Good day and thank you for standing by. Welcome to the Q4 2021 Investor Teleconference for Oil Dri Corporation of America.
At this time, all participants are in
a listen only mode. After the speakers' presentation, there will be a question and answer session. I would now like to hand the conference over to your speaker today, Mr. Dan Jaffe, President and CEO. Thank you.
Please go ahead.
Thank you, Deb, and welcome, everyone, to our Q4 fiscal year ending teleconference as we completed our 81st Fiscal year and business, very exciting. Joining me on the call today is Susan Cray, CFO Molly Vanden Heuvel, COO Jessica Moskowitz, VP and General Manager of our Consumer Products division Fred Kao, Vice President of Global Sales for Amlan International Laura Sheulan, Vice President and General Counsel and Leslie Garber, Manager of Investor Relations. Leslie, will you walk us through our safe harbor?
Yes. Thank you. Welcome, everyone. On today's call, comments may contain forward looking statements regarding the company's performance in future periods. Actual results in those periods may materially differ.
In our press release and in our SEC filings, we highlight a number of important risk Factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil Dri Stack. Thank you for joining us. Dan?
Great. Thank you. And before I turn it over to Susan For what I call a play by play, I'll give a little color on the year and I'll try not to steal too much of a thunder, but obviously Very happy with the top line growth, overall 8% growth, all organic, no acquisitions during the year, And then 20% in the 4th quarters. You can imagine what that did, especially what everyone knows about global supply chains, what a great job our team did of getting all that out. However, costs, we're in a whole new cost environment.
I mean, whatever we thought we were seeing is way worse. And so we were in a Constant game of catch up and we just put out a news release this week about it. So we're still playing catch up. But the good news is the strategies are working, the supply chains, it's My father used to always joke that when people would ask him, how's your wife? And he'd say, compared to who?
And so how is our supply chain compared to Hooves? I mean, when you go to the shelves, certainly in the consumer area, you see out of stocks everywhere. And generally, you See the competition more out of stock than we are, which is why I think we were up so much in the Q4. So it is tough. Challenging times, heads are down, trying to execute on price increases and cost control as we are also in the midst of really some Very exciting growth opportunities in many of our businesses.
So it's very challenging times. Very proud of the team. They've done a phenomenal job. We've certainly Correct. One of our core values, which is the W, which is work, life, talent, we've definitely been Leaning too much towards work and not enough towards life these last 90 to 120 days, but the team has cracked up and I'm very appreciative of what they've done.
So Susan, I'm going to turn it over to you for some details and then you can kick it back to me for Q and A.
Sounds good. Thanks, Jan. 2021 is a year of momentum, of challenges and of opportunities. We experienced momentum that Jan was just describing in our sales growth of full year consolidated net sales reached an all time record high of $305,000,000 great decline growth over the prior year. This was primarily due to the higher demand of our cat litter and agricultural products, which increased by 9% 19% respectively over the prior year.
Revenues from our fluids fabrication products were 3% higher than last year, while sales of animal health and nutrition products were essentially Flat. Industrial and sports products revenues grew 9% year over year, and we experienced steady sales growth of 2% from our pro packaging course cat litter business. Annual consolidated gross profit was a different story, as Dan mentioned, and it decreased by $3,500,000 year over year as we experienced the significant challenges of market based inflation. Commodity based cost increases caused our cost of goods sold per manufactured ton, a key financial metric for Oil Dry, increased approximately 8% compared to the prior year, that's a very significant portion of those cost increases occurring in the back half of the year. Packaging costs, which include resin based drugs and tails as well as experienced the most dramatic increase at 19% year over year, followed by natural gas, which increased 15% year over year.
Domestic freight, which has been under pressure to help the rates and availability, increased 14%. Higher supply chain team worked hard to achieve during fiscal 2021. Selling, general and administrative expenses for the year decreased 8% from the prior year, primarily due to lower advertising spending, lower annual incentive bonus accrual and lower pension As for opportunities, we increased our investment in SG and A in our Animal Health Nutrition Products business by $1,000,000 year over year, and we are excited about new customers and the activity with those customers that this enhanced team has enabled to generate. While we were disappointed with our ability to maintain our margins during the rising cost environment that we experienced since 2021. I would like to point out that our prior year fiscal 2020 results included a onetime pretax gain of $13,000,000 related to a confidential licensing agreement.
