Full Press Release Details
Phibro Animal Health Corporation Reports First
N.J., November 2, 2021 (Business Wire) - Phibro Animal Health Corporation (Nasdaq:PAHC) today announced financial
results for its first quarter ended September 30, 2021.
"I was most encouraged by first quarter sales performance as
it reflects continued growth in the demand for our products, particularly nutritional specialties and vaccines. Overall, our
financial performance was in line with internal expectations," said Jack Bendheim, Phibro's Chairman, President and
Chief Executive Officer.
Jack continued, "While we raised the
prices of select products, the increases did not fully compensate for the higher cost of freight, labor, and the unfavorable
currency movements that are putting pressure on margins. Subject to normal competitive conditions, we plan to adjust prices
further and pass-through incremental freight costs in the form of a surcharge, the benefit of which should be
realized in the second half of our fiscal year. Consequently, we are raising full year net sales guidance to $860 - $890
million, while maintaining our previous guidance on adjusted
Net sales of $214.7 million for the three months
ended September 30, 2021, increased $19.5 million, or 10%, as compared to the three months ended September 30, 2020. Animal
Health, Mineral Nutrition and Performance Products net sales increased $12.6 million, $3.0 million and $3.8 million, respectively.
Net sales of $141.0 million for the three months
ended September 30, 2021, increased $12.6 million, or 10%. Net sales of MFAs and other increased $5.1 million, or 6%, driven by stronger
international demand, primarily for poultry and cattle products in the Latin America and Southeast Asia regions, partially offset by timing
of certain domestic and other international customer orders. Net sales of nutritional specialty products increased $3.4 million, or 10%,
driven by strong international demand in dairy products. Net sales of vaccines increased $4.2 million, or 25%, driven by growth across
all major markets, but primarily stronger demand in Eastern Europe and India.
Net sales of $54.4 million for the three
months ended September 30, 2021, increased $3.0 million, or 6%, driven by increased average selling prices, partially offset by lower
volumes. The increase in average selling prices is correlated with the movement of the underlying raw material costs.
Performance Products
Net sales of $19.2 million for the three
months ended September 30, 2021, increased $3.8 million, or 25%. The increase was driven by strong demand for copper-based products
coupled with increased selling prices correlated with underlying raw material costs.
Gross profit of $64.7 million for the three
months ended September 30, 2021, increased $0.6 million, or 1%, as compared to the three months ended September 30, 2020. Gross
margin decreased 270 basis points to 30.1% of net sales for the three months ended September 30, 2021, as compared to 32.8% for the
three months ended September 30, 2020.
Animal Health gross profit decreased $1.3 million
due to higher logistics and manufacturing costs, as well as unfavorable geographic and product mix. Mineral Nutrition gross profit increased
$1.6 million, driven primarily by higher average selling prices and favorable product mix. Performance Products gross profit increased
$0.2 million driven by volumes.
Selling, general and administrative expenses
Selling, general and administrative expenses ("SG&A")
of $50.1 million for the three months ended September 30, 2021, increased $1.6 million, or 3%, as compared to the three months ended
September 30, 2020. SG&A for the three months ended September 30, 2020, included $0.6 million of stock-based compensation.
Excluding these costs, SG&A increased $2.2 million, or 5%.
Animal Health SG&A increased $1.1 million,
due to investments in market expansion initiatives in certain international regions, as well as increased marketing and sales team travel
costs. Mineral Nutrition and Performance Products SG&A were comparable to the prior year. Corporate SG&A increased $0.4 million
due to incremental investments in strategic initiatives and higher compensation costs, partially offset by the decrease in stock-based
Interest expense, net
Interest expense, net of $2.9 million for the
three months ended September 30, 2021, increased $0.1 million, or 3%, as compared to the three months ended September 30, 2020.
Interest expense, net increased primarily due to higher levels of debt outstanding and lower interest income, partially offset by favorable
variable borrowing rates.
Foreign currency (gains) losses, net
Foreign currency (gains) losses, net for the three
months ended September 30, 2021, amounted to net losses of $2.1 million, as compared to $3.6 million of net gains for the three months
ended September 30, 2020. Foreign currency (gains) losses, net primarily arose from intercompany balances, driven by the weakening
of the Turkish, Mexican and Brazilian currencies relative to the U.S. dollar.
Provision for income taxes
The provision for income taxes was $3.1 million
and $4.2 million for the three months ended September 30, 2021 and 2020, respectively. The effective income tax rate was 31.9% and
25.5% for the three months ended September 30, 2021 and 2020, respectively. The provision for income taxes during the three months
ended September 30, 2021, included a $0.4 million expense resulting from changes in uncertain tax positions related to prior years.
The effective income tax rate without this expense would have been 27.4% for the three months ended September 30, 2021.
Net income of $6.5 million for the three months
ended September 30, 2021, decreased $5.8 million, as compared to net income of $12.3 million for the three months ended September 30,
2020. Operating income declined $1.1 million, driven by increased SG&A expenses, partially offset by higher gross profit. The increase
in gross profit in the Mineral Nutrition and Performance Products segments was partially offset by a decrease in gross profit and gross
margin in the Animal Health segment, driven by higher logistics and manufacturing costs, as well as unfavorable geographic and product
mix. SG&A expenses increased due to investments in strategic initiatives and increased travel costs. The variance in foreign currency
(gains) losses resulted in a $5.8 million unfavorable impact on income before income taxes, while income tax expense decreased $1.1 million.
Adjusted EBITDA of $22.5 million for the three
months ended September 30, 2021, declined $1.8 million, or 8%, as compared to the three months ended September 30, 2020. Animal
Health adjusted EBITDA decreased $2.5 million on lower gross profit and increased SG&A costs. Mineral Nutrition adjusted EBITDA increased
$1.5 million, driven by increased gross profit on higher average selling prices and favorable product mix. Performance Products adjusted
EBITDA increased $0.2 million driven by increased gross profit. Corporate expenses increased $1.0 million, primarily due to incremental
investments in strategic initiatives and higher compensation costs.
Adjusted provision for income taxes
The adjusted effective income tax rates for the three
months ended September 30, 2021 and 2020, were 26.4% and 31.0%, respectively. The decrease in our adjusted effective income tax rate
was driven primarily by a change in the jurisdictional mix of earnings.
net income of $10.2 million for the three months ended September 30, 2021, decreased $0.6 million, or 6%, as compared to the three
months ended September 30, 2020. The decrease was driven by higher SG&A expenses, partially offset by a lower provision
for income taxes. SG&A expenses increased due to incremental investments in strategic initiatives and increased travel costs.
Adjusted diluted EPS
Adjusted diluted EPS was $0.25
for the quarter, a decrease of $0.02, as compared to $0.27 for the three months ended September 30, 2020.
BALANCE SHEET AND CASH FLOWS
REVISED FINANCIAL GUIDANCE
Our revised projections of financial performance for the year ending
June 30, 2022, are as follows:
This revised financial guidance includes but
is not limited to sales growth across all three business segments, further price adjustments and the pass
through of incremental freight costs in the form of a surcharge, where applicable and competitive conditions allow.
We are not providing revised forward-looking
guidance for certain GAAP financial measures or a quantitative reconciliation of forward-looking non-GAAP financial measures to the most
directly comparable GAAP measure because we are unable to predict with reasonable certainty the ultimate outcome of certain significant
items, including but not limited to the impact of foreign currency exchange gains or losses.
The COVID-19 global pandemic continues to
present challenges to the animal health industry, including but not limited to increased material and shipping costs and labor cost
increases and shortages.
We will continue to monitor the impact the pandemic is having on our