Phibro Animal Health Corporation Reports Third Quarter Results TEANECK, N.J.

Phibro Animal Health Corporation Reports

Third Quarter Results

TEANECK, N.J., May 7, 2020 (Business

Wire) - Phibro Animal Health Corporation (NASDAQ:PAHC) today announced its financial results for its third quarter

ended March 31, 2020.

Highlights for the March 2020 quarter (compared

to the March 2019 quarter)

"The well-being of our employees, their

families and communities, and our customers is our priority during this challenging time. We also want to recognize the dedication

and sacrifices of health care professionals, first responders and many others as the world battles the COVID-19 pandemic,"

said Jack Bendheim, Phibro's Chairman, President and Chief Executive Officer. "I am proud of the way Phibro has responded

to the many challenges posed by the pandemic. I thank our employees for their dedication and focus to ensure we continue to manufacture

products and support our customers. The strong results we delivered this quarter are a direct reflection of the integral role our

products play in supporting the production of healthy, affordable food.

For the March quarter, our Animal Health

sales grew at a healthy 8% rate, reflecting accelerating growth in vaccines and nutritional specialty products, plus strong sales

of MFAs and other products in many regions, almost offsetting the loss of last year's sales in China. We believe we experienced

only a modest benefit from customer stocking in the quarter. International demand for our poultry vaccines continued to increase,

driven by new product introductions and increased penetration. Poultry and dairy-focused nutritional specialty products are gaining

additional acceptance, as customers gain an understanding of the animal welfare, health and efficiency benefits of our suite of

nutritional specialty products.

For the June quarter, we are seeing unprecedented

demand disruption and production impacts in the global food animal industry, due to the COVID-19 pandemic. We are actively working

with our customers to support their operations and remain the same trusted industry partner that we have always been. While our

sales to date have continued close to our expectations, we anticipate a decline in demand for our products in the June quarter,

as our customers attempt to navigate rapidly evolving market conditions. Given the many uncertainties in the industry, we are unable

to estimate the overall effects on our business for the quarter and, as a result, we are withdrawing our financial guidance."

Net sales of $210.7 million for the

three months ended March 31, 2020, increased $5.0 million, or 2%, as compared to the three months ended March 31, 2019. Animal

Health increased $9.8 million, while Mineral Nutrition and Performance Products declined $4.5 million and $0.3 million, respectively.

Net sales of $139.0 million for the three

months ended March 31, 2020, increased $9.8 million, or 8%. Net sales of MFAs and other declined $1.4 million, or 2%, as increased

demand from poultry and cattle customers in the U.S. and Latin America were offset by reduced volumes in China due to African Swine

Fever and regulatory changes that took effect January 1, 2020. Net sales of nutritional specialty products grew $6.4 million, or

23%, due to growth of domestic poultry and dairy products and the recent Osprey acquisition, which accounted for approximately

half of the nutritional specialties sales growth. Net sales of vaccines increased $4.8 million, or 28%, driven by strong international

demand for our poultry vaccines and growth in adjuvant sales.

Net sales of $56.2 million for the

three months ended March 31, 2020, decreased $4.5 million, or 7%, due to lower average selling prices, partially offset by increased

overall unit volume. The decline in average selling prices is correlated with the movement of the underlying raw material costs.

Performance Products

Net sales of $15.6 million for the

three months ended March 31, 2020, decreased $0.3 million, or 2%, driven by lower volumes of ingredients for personal care products.

Gross profit of $69.6 million for

the three months ended March 31, 2020, increased $4.7 million, or 7%, as compared to the three months ended March 31, 2019. Gross

profit increased to 33.0% of net sales for the three months ended March 31, 2020, as compared to 31.5% for the three months ended

Animal Health gross profit increased $5.4

million due to volume growth in nutritional specialty and vaccine products, partially offset by lower volume in MFAs and other.