Excluding that prior year one time gain, our operating income of $13,000,000 in fiscal 2021 increased 10% growth over the prior year. Full year net income for the fiscal 'twenty one attributed to Oil Dri was $11,100,000 Net income per diluted common share was $1.57 That compares to 2.65 cents per diluted common share in the prior year. That amount included $13,000,000 pre tax onetime gain I mentioned earlier. Excluding the impact of that onetime gain, which equated to $1.26 per share, last year's net Income per diluted common share would have been $1.39 meaning that this year's result is 13% higher in fiscal 2020 excluding the onetime gain. Now switching gears to some 4th quarter highlights.
Dan mentioned our 4th quarter consolidated net sales grew 20% and reached an all time quarterly high at $78,000,000 Sales from our tractor, industrial and sport and agricultural headwinds drove the majority of this growth. Demand for fluids, purification products and packaged course cat litter also increased in the Q4 compared to the prior year, while revenues from our animal health and nutrition products were essentially flat. As a result of commodity prices that Continued to rise rapidly during the Q4, our consolidated gross profit decreased by approximately 1,500,000 even after the price increases that we implemented during the quarter. Due to extreme inflation on resin and lumber prices, Our packaging costs per manufactured ton increased 40% in the quarter compared to the same quarter in the prior year. Further contributing to the reduction in margin was higher natural gas per manufactured tonne, which increased 37% in the Q4 over the same quarter in the prior year.
The macroeconomic environment remains challenging, and we are working with our customers to implement additional price increases to help cover the rapidly increasing input costs. Now let me talk a little bit about our product Business Class Group's 4th quarter revenues reached a record $30,000,000 a 13% increase over the same quarter in the Prior year, that was primarily driven by strong revenue growth from agricultural and fluid purification businesses. Sales of agricultural products increased by 37% over the prior year and demand from one of our largest customers rose in the quarter. B2B Products has also benefited from a 7% increase in revenues in the fluids purification business. We sell bleaching clay products were strong in North America and Latin America.
Our co packaging horse cat litter Products experienced increased sales of $16,000,000 in the 4th quarter compared to the prior year, primarily due to increased pricing. And while 4th quarter revenues of Animal Health and Nutrition Products remained flat compared to the same period last year, We were encouraged by strong year over year sales growth of 66% in the quarter in China. Operating income for the G2D Products increased $3,800,000 in the 4th quarter compared to $6,300,000 in the Q4 of fiscal 2020. The favorable impact of strong revenue growth was more than offset to the ramp up in driving chemical costs has been discussed.
The
retail and wholesale product group's 4th quarter revenues were 48,000,000 a 26% increase over the same quarter in the prior year, driven by our branded and private label jackpotter products. We continue to benefit from our strategic focus on light weight litter, and sales were up 43% in the Q4 over the prior year. And our e commerce business also experienced double digit revenue gains in the 4th quarter. Our financial position remains strong as is reflected in our balance sheet. We ended the year with cash and cash equivalents of $500,000 We carry very little debt, planning to adjust the total capital ratio of about 5%.
One of the primary uses of our cash is the growing trade working capital. During fiscal 2021, our accounts receivable increased to 6,000,000,000 reflecting our strong sales growth. The decrease in our current liabilities of $4,000,000 for the fiscal year was primarily driven by and in the annual incentive bonus. We also use our cash to fund capital investments in our business, including those required for growth and those required to drive cost reductions in addition to normal repair and replacement capital. At times, we used cash to opportunistically repurchase stock to help offset dilution and shares of our restricted stock best.
And for fiscal 2021, we repurchased approximately 88,000 shares of our common stock for $3,100,000 I open by saying that 2021 was a year of momentum, challenges and opportunities. And we have momentum in sales growth across many of our product groups. We're experiencing significant inflationary challenges that require us to increase our pricing to our customers. And we are capitalizing on our strategic opportunities in our lightweight catheter products and positioning ourselves for future growth in our animal health nutrition products. Oil Dri remains a strong financial position with low leverage, And we are well positioned to fund our future strategic opportunities.
So with that, Dan, I'll turn it back over to you.
All right. Thank you, Susan. And Kevin, at this time, we'd like to open up the lines. And as he mentioned, and as always, I'll ask your most important question first and then go back into the queue so that everybody has a chance to ask at least one question.
Our first question comes from the line of Ethan Spar, a private investor. Ethan, you may ask your question.
What progress are you making in marketing and selling Varium and NeoPrime? What feedback are you getting from the trials? And when do you think we might see increased sales of these products?
