Phibro Animal Health Corp. announced financial results for its first quarter ended Sept. 30, 2020, with net sales rising $5.5 million, or 3%, to $195.2 million.

Net income was up $9.8 million to $12.3 million, compared to $2.5 million for the September 2019 quarter. The increase was primarily due to $5.5 million higher operating income, $500,000 lower interest expense and favorable foreign currency comparisons of $6.9 million, partially offset by increased income tax expense of $3.2 million.

Diluted earnings per share (EPS) for the first quarter were 30 cents, an increase of 24 cents.

The company reported that Animal Health and Performance Products results increased, while Mineral Nutrition results declined.

Gross profit of $64.1 million for the first quarter of 2020 increased $6.5 million, or 11%, versus the three months ended Sept. 30, 2019. Gross profit increased to 32.8% of net sales for the 2020 quarter, compared to 30.4% for the 2019 first quarter, which included $300,000 of acquisition-related cost of goods sold.

“Our financial results for the September 2020 quarter reflected the continuing recovery of the industry sectors we serve,” Phibro chairman, president and chief executive officer Jack Bendheim said. “We saw improved sales and profitability compared with the same quarter last year and, in particular, sequential improvement over the June 2020 quarterly results. As more fully described in our earnings guidance, we are forecasting additional sequential improvement for our December 2020 quarter as the industry continues to adjust and move toward more typical operating levels. At the same time, we remain cautious in the face of ongoing uncertainties resulting from the pandemic.”

Bendheim continued, “We saw positive trends in sales and profitability for our core Animal Health segment. Customer demand continues to increase for our expanded offerings in nutritional specialty products and vaccines. We see these categories as the future growth drivers of our business. At the same time, we continue to invest in strategic initiatives to set the foundation for the future.”

Results by segment

Animal Health. Phibro reported net sales of $128.4 million in the Animal Health business for the 2020 first quarter were up $6.5 million, or 5%.

Net sales of medicated feed additives and other increased $3.7 million, or 5%, driven by increased international demand, primarily for poultry products, coupled with the favorable timing of certain customer orders. Net sales of nutritional specialty products grew $2.2 million, or 7%, due to international growth in dairy products, while domestic sales were comparable to the prior year. Net sales of vaccines increased $700,000, or 4%, driven by increased international demand for our poultry vaccines.

Animal Health gross profit increased $5.5 million due to sales growth, a favorable product mix and favorable production costs, primarily related to foreign currency movements.

Mineral Nutrition. First-quarter net sales of  $51.4 million for the Mineral Nutrition business decreased $1.2 million, or 2%, as volume growth was offset by lower average selling prices. The decline in average selling prices is correlated with the movement of the underlying raw material costs.

Mineral Nutrition gross profit decreased $500,000, driven primarily by unfavorable production costs.

Performance Products. The Performance Products business had net sales of  $15.4 million for the quarter, up $200,000, or 1%. Increased sales of personal care product ingredients were partially offset by lower sales of copper-based products.

Performance Products gross profit increased $1.1 million, driven by a favorable product mix and production costs.

SG&A expenses

Selling, general and administrative (SG&A) expenses of $48.4 million for the first quarter of 2020 increased $900,000, or 2%, from the first quarter of 2019, which included $400,000 of restructuring costs and $500,000 of acquisition-related transaction costs. Excluding the effects of these costs, SG&A increased $1.8 million, or 4%.

Animal Health SG&A expenses increased $600,000, primarily due to increased professional fees to support the continued use of carbadox and costs associated with new products, partially offset by the favorable effect of foreign currency movements and timing of marketing spending.

Mineral Nutrition and Performance Products SG&A expenses were comparable to the prior year. Corporate SG&A expenses increased $1.1 million due to increased costs for strategic initiatives.

Financial guidance

Phibro reported that, given the uncertainty of the future course of the coronavirus pandemic and the ongoing difficult industry conditions, it will forecast only near-term expectations. The animal production industry continues to recover from the effects of the pandemic, and the company believes conditions will continue to normalize as its fiscal year progresses, gradually returning to typical operating levels.

Phibro expects financial results for the three months ending Dec. 31, 2020, to include: net sales of approximately $205 million, net income of roughly $9 million and diluted EPS of about 23 cents.

"We are encouraged by the improving trends in our business," Phibro reported.

"Compared to the same period last year, our expected December 2020 quarterly results are lower as our business continues to gradually recover from the effects of the pandemic. Net sales, net income and diluted EPS are expected to be below last year by $9 million, $3 million and 6 cents, respectively," the company said.