Favorable product mix contributed to an improved gross profit ratio compared to the prior year. Mineral Nutrition gross profit

decreased $0.8 million, as the decline in average selling prices and unfavorable product mix more than offset lower raw material

costs. Performance Products gross profit increased $0.1 million.

Selling, general and administrative expenses

Selling, general and administrative expenses

("SG&A") of $48.2 million for the three months ended March 31, 2020, increased $5.9 million, or 14%, as compared

to the three months ended March 31, 2019.

Animal Health SG&A increased $5.0 million,

due to increased investments in product development and marketing costs, the effect of the Osprey acquisition and increased variable

compensation. Mineral Nutrition SG&A increased $0.5 million due to employee-related costs. Performance Products SG&A increased

$0.1 million. Corporate expenses increased $0.3 million due to increased public company costs.

Interest expense, net

Interest expense, net of $3.3 million for

the three months ended March 31, 2020, increased $0.3 million, or 11%, as compared to the three months ended March 31, 2019. The

increase in interest expense was primarily driven by the increase in outstanding borrowings on the Revolver, partially offset by

the benefit of lower variable interest rates. Interest income from our short-term investments declined due to lower rates.

Foreign currency (gains) losses, net

Foreign currency (gains) losses, net for

the three months ended March 31, 2020, amounted to net gains of ($0.6) million, as compared to $0.1 million in net losses

for the three months ended March 31, 2019. Foreign currency gains from third party balances were partially offset by foreign currency

losses from intercompany balances.

Provision for income taxes

The provision for income taxes was $5.2

million and $4.7 million for the three months ended March 31, 2020 and 2019, respectively. The effective income tax rate was 27.7%

and 23.9% for the three months ended March 31, 2020 and 2019, respectively. The provision for income taxes for the three months

ended March 31, 2019, included a $0.5 million benefit from increased foreign tax credits, a $0.2 million benefit from an adjustment

to the previously recorded mandatory toll charge on deemed repatriation of undistributed earnings of foreign subsidiaries and a

$0.1 million benefit from the exercise of employee stock options. The effective income tax rate, without these benefits, would

have been 27.8% for the three months ended March 31, 2019.

Net income of $13.5 million for the three

months ended March 31, 2020, decreased $1.3 million, as compared to net income of $14.8 million for the three months ended March

31, 2019. The decrease was primarily due to a $1.2 million decline in operating income, increased interest expense of $0.3 million,

increased income tax expense of $0.5 million, partially offset by favorable foreign currency gains of $0.7 million. The

decline in operating income was driven by increased SG&A costs of $5.9 million, partially offset by $4.7 million of increased

gross profit driven by volume growth in our Animal Health segment.

Adjusted EBITDA of $30.1 million for the

three months ended March 31, 2020, was comparable to the three months ended March 31, 2019. Animal Health Adjusted EBITDA increased

$1.4 million driven by increased gross profit from volume growth, partially offset by increased SG&A costs as a result of investments

in product development and marketing and the effect of the Osprey acquisition. Mineral Nutrition Adjusted EBITDA decreased $1.2

million, driven by decreased gross profit and increased SG&A costs. Performance Products Adjusted EBITDA increased $0.2 million,

while Corporate expenses increased $0.2 million.

Adjusted provision for income taxes

The adjusted effective income

tax rates for the three months ended March 31, 2020 and 2019, were 26.3% and 26.4%, respectively.

Adjusted diluted EPS

diluted EPS was $0.38 for the quarter, a decrease of $0.01, as compared to $0.39 in the prior year. Increased gross profit driven

by volume growth in the Animal Health business was more than offset by increased SG&A expense, as a result of investments

in product development and marketing and the effect of the Osprey acquisition.

BALANCE SHEET AND CASH FLOWS

Withdrawal of guidance for our fiscal year 2020

Due to the COVID-19 pandemic, the animal

production industry is facing unprecedented demand disruption and production impacts, including its ability to process animals.