While the ongoing African swine fever has destroyed Chinese pork supplies and threatens to possibly spread to the rest of the world, this has also had a major impact on animal health and nutrition companies. Phibro Animal Health (NASDAQ: PAHC) saw its share price plunge by almost a third over the course of the day when the company completely missed its earnings figures.
The company blamed the African swine fever for culling China’s pork herds which had an adverse effect on demand for their products. In turn, this prompted an increase in research and development spending from Phibro, which further weighed down on their profits. Phibro reported fiscal Q4 earnings of just $0.33 per share on $204 million in revenue, down from the $0.36 per share earnings and $206 million revenue expected by Wall Street.
“The effects of African Swine Fever, as discussed last quarter, have significantly impacted our performance in the June quarter and will have an even larger impact in the new fiscal year,” said Jack Bendheim, Phibro’s CEO, President, and Chairman in an official statement. “We have made the strategic decision to continue to accelerate our new product initiatives despite the challenges posed by ASF, recognizing the short-term impact on our financial results. Overall, we continue to be bullish on the long-term potential of the animal health industry.”
Animal health has remained one of the more peculiar, but still attractive, sub-sectors to investors due to its capacity for rapid growth as well as its resilience in the face of recessions. Phibro could potentially be a long-term winner in the sector as its current working to develop a swine fever vaccine. Currently, there are no treatment options for African swine fever, so a potential treatment would be highly sought all over the world and result in billions in revenue for the company. However, that option still remains a long shot at this point.
Shares of Phibro fell by 31.1 percent in response to the bad news. Over the past six months, shares have hovered around the $30 price range before today’s plunge. The last time the company saw such a major decline was just recently in May when the stock plunged around 20 percent from $38 to $28.9. Overall, the company’s management team remains optimistic that the stock will recovery as the swine fever sorts itself out, but many experts are warning that it could take years before pig herds make a full recovery.
Phibro Animal Health Company Profile
Phibro Animal Health Corp operates as a diversified animal health and mineral nutrition company. It develops, manufactures, and markets products for a range of food animals comprising poultry, swine, beef and dairy cattle, and aquaculture. The product portfolio of the company includes animal health products such as antibacterials, anticoccidials, nutritional specialty products and vaccines, and mineral nutrition products. The company operates through three segments, Animal Health, Mineral Nutrition, and Performance Products, of which key revenue is derived from the Animal Health segment which relates to the development, manufacturing, and marketing of antibacterials, nutritional specialty products, and vaccines. The entity sells its products in the US and other international countries. – Warrior Trading News
