On June 6, 2024, Oil-Dri Corp of America (ODC, Financial) released its 8-K filing announcing record sales and gross profit for the third quarter and first nine months of fiscal year 2024. Oil-Dri Corp of America develops, manufactures, and markets sorbent products made predominantly from clay. Its absorbent offerings include cat litter, floor products, toxin control substances for livestock, and agricultural chemical carriers. The company operates through two segments: Retail and Wholesale Products Group and Business to Business Products Group, with products sold under various brands such as Cat's Pride, Jonny Cat, Amlan, Agsorb, Verge, Pure-Flo, and Ultra-Clear.
Performance Overview
Oil-Dri Corp of America reported consolidated net sales of $106.8 million for the third quarter, marking a 1% increase from the previous year. This growth was driven by higher prices and an improved product mix, despite lower volumes. The company also achieved a 10% increase in gross profit, reaching $30.1 million, with gross margins expanding to 28% from 26% in the prior year. This marks the 12th consecutive quarter of year-over-year sales growth.
Financial Achievements
Net income attributable to Oil-Dri for the third quarter was $7.8 million, a 9% decrease from the previous year. However, for the first nine months of fiscal 2024, net income surged by 75% to $30.9 million. Diluted earnings per share (EPS) for the quarter were $1.07, down 14% from the prior year, but year-to-date diluted EPS increased by 65% to $4.26.
Segment Performance
The Business to Business (B2B) Products Group reported a 2% increase in net sales to $36.2 million for the third quarter, driven by higher prices and improved product mix. The Retail and Wholesale (R&W) Products Group saw a 1% increase in net sales to $70.6 million, primarily due to higher prices of domestic and co-packaged cat litter products.
Income Statement Highlights
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Sales | $106,779 | $105,425 | 1% |
| Net Income Attributable to Oil-Dri | $7,777 | $8,535 | (9)% |
| Gross Profit | $30,137 | $27,467 | 10% |
| Diluted EPS - Common | $1.07 | $1.24 | (14)% |
Challenges and Future Outlook
Despite the positive sales and gross profit figures, Oil-Dri faced challenges with increased selling, general, and administrative (SG&A) expenses, which rose by 51% to $19.7 million. This increase was attributed to higher compensation, advertising expenses, and costs related to the acquisition of Ultra Pet Company, Inc. The acquisition, completed on May 1, 2024, is expected to be immediately accretive to earnings and create long-term value for shareholders.
"I am pleased to report we set new records for sales and gross profit for the third quarter, representing a 1% and 10% increase, respectively, over the prior year. These results reflect the continued growth of our fluids purification and cat litter businesses," said Daniel S. Jaffee, President and Chief Executive Officer.
Cash Flow and Balance Sheet
Oil-Dri's cash and cash equivalents totaled $46.8 million as of April 30, 2024, up from $29.7 million the previous year. This increase was driven by higher earnings and the issuance of $10 million in notes to finance the Ultra Pet acquisition. Significant uses of cash included capital investments for manufacturing infrastructure improvements.
Conclusion
Oil-Dri Corp of America's record sales and gross profit for the third quarter and first nine months of fiscal 2024 highlight the company's strong performance and strategic growth initiatives. While challenges such as increased SG&A expenses impacted the bottom line, the acquisition of Ultra Pet Company, Inc. positions Oil-Dri for future growth in the rapidly expanding crystal cat litter market. Investors and stakeholders can look forward to further details during the company's earnings discussion webcast on June 7, 2024.
Explore the complete 8-K earnings release (here) from Oil-Dri Corp of America for further details.
