Phibro(US:PAHC)2023-05-06 21:28Financial Data and Key Metrics Changes - Consolidated net sales for Q3 2023 were $246 million, reflecting a 3% increase compared to the same quarter last year [55] - Adjusted net income and adjusted diluted earnings per share decreased by 13%, driven by higher SG&A expenses and taxes, offset by higher gross profit [28] - Consolidated adjusted EBITDA decreased by $0.6 million or 2% compared to the prior year's quarter, influenced by lower adjusted EBITDA in the Mineral Nutrition and Performance Products segments [7] Business Line Data and Key Metrics Changes - The Animal Health segment achieved a 10% year-to-date increase in net sales compared to the same period last year, with Q3 net sales of $164.4 million, an 11% increase year-over-year [4][8] - Within the Animal Health segment, MFAs and other products increased by $8.9 million or 11%, nutritional specialties grew by 9%, and vaccines saw a $3.3 million or 15% increase [5][29] - The Mineral Nutrition segment reported net sales of $62.9 million, a decline of 9% year-over-year, driven by decreased demand for trace minerals [9] - Performance Products segment net sales were $18.3 million, reflecting a $3.7 million decline primarily due to decreased demand for copper-based products [30] Market Data and Key Metrics Changes - The company is experiencing recessionary pressures in the Mineral Nutrition segment as customers reduce purchases and lower inventory [4] - The company noted strong demand for its products in Latin America, particularly in the vaccine category, following the opening of a new facility in Brazil [5] Company Strategy and Development Direction - The company continues to focus on raising prices when market conditions allow and remains optimistic about growth opportunities in the Animal Health segment [6] - The Companion Animal segment is viewed as a medium-term growth driver, with ongoing development in the pipeline [26] - The company is taking steps to better balance inventory to meet customer needs, particularly in the Mineral Nutrition segment [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year guidance despite challenging market conditions, projecting net sales of $960 million to $1 billion for the fiscal year [34] - The company anticipates improvements in free cash flow as it focuses on cost control and managing working capital [11] - Management views the business as recession-resistant, noting that demand for protein remains stable even during economic downturns [46] Other Important Information - The company had $192 million of liquidity available at the quarter end, including cash and short-term investments of $77 million [12] - The gross leverage ratio at quarter end was 4.3x, calculated by dividing total debt of $482 million by trailing 12-month adjusted EBITDA of $112 million [33] - The company plans to publish its second ESG report, reflecting progress made in 2022 [35] Q&A Session Summary Question: Update on feedlot dynamics in Mineral Nutrition - Management noted that demand is influenced by inventory adjustments following previous supply chain concerns, with a focus on managing working capital [36][37] Question: Impact of China's lifting of the embargo on Brazilian beef imports - Management acknowledged this change as a potential tailwind for the Latin America Animal Health business, which has been performing well [38] Question: Capacity of the Brazilian vaccine facility - The facility is involved in custom vaccine production, which is a farm-by-farm business, and recent approvals for poultry vaccines are expected to enhance growth [39] Question: U.S. broiler volumes and Brazilian cattle dynamics - U.S. broiler volumes are reported to be flat and holding steady, while Brazilian cattle business remains flat to slightly up [40][42]