Full Press Release Details
Phibro Animal Health Corporation Reports
Second Quarter Results
TEANECK, N.J., February 3, 2021 (Business
Wire) - Phibro Animal Health Corporation (NASDAQ:PAHC) today announced financial results for its second quarter ended
Highlights for the December 31, 2020 quarter
(compared to the quarter ended December 31, 2019)
"Our financial results for the quarter
ended December 31, 2020 were strong. Although sales declined, profitability improved in comparison to the same quarter last year,"
said Jack Bendheim, Phibro's Chairman, President and Chief Executive Officer. Jack continued, "We are encouraged by
signs the industry is stabilizing, despite the continued pandemic, and we continue to invest in the future in both our production
and pet business. We recently announced an upgrade of our Omaha mineral nutrition plant and development continues on two early-stage
opportunities in our pet business. We are cautiously optimistic about the near term and, as detailed in our updated guidance, are
projecting solid third quarter financial results."
Net sales of $206.1 million for the three
months ended December 31, 2020, declined $7.9 million, or 4%, as compared to the three months ended December 31, 2019. Animal Health
and Mineral Nutrition decreased $7.5 million and $1.5 million, respectively, while Performance Products increased $1.1 million.
Net sales of $136.2 million for the three
months ended December 31, 2020, declined $7.5 million, or 5%. Net sales of MFAs and other decreased $10.4 million, or 11%, driven
by lower international demand, partially offset by favorable domestic customer order patterns. The decrease in international demand
was primarily concentrated in China and Latin America. The prior period included customer orders in China ahead of regulatory changes
effective January 1, 2020. Net sales of nutritional specialty products increased $3.3 million, or 10%, due to domestic and international
growth in dairy products. Net sales of vaccines declined $0.4 million, or 2%. Higher domestic vaccine sales were more than offset
by lower international volume due to timing of customer orders and reduced demand during the quarter.
Net sales of $54.2 million for the
three months ended December 31, 2020, decreased $1.5 million, or 3%, driven by lower average selling prices. The decline in average
selling prices is correlated with the movement of the underlying raw material costs.
Performance Products
Net sales of $15.8 million for the
three months ended December 31, 2020, increased $1.1 million, or 8%. Increased volumes of copper-based products were partially
offset by lower sales of personal care product ingredients.
Gross profit of $68.3 million for
the three months ended December 31, 2020, decreased $0.8 million, or 1%, as compared to the three months ended December 31, 2019.
Gross margin increased 80 basis points to 33.1% of net sales for the three months ended December 31, 2020, as compared to 32.3%
for the three months ended December 31, 2019.
Animal Health gross profit decreased $1.8
million due to lower volumes of MFAs and other products, partially offset by favorable product mix and favorable production costs,
primarily related to foreign currency movements. Mineral Nutrition gross profit increased $0.4 million, driven primarily by product
mix. Performance Products gross profit increased $0.6 million driven by volume increases coupled with decreases in raw material
and production costs.
Selling, general and administrative expenses
Selling, general and administrative expenses
("SG&A") of $48.4 million for the three months ended December 31, 2020, decreased $1.1 million, or 2%, as compared
to the three months ended December 31, 2019. SG&A for the three months ended December 31, 2019, included $0.2 million of other
acquisition-related costs. Excluding these costs, SG&A decreased $0.9 million, or 2%.
Animal Health SG&A decreased $1.5 million,
primarily due to the favorable effects of foreign currency exchange and decreased marketing and sales team travel costs driven
by COVID-19 safety concerns and limitations. Mineral Nutrition SG&A was comparable to the prior year; Performance Products
SG&A declined $0.2 million. Corporate SG&A increased $0.7 million due to increased professional fees and information technology
Interest expense, net
Interest expense, net of $3.2 million for
the three months ended December 31, 2020, decreased $0.2 million, or 6%, as compared to the three months ended December 31, 2019.
Interest expense decreased due to favorable variable interest rates, partially offset by higher levels of debt outstanding and
lower interest income from short-term investments.
Foreign currency (gains) losses, net
Foreign currency losses, net
for the three months ended December 31, 2020, were $0.6 million, as compared to $0.7 million in net gains for the three months
ended December 31, 2019.
Provision for income taxes
The provision for income taxes was $3.3
million and $5.0 million for the three months ended December 31, 2020 and 2019, respectively. The effective income tax rate was
20.3% and 29.6% for the three months ended December 31, 2020 and 2019, respectively. The provision for income taxes during the
three months ended December 31, 2020, included (i) a $0.9 million benefit for the year ended June 30, 2019 related to final regulations
issued in July 2020 for the Global Intangible Low-Taxed Income ("GILTI") tax and (ii) an $0.8 million benefit related
to exchange rate differences on intercompany dividends. The effective income tax rate, without these benefits, would have been
30.8% for the three months ended December 31, 2020.
Net income of $12.8 million for the three
months ended December 31, 2020, increased $0.9 million, as compared to net income of $11.9 million for the three months ended December
31, 2019. Operating income increased $0.3 million, driven by favorable SG&A expenses, partially offset by lower sales and related
gross profit. The decrease in gross profit in the Animal Health segment due to lower overall sales was partially offset by increased
gross profit in the Mineral Nutrition and Performance Products segments. Favorable production costs and product mix contributed
to the increase in the gross margin compared to the prior year. Interest expense was lower by $0.2 million, while foreign currency
losses increased $1.3 million. Income tax expense declined $1.8 million, primarily due to $1.7 million in tax benefits related
to GILTI income tax regulations and exchange rate differences on intercompany dividends.
Adjusted EBITDA of $28.5 million for the
three months ended December 31, 2020, was comparable to the three months ended December 31, 2019. Animal Health Adjusted EBITDA
decreased $0.5 million on lower sales and gross profit, partially offset by favorable SG&A costs. Mineral Nutrition Adjusted
EBITDA increased $0.5 million, driven by increased gross profit on favorable product mix. Performance Products Adjusted EBITDA
increased $0.8 million driven by increased gross profit. Corporate expenses increased $0.8 million, primarily due to increased
professional fees and information technology costs.
Adjusted provision for income taxes
The adjusted effective income tax rates for
the three months ended December 31, 2020 and 2019, were 28.6% and 28.0%, respectively.
Adjusted net income was $13.9 million for the
three months ended December 31, 2020, comparable to the prior year.
Adjusted diluted EPS
Adjusted diluted EPS was
$0.34 for the quarter, comparable to the prior year.
BALANCE SHEET AND CASH FLOWS
Our expected financial results for the three months ending March
Although there are signs that the Animal Health
industry is stabilizing, we continue to forecast only near-term expectations given the uncertainty of the future course of the
COVID-19 pandemic and the potential for demand and production disruptions.
WEBCAST & CONFERENCE CALL DETAILS
Phibro Animal Health
Corporation will host a webcast and conference call during which the company will review its financial results and respond to questions.
NOTE: In order to join this conference
call, all participants will be required to provide the Conference ID number.
A replay of the webcast will be archived and
made available on Phibro's website.
Statements: This communication contains forward-looking statements that are subject to risks and uncertainties. All statements