Release Date: October 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oil-Dri Corp of America (ODC, Financial) achieved record consolidated net sales of $437.6 million for fiscal year 2024, reflecting a 6% increase over the prior year.
- The acquisition of Ultra Pet was accretive to earnings in the first quarter of ownership, contributing $4 million in net sales and $200,000 in pretax income.
- The company successfully integrated Ultra Pet into its ERP system, enhancing operational efficiencies and customer service.
- Oil-Dri Corp of America (ODC) reported a record gross profit of $125 million, with margins expanding to 29% from 25% in the previous year.
- The company announced a 2-for-1 stock split to increase trading liquidity and attract a broader set of investors.
Negative Points
- The agricultural and co-packaging coarse litter businesses experienced a decline in demand, with sales dropping by 17% and 4% respectively during fiscal year 2024.
- Despite record sales, the company faced increased costs, including higher labor, depreciation, and freight expenses, which impacted overall profitability.
- The integration of Ultra Pet incurred additional costs, including a $449,000 charge to cost of goods sold and $300,000 in transaction-related expenses.
- Oil-Dri Corp of America (ODC) anticipates similar levels of integration costs in the first quarter of fiscal 2025, potentially affecting short-term profitability.
- The company's tax rate may increase due to the Ultra Pet acquisition, as the Crystals business does not benefit from the depletion deduction available to other parts of the business.
Q & A Highlights
Q: Fluids Purification products sales were up 19% year-over-year. Is there any particular market that has been especially strong, such as food oils or transportation fuel?
A: Renewable diesel has been driving growth in our Fluids Purification division, with new plants frequently emerging. - Daniel Jaffee, CEO
Q: What progress is Amlan making, and what will it take for the poultry and swine industries to adopt your product worldwide? How are trials going with larger prospective customers?
A: We see good adoption of our products globally, especially in Asia Pacific, China, and the Americas. Despite a challenging year in agriculture, we are closing with strong momentum and successful trials. We expect continued growth as our products are evaluated and adopted. - Wade Robey, VP of Agriculture and President of Amlan International
Q: What opportunities do you see to expand distribution of silica gel crystal cat litter via new customers, private label, and in Europe?
A: We are focused on growing the private label segment of the crystal litter business, leveraging existing retailer relationships. While Europe is still being assessed, we are engaged with several national and regional customers for private label development. - Christopher Lamson, Group VP of Retail and Wholesale
Q: Do you expect to maintain gross margins this year?
A: While we don't provide forward-looking guidance, market rationality has allowed us to adjust pricing with cost changes. Growth in high-value product lines like fluids purification and lightweight cat litter should positively impact gross margins. - Susan Kreh, CFO and CIO
Q: How has your vertically integrated business model contributed to your competitive advantage, particularly in terms of cost structure and product innovation? Is purchasing a silica gel-based crystal cat litter an indication that clay is losing its luster in the litter market?
A: Our geographic spread from coast to coast provides a strategic advantage, especially in freight costs. While clay remains dominant, the growing segment of silica gel-based litter reflects consumer willingness to pay for enhanced performance. - Daniel Jaffee, CEO
Q: Where does debt paydown fall in the capital allocation priority chain?
A: Our priority is reinvesting in the business, followed by dividends, M&A opportunities, and then debt paydown if financially sensible. We aim to maintain financial flexibility for growth opportunities. - Susan Kreh, CFO and CIO
Q: Do you expect sales growth of Fluid Purification products for renewable diesel to continue increasing at similar percentages to fiscal '24? Are you selling these products internationally?
A: We expect continued growth in fiscal '25, particularly in North America. While we are active in Brazil, we do not currently sell into Indonesia. - Daniel Jaffee, CEO
Q: How do you feel about the strategic value and future opportunities in your substantial clay reserves? Is it still a significant competitive advantage?
A: Our clay reserves are a significant competitive advantage, with no new greenfield clay plants built in the US in decades. We ensure we have at least 40 years of reserves and continue to seek opportunities to acquire more. - Daniel Jaffee, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
