Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Phibro Animal Health Corp (NASDAQ:PAHC) reported a 32% year-over-year increase in total sales, with adjusted EBITDA rising by 85% and adjusted diluted EPS more than doubling. The animal health segment led with a 42% revenue growth, driven by the integration of the Zoetis MFA portfolio and strong execution across teams. Nutritional specialties maintained positive momentum with an 8% revenue growth, while mineral nutrition and performance products posted strong gains of 4% and 28%, respectively. The company has made targeted investments in procurement and supply chain resilience, helping manage potential disruptions and navigate external challenges like tariffs. Phibro Animal Health Corp (NASDAQ:PAHC) raised its full-year guidance, expecting net sales between $1.26 billion and $1.29 billion, reflecting solid execution and continued momentum.

Negative Points

Legacy MFA and other sales experienced a slight decline of 3% due to the timing of specific customer orders and strong performance in the prior year. The company faces potential pressure from tariffs on certain inputs and markets, with anticipated impacts ranging from $5 to $10 million in fiscal 2026. Higher SG&A expenses due to increased employee-related costs partially offset the increased gross profit driven by sales growth. The integration of the Zoetis MFA portfolio includes unusual impacts such as destocking of inventory and incremental costs related to transition service agreements. Corporate expenses increased by $3.4 million, driven by higher employee-related costs, impacting overall profitability.

Q & A Highlights

Warning! GuruFocus has detected 6 Warning Signs with PAHC.

Q: Can you elaborate on the company's exposure to tariffs, particularly regarding the upcoming pharma tariffs, and how you plan to mitigate these impacts? A: Glenn David, CFO: The majority of our manufacturing is done in the US, Brazil, and Israel, with some in Italy and China. We have taken steps to mitigate tariff impacts, such as building inventory, switching suppliers, renegotiating with suppliers, and implementing price increases on affected products. The slower MFA growth of 3% this quarter was mainly due to the timing of orders and a strong comparative quarter last year. Overall, MFA and other segments have grown 7% year-to-date.

Q: You updated your guidance, increasing EBITDA and EPS while keeping revenue guidance unchanged. What is driving this change? A: Glenn David, CFO: The increase is driven by a mix of factors, including strong performance in our vaccine portfolio, the Fiber Forward Income Growth Initiative, and improved margins from the Zoetis MFA portfolio. We have been able to leverage our global infrastructure more effectively, resulting in greater profitability.

Story Continues

Q: Can you provide more details on the tariffs, specifically which products or categories are affected, and the potential future impact? A: Jack Bentheim, CEO: The tariffs are not primarily from China, as most of our active ingredients are produced in the US, Brazil, and Israel. The tariffs affect inputs from various global sources. We are working on mitigating these impacts by negotiating with suppliers and adjusting raw materials.

Q: Are you lobbying for an exception for animal health from potential pharma tariffs, and what has been the impact of FX on the quarter? A: Jack Bentheim, CEO: We are actively lobbying with other animal health companies for tariff exceptions, as these products impact food prices. Initial reactions are positive. Regarding FX, we saw limited impact this quarter as we transact in US dollars in many international markets, minimizing FX effects.

Q: How is the company handling the integration of the Zoetis MFA portfolio, and what are the expected contributions to fiscal year 2025? A: Glenn David, CFO: The Zoetis MFA portfolio integration is progressing well, contributing positively to our margins. We expect continued strong performance and profitability from this portfolio, with a full year of revenue and adjusted income contribution anticipated in fiscal year 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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