Well, I think I mentioned in the was it in the 4th or the 3rd quarter that we're hoping for some activity in the Q2, which is coming up. So I'll stick with that for now. As you know, I'm not going to get into too many details, but it's still very positive. But I will tell you That we're in such a dynamic cost environment that yes, we are still doing a lot of things for the future, Our heads are down just trying to execute, trying to get product out the door, trying to get trucks to show up, Trying to get pallets to put our products on top of, trying to get all the additives that we need, everything is under unbelievable pressure and I'm sure you're seeing it And all the articles you read. So I will say still long term very bullish on animal health.
We did hire a couple more people to help fill out the During the quarter, so it continues to validate that they're seeing what those who joined us before them saw. We really do have one of the best Solutions. I don't know if you saw in the most recent month or 2, but the EU now has mandated that all imported meat Be antibiotic free and therefore that causes repercussions throughout their supply chain. They're a major importer from Brazil And so then that ripples into Brazil. So anyway, all good news.
Fred's on the call, but I don't want to get into too many details because it's just not But it's all happening and it's all good.
The next question comes from the line of Robert Smith of the Center. Robert, you may ask your question.
The Center for Performance Investment. Yes. So good morning, everyone. Hi, Bob. Dan, you know that I've been an investing member of the Oil Dri family for a long time, Now more than 25 years.
So I just want to share with you that In the greater part of the last decade, we've been missing an action, so to speak, from 1 of the greatest bull markets in history. And in part, I feel that's because we're missing an action from Investor Relations and sharing the story with the investment community. You're a small cap stock. There are numerous ways and means of getting your story out. You have a transformative story to tell about animal health and the future of the company.
A great story that you've got to tell. And I hope that you'll give Much greater consideration for doing that.
Bob, you and I can debate this all you want, and it's just going to make me look worse. But the fact of the fact, I mean we're trading at 16.5 times earnings. What do you think our multiple should be? If I had been out in the street hawking the stock, You think we should trade it 20? We're not a growth stock.
I mean, we hope to be, but we're a valued stock. We've paid good dividend, high yield. So what do you think our multiple should be?
The multiple is not that important. It's the future earning power of the company and a
transformative business. So whatever the multiples reflect it or that It's just
a few that if the Street knew about your animal health potential, the stock would be closer to 60 35.
All right. But I mean, given what they can see, I hear you, but we're going to keep agreeing to disagree. And from better or for worse, Nejana, Who took us public back in 1971 and served on our Board for years and is revered in the investment world, The management target of William Blair absolutely hammered me. He said between hawking your stock and getting expectations out in front of your performance, you're going to end up doing is disappointing somebody. Put your head down and run the business and they will find you.
And I think our multiple is very relevant. I think we are well priced. When we start to deliver on animal health, it will move. But to get it going in front of that performance, To me, I don't see the value of that. So Then the stock market
is a discounting mechanism. No one's buying It's not from present day value. They want to see the future. You've got a story to tell about your future. Tell it.
Well, then I'm going
to ask you again, what do you think Well, should we. If it was at 6 or 8, I'd be agreeing with you. It's at 16.5.
The multiple average multiple in the market is in the mid-20s now. And what I'm suggesting is For small caps? If you told the Sorry, the stock would be posted at $60.35 That's my
Did you have a question or just how
Well, I do have a question. So my question is, can you tell us anything further about the trials? Where are the several trials being held And the timeline for when they might come to greater fruition.
Well, unfortunately, we're out of time. So I would have gotten into that. No, I'm just kidding, Bob. No, I will not be telling you where the trials are being held. We go through this every single quarter.
You guys push me to have longer teleconferences, but the questions seem to be the same and I have to keep giving you the same answer. In football, My analogy doesn't seem to help to yell to the competition what plays you're going to run. So, no, I will not be telling you where our trials are.
The next question comes from the line of John Gerb of Sanddwell. John, you may ask your question.
Thank you.
Interesting answer there. I guess if Bob's disappointed, there is an option as to what he can do with his holdings. But in any case, congratulations on actually Having a profitable quarter, not as well as you would like or any of us would like, but given the backdrop of Commodities, I was frankly concerned that perhaps that wouldn't be the case. So kudos in that regard. My question is first question is, read recently that the swine and pork prices and consumption in China has Decrease due to the Asian flu impact and a shift by consumers to consume more Poultry.
