near there dramatically of the you're the weren't quarter still that that time. XX%-XX% quarter, huge first we the we better. the it were get were all time, window within and stay able in of a nowhere

stable I yes, fines the like, never more just see XXX% feasible. of we there So know time, down. once you're go not will we get But it's it's the

get kind you get up, fine they too that. don't their either that they early. there they it's flat one. of tire appointment, miss the driver's a hard stop to Your show And or And

So, meet manage don't that's when they that the where them and cost those help and they that compliance they there's fine to supplier. a then come windows the their business pass cost that from to know them back right suppliers

John Bair

tight Is that from window, hours, vary mean, are or typically that a I days does customer-to-customer? pretty we talking

Dan Jaffee

would in say you're a talking XX-hour about but XX. It sometimes does I window, general vary,

John Bair

situation driver so That would forth. the and sense with make tightness of

Dan Jaffee

of -- receive. you all Yes, trucks think can they

John Bair

I'm sorry.

Dan Jaffee

their thousands if You it receiving of business. or they're think or three the missed five trucks days, plan by wouldn't all four they be to about can everybody able

it's window it a sense enough logically tight parties. both makes where So to

John Bair

Alright.

that the lot you. a clarifies Okay. get Thanks lot, in back a Very standpoint. my good. I’ll Thank from queue.

Operator

question next Ethan Starr. of comes the our line And from

Your line open. is now

Ethan Starr

U.S. customers without lightweight get and launching continuing are litter, Private label litter I label new new and lightweight still private and more you customers? the or are private retailers was see in label Canada? litter, how out soon sell-through to there

Dan Jaffee

new business things as which we're on our which we in increase all to in both the being the still rolling past, existing Yes, continue strategy, are of about up equal the and with And on dramatic I seeing and pricing business. mean I've performance, rolling talked execute is new a velocity. skews we ramp

give I anecdotally. this So,

who the So, and where We parity major launched was heavy the it going pricing continuing major improving with they performance what the going light because The retailer, of them having selling. through we it's to and it see a a parity. and The they're now scale lightweight. favor the is selling at our at we to heavy, parity, X, the at and velocities with tilt that pretty the significant We're the lightweight heavy parity. in premium probably it all what lightweight the in to to is wasn't take X retailer wasn't are out today movement. the - were was below keep actually does it selling cost testing think is more much total quality be the

by seeing absolutely the I you we a we're numbers at in mentioned bit new am but and or so unit are numbers. some I release everything So our allowed supply looked it, it. to Nielsen [indiscernible]. covered that way basis. I it's quote know, is some retailers at right, mean Nielsen quote All not Nielsen to got new little can news to a look on I we unit I this share,

Pride XX.X% priced the a ended, the going a a So of price the rate not two ways you're premium price weeks And XX-week from opening now And just as to category in guys get like It's popular you're we’re unit of so period same it's fold that basis on at popular ago share unit rate point other gained to then a not almost a on about XX Walmart, running we're is you lot or the last XX.X%, to when of going but you're Cat’s running year movement. see a but we basis. a very brand whichever and the points dollar cheap, again ring private competing two XX-week label, at on basis. more want. call, so

every that shopping me about validate thriving continues why is and is dollar to We're in a that retailers nationwide. one So, carts despite share. out well to Oil-Dri low doing of just branded six leave

that So you know we're rapidly. number a very formidable is growing supplier and

come it’s we on to like spend during but shop. self-serving, market actually obviously, buy So working know all unit, that retailer's on the about the each average they know units, $XXX the basket, and shoppers don't depending retailer they just $XXX

So to $XXX they brings get it. the unit store that grabbing and

about happy we're So that.

Ethan Starr

Okay.

is one unit one So, jug?

Dan Jaffee

the they could one the format be is yes, whatever unit - happen to jug, could it it It one be is that whatever buying bag, unit.

Ethan Starr

that's XX.X, stores? so XX.X or all And all is stores

Dan Jaffee

XX.X, somewhere… No, that was XX.X year last like year or it's and this

Ethan Starr

I of they And more there? more you're private there, it in guess more selling private selling you're and Canada use label label - lightweight sell people

Dan Jaffee

whole it's that's lagging. the Well, been -

weight Canada, launching Canada. ultimately almost and It dollars dollars about the in light in represents represents XX% U.S. private label in is label of the of XX% private So, the

a So, pool bigger clearly there. there’s

Ethan Starr

One the other question. you money save quick system ERP How long-term? will

Susan Kreh

periods. like got do moving mentioned earlier material not just that we rate money. lease down build of we've the inventories costs see about were we've why labor mean we're of question go it's peak But support the we get then around to all those that levels, warehouses and a because I there normal support asking. this It's to and things talking you add Well, because launch, had going in down? today would again, extra costs costs some back we to run as would of our was incremental I lot to more if saving that to about time

Ethan Starr

rid of itself save to No the just extra system start it, in itself software how - getting you forget long-term? will cost money the the itself

Susan Kreh

us give capability is more software to going itself long-term. The

we have profitability help lot implementing planning. improve to more material pricing. us insights some into just It help better help management, to with do costs. do capability transportation, prior a said requirement should if that our us It should save I didn’t this. So of It us there's than should

are that there's help cost So into. bundle a just us but that are say not it really I'd should of profitability things

Dan Jaffee

see it And more and infrastructure we'll plays it the foundation focus but grow. provides always which really on upon how all we’ll up the we could

much these everybody why all real-time truth believe all companywide are was the you pretty database visibility the for there you maxed in. put spreadsheets numbers euphemisms and to is point We same not heard out it system one old on work around into for was of had of may because a I it and Excel

more in future then figured us and the as infrastructure it would and possible. at the will enhance foundation really growth which technology, all we've working out upon the is I look to it and So form once the opportunities is for

Operator

will Smith question last line of our And of Performance Center from Investments. the come Robert the

line now open. Your is

Robert Smith

forward May, going to So - didn't you on words, In curve give it ahead? to anticipated color so other to that some you ahead price the profile give of increase me again you're is about is wiggle this room some going bring cost lagging in that. anticipate making the you're you or going your up be

Dan Jaffee

advances I caught hope it's was been one. competitors to in rational. all that is have then If be but it of that moving in so of the that to taken everybody but stabilized, hope yes got major have kind you obviously which a sort our rational as this not, target, and shape. price hope think gas, behind if mean be I stuff very good you costs All will X-stage freight well natural

now it hope, you that’s but moving the front chasing are a we've target. of the that So hope got in is

Robert Smith

you. Thank

Dan Jaffee

support. appreciate your you everybody, thank appreciate as interest Well your always,

talk and will be three in you will to then. months back Thank you you. at we We

Operator

and may participating Ladies you conference. This in thank you conclude wonderful does a day. and all disconnect. program gentlemen, today's for have Everyone the

Oil-Dri Corporation of America (ODC) 11 Mar 192019 Q2 Earnings call transcript