Phibro seeks growth in aquaculture as Q1 sales growth slows

During Phibro Animal Health's ($PAHC) earnings call on Tuesday, one analyst asked about the company's aquaculture business and whether it was seeking to expand it. The query was understandable in light of the news last week that animal-health giant Zoetis ($ZTS) was buying a leading maker of fish vaccines, Pharmaq, for $765 million.

"As you remember we just launched our efforts in [aquaculture] over the last two years," replied Phibro CEO Jack Bendheim. The company is testing some products, exploring the market opportunity for fish vaccines and considering acquisitions in the sector, he said.

When asked specifically about the "rich multiple" Zoetis paid for Pharmaq--about 9 times trailing sales--Bendheim declined to comment, except to say that Phibro's relatively small size "would restrain us from competing in those kinds of markets."

Phibro, which sells specialty nutritional products and vaccines for food animals, has been working to expand its market share, particularly in vaccines. The work has paid off, though economic challenges in overseas markets were a drag on the company's fiscal first quarter. Phibro reported sales of $181.7 million, up just 3% from the year-ago period, and net earnings that were relatively flat at $18.8 million. Earnings adjusted for nonrecurring gains came in at $0.44 a share, beating the average analyst estimate of $0.42, according to Zacks.

In January, Phibro began selling vaccines made by MJ Biologics, which helped push its total vaccine sales up 12%, the company said in its earnings release. Its sales of nutritional specialty products grew 15%, thanks largely to a new poultry line. The products are designed to help control pests and bacteria without the use of antibiotics--an idea that has been gaining steam in the U.S. due to a push to eliminate the spread of antibiotic-resistant bugs.

When asked about overall demand for poultry products, Bendheim said the industry in the U.S. is "quite healthy" but the export market remains a challenge because of the strong dollar.

Investors were clearly hoping for a better start to Phibro's fiscal year, however. By midday Tuesday, shares were down 5% to $31.38.

- here's the earnings release
- read a transcript of the earnings call here

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