Phibro(US:PAHC)2022-11-13 17:42Financial Performance and Key Metrics Changes - Consolidated net sales for Q1 2023 were $232.5 million, an increase of $17.9 million or 8% year-over-year, driven by growth in both Animal Health and Mineral Nutrition segments [18] - GAAP net income and diluted EPS decreased by 41% due to higher SG&A expenses, interest expenses, and foreign exchange losses, despite favorable gross profit and lower income tax expenses [19] - Adjusted net income and adjusted diluted EPS declined by 18%, driven by higher SG&A expenses and taxes, offset by higher gross profit [20] Business Segment Performance - The Animal Health segment reported net sales of $154.9 million, a 10% increase year-over-year, with notable growth in MFAs and other products, nutritional specialties, and vaccines [21][22] - Mineral Nutrition segment net sales were $59.6 million, reflecting a 10% increase, driven by higher average selling prices of trace minerals [24] - Performance Products segment net sales were $18 million, a 6% decline compared to the previous year, attributed to lower demand for copper-based products [26] Market Data and Key Metrics Changes - The company experienced macroeconomic challenges, including supply chain disruptions and sustained inflation, impacting margins and inventory carrying values [10][11] - Free cash flow for the 12-month period ending September 30, 2022, was negative $21 million, with significant capital expenditures of $38 million [28] Company Strategy and Development Direction - The company is optimistic about growth opportunities from strategic investments in vaccines and nutritional specialties, with new registrations expected to open new markets [12][13] - The company plans to continue raising prices to mitigate input cost pressures while managing discretionary spending [11] Management's Comments on Operating Environment and Future Outlook - Management remains bullish on the business despite short-term uncertainties, anticipating continued demand for products globally [16][43] - The company reiterated its full-year 2023 net sales guidance of $960 million to $1 billion and adjusted EBITDA guidance of $113 million to $118 million, while revising net income and EPS guidance downward due to increased interest expenses and tax regulation changes [15][40] Other Important Information - The company executed a credit agreement amendment to increase its unused revolving credit facility by $60 million, reflecting a prudent action amid current market uncertainties [35] - The adjusted effective tax rate for fiscal year 2023 has been raised from 30% to 33% due to changes in U.S. tax regulations affecting Brazilian income tax [41] Q&A Session Summary Question: What is embedded in your fiscal 2023 guidance regarding pricing? - The company continues to take pricing actions where competitive conditions allow, reflecting higher input costs and tighter margins [46][47] Question: Can you provide an update on fundamentals across key livestock categories? - Overall demand in the animal protein business remains strong, with specific challenges noted in the U.S. cattle business, while Brazilian cattle operations are performing well [48][49] Question: How did sales of Rejensa trend in the context of your target of doubling sales year-over-year? - Sales were high double digits but slightly short of the target, with some slowdown noted relative to previous growth rates [52][53] Question: Can you elaborate on the Brazilian income tax law change? - The adjusted effective tax rate increased due to changes in U.S. federal tax legislation affecting Brazilian earnings, leading to a higher GILTI tax liability [55]