Phibro(US:PAHC)2021-02-05 20:53Financial Data and Key Metrics Changes - In Q2 2021, consolidated sales decreased by 4% year-over-year, while diluted EPS increased by 10% [9][22] - Compared to the previous quarter, sales and diluted EPS grew by 6% and 7% respectively [10] - GAAP net income was $12.8 million, an 8% increase from the prior year, with diluted EPS of $0.32, a 10% increase [26][22] - Adjusted EBITDA, adjusted net income, and adjusted diluted EPS were comparable to the prior year [27] Business Segment Data and Key Metrics Changes - Animal Health segment sales decreased by 5%, driven by an 11% decline in MFAs and others, a 10% growth in nutritional specialties, and a 2% decline in vaccine sales [25][28] - Mineral Nutrition segment net sales were $54.2 million, a decrease of 3%, but adjusted EBITDA increased by 14% to $4.2 million [31][32] - Performance Products segment net sales increased by 8% to $15.8 million, with adjusted EBITDA rising by 56% to $2.3 million [33] Market Data and Key Metrics Changes - The company noted stabilization in the Animal Health industry despite ongoing pandemic impacts [11] - The company anticipates flat sales of MFAs and strong growth in nutritional specialties, particularly in Europe and Asia [12] Company Strategy and Development Direction - The company is investing in future growth, including trials of the pHi-Tech vaccine device in over a dozen countries [14] - Expansion of the Mineral Nutrition facility in Omaha aims to enhance food safety and product quality [16] - The company is exploring opportunities in the pet business, with a focus on products like Rejensa for canine joint health [17][20] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the near-term outlook, citing industry stabilization [11] - The company expects solid financial results for Q3, with guidance for net sales between $205 million and $208 million [38] - Management highlighted the impact of rising input costs on the animal protein business, which could affect herd sizes and expansion [63][70] Other Important Information - The effective tax rate for the quarter improved to 20.3% from 29.6% in the prior year due to regulatory changes [23] - The company maintained a gross leverage ratio of 3.6x as of December 31, 2020, with $165 million in available liquidity [35][36] Q&A Session Summary Question: Can you describe the derma care product and its approach? - Management indicated that the product is early in development and will undergo several milestones before market launch [42][43] Question: Can you discuss Performance Products margin contribution? - Management noted that unusual factors contributed to strong margins this quarter, but long-term focus remains elsewhere [44][45] Question: What is the company's interest in generics for cattle? - Management expressed strong interest in the cattle market, particularly in Mexico and Brazil, and mentioned a recent agreement to distribute a generic product in Canada [46][48] Question: What are the implications of new African swine fever strains in China? - Management acknowledged the challenges but noted that China is working hard to repopulate its hog population [51][53] Question: What is the status of the registration process in China? - Management confirmed that the re-registration package has been submitted, with an expected timeline of 1.5 to 2 years for participation in the re-herding cycle [54] Question: Can you provide updates on the next-gen OmniGen? - Management reported traction with the next generation product, OmniGen Pro, and expects continued success [55] Question: What are the key drivers of lower vaccine demand trends internationally? - Management attributed lower demand to economic impacts of COVID-19, particularly in poultry markets [58][59] Question: How are rising input costs affecting the outlook? - Management indicated that while input costs are rising, demand for protein will drive production, ultimately leading to higher prices [67][70] Question: What is the status of the FDA's assessment of Mecadox? - Management stated they are in touch with the FDA but expect slow progress due to the change in administration [94] Question: What is the timeline for the Irish facility launch? - Management confirmed they are on target for an early launch in the next fiscal year, which will open up new markets [97]