Phibro(PAHC) - 2024 Q3 - Earnings Call Transcript

Financial Performance - Consolidated net sales for the quarter ended March 31, 2024, were $263.2 million, reflecting an increase of$ 17.6 million or a 7% increase over the same quarter one year ago [32] - Adjusted EBITDA increased by $2.3 million, with Animal Health improving by$ 2.3 million or 7% due to gross profit from increased sales, partially offset by higher SG&A [11][12] - Year-to-date revenue growth was 3%, with adjusted EBITDA growth of negative 3% [30] Segment Performance - The Animal Health segment posted $181.3 million in net sales for the quarter, an increase of$ 16.9 million or 10% compared to the same quarter last year [12] - Nutritional Specialties net sales declined by $4.8 million or 11%, primarily due to lower demand for microbial and dairy products [13] - Performance Products segment net sales were$ 17.7 million, reflecting a decrease of $0.7 million or 4%, driven by decreased demand for personal care product ingredients and industrial chemicals [66] Market Performance - Growth in Animal Health was driven by strong performance in Medicated Feed Additives (MFA) and vaccines, with MFA and other net sales growth of$ 15 million or 16% [35] - Vaccine net sales grew by $6.7 million, a 26% increase driven by product launches in Latin America and increased domestic demand [35] - The highest growth areas geographically were North America and South America [17] Company Strategy and Industry Competition - The company announced an agreement to purchase Zoetis medicated feed additive portfolio, which is expected to lead to strong earnings accretion and support investments in faster-growing segments [4][5] - The acquisition is anticipated to enhance and diversify Phibro's species and product offerings, maximizing opportunities related to the portfolio [27] - The company aims to continue investing in Companion Animal, Nutritional Specialties, and Vaccines as key focus areas post-acquisition [46] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about continued growth in the Animal Health business and improvements in Mineral Nutrition and Performance Products as demand rebounds [28][38] - The company affirmed its guidance for net sales, adjusted EBITDA, and adjusted diluted EPS, while updating GAAP net income and diluted EPS to reflect one-time costs related to the Zoetis acquisition [15][65] - Management highlighted the importance of maintaining dividends and refinancing debt to support the acquisition [57] Other Important Information - The company generated$ 40 million of positive free cash flow for the 12 months ended March 31, 2024, with $79 million of operating cash flow and$ 39 million in capital expenditures [14] - Cash and cash equivalents and short-term investments were $99 million at the end of the quarter [14] - The gross leverage ratio was 4.4 times, and the net leverage ratio was 3.5 times at the end of the third quarter [14] Q&A Session Summary Question: What drove the growth in the MFA business? - Strong growth in the Animal Health segment, particularly in Medicated Feed Additives and vaccines, with growth experienced in North America and South America [17] Question: Can you provide an update on the Companion Animal pipeline? - Progress continues, with the Zoetis MFA acquisition expected to enhance investment capabilities in Companion Animal [43] Question: What is the impact of the veterinary feed directives on market opportunities? - The Zoetis MFA business includes products not considered medically important for human medicine, allowing the company to serve customers with antibiotic-free options [47]