And so my question is, have you seen an increase in demand for your poultry related product versus Swine products in China or has the swine product sales remained Consistent or actually increasing. In other words, have they been cannibalized by an increase in interest in poultry consumption? Sure.
Hey, John, great question. And Fred, you take it, but start with the swine because you and I have had a lot of conversations What's going on with swine in Asia in general and China in particular? And then talk about the other areas that we may be able to see Some benefit of our products going into.
Okay. Sure. And, John, that's a very, very good question. Right? So as I'm in China right now, I That's what I mean.
Well, there's always a swine. African swine fever has really taken its toll on the Chinese swine logic. The reason I'm saying that is not because there is not enough pork meat in the market actually to get reversed. There's too much We'll be focusing around because they're able to take the population back from where it was back in 2018 before ASF. Now they actually have the same population over the same population back 3 years ago.
And now the reason the price is so bad is exactly what you mentioned, Got it. When poultry meat or other meat came in as a substitute for the last 3 years, people got used to a better taste Of shelf feed products. And because of that swan market, it's not going to be going back to where it was, kind of like One of the things I've heard in the past is when you get used to the taste, you're not going
to get back to the same,
the poorly pork meat. And that's exactly what I've seen in China. And I'll give you a little bit more example on that is the price cost of production for kilo Pork meat is roughly $3 to 4, let's say, close to $4 That's selling $2.30 right now So all the producers are losing a lot of money because of that. Prudential, your second part of your question, poultry market is definitely Very stable. May I mean the prices remain on a flexible level.
Now until maybe about 2 weeks ago, And that shows how important the grocery center is going to be in case of swine market not doing so well. And also give us a great confidence On that, that strategy we took over quarters ago that we're going to focus on approaching market funds. And then the locking one adds to Dairy market in China is the only animal product that's produced in China that has got very, very stable price Ever since the pandemic, so people eating less meat because of less of meals eating outside, but dairy consumption and table
Yes. So I guess, so you are seeing an increase in demand for your poultry related animal health products. Is that what I'm hearing?
Correct. Yes. We do see the increase because of the cost of market being Pretty stable, I can't say no. Stabilize meaning the prices in which they stabilized last year. The population of poultry has increased Tremendously in the last 3 years, so that's the end of this time.
Is that some is that a trend that translates into other geographical areas as well?
We're seeing some of that in Asia. Yes, that's what we're seeing some of that trend in Asia, but it's Quite careful to check that because if you look at Asia, the predominantly core consumption countries are China, Vietnam, Philippines, Japan And Thailand, right? So in these countries, definitely, we're seeing some of that. But the difficult thing to see is we don't really have the same effect And ASR has poured through China in the last 3 years. So we've not quite seen that just yet, if that makes sense.
The next question comes from the line of Ethan Starr, a questioner. Ethan, you may ask your question.
Yes. I grew to avoid open ended discussions on Investor Relations on these calls. My question is, could you please Could you please take more detail on the increase in sales of what you've branded in private people's cat litter? And also I'm wondering, do
you guys cover revenue growth in
the last year due to Price increases versus increase in tons sold.
Jessica, you take the first one, and then I'm not sure I have the data for the second one. But if Susan does, Okay, good. So, Jessica, you go first.
And the growth in cat litter has been driven Growth driven by overall growth in people having cast and pets overall, Additionally, reflecting new customer acquisitions, so bringing on new private label lightweight Customers and new customers and then also by overall building the branded business And the launch of new items
for £15 under our £15, which is our best performing line.
Great. Thank you.
And Susan, do you have what Yes. Yes. How much was pricing and how much was volume?
Right. Hey, Jessica, I think you need to mute. Yes. The volume accounted for half of the growth, And then the rest was pricing and improved mix. So volume was half of the revenue growth.
That's all the time we
have for the Q and A session. I will now turn the conference over to Mr. Dan Jaffney. Thank you.
Well, thank you, everybody. Again, we're very happy with the demand, again validating Not only our successful strategies, but also our ability to get stuff out the door. I mean, I am sure as you do retail checks, you see a lot of empty shelves out there. Very dynamic times. We are going to continue to put prices up, control our costs Get as much out the door as we can in the next 90 days.
And no one has a crystal ball, but no one I'm talking to you who thinks this is going to end anytime in the next 90 days. I mean, this is going to be the new reality for at least a year, maybe even into 2 years. So appreciate your support and patience, and we'll be back with you in 90 days ish for the next teleconference. Thank you.
This concludes today's conference call.
Thank you for participating. You may now disconnect.