The margins are pretty good for animal supplements. I was surprised to see this trade in the $40's in 2018 w/ a much higher PE.
Did not know they had such high debt as it must be from their recent acquisition from Zoetis.
Check this out:
Phibro Animal Health Corporation (PAHC) recently acquired Zoetis' medicated feed additive (MFA) product portfolio and certain water-soluble products.
How much did they pay? Phibro paid $350 million for the acquisition.
What percentage of revenues does this new product provide to 2025 & 2026 revenues?
The acquired portfolio generated approximately $400 million in revenue for Zoetis in 2023.
For Phibro, this acquisition significantly boosts their revenue:
- Fiscal Year 2025 (ending June 30, 2025):
- Phibro completed the acquisition on October 31, 2024.
- In their Q2 2025 earnings call (covering the period ending December 31, 2024), Phibro reported that the new MFA business contributed $36.7 million in sales for two months (November and December 2024).
- In their Q3 2025 earnings (covering the period ending March 31, 2025), Phibro stated that incremental revenues of $77.0 million came from the Zoetis MFA portfolio.
- Phibro has updated its fiscal year 2025 guidance, expecting net sales of $1.26 billion to $1.29 billion.
- Based on these figures, the Zoetis acquisition is a substantial contributor to Phibro's 2025 revenue, likely representing a significant percentage of the total, especially considering the full year's contribution. If we take the approximate $400 million annual revenue from the acquired portfolio and compare it to Phibro's updated 2025 guidance of roughly $1.28 billion, it would represent approximately 31% of their total revenue for fiscal year 2025.
- Fiscal Year 2026 (ending June 30, 2026):
- Phibro's revenues for fiscal 2026 are projected to reach $1.41 billion.
- While specific percentage breakdowns for 2026 directly attributable to the Zoetis products haven't been explicitly stated, given the acquired portfolio's 2023 revenue of $400 million, it's reasonable to expect a similar annual contribution.
- If the acquired portfolio continues to generate around $400 million in 2026, it would represent approximately 28% of Phibro's projected total revenue for fiscal year 2026.
It's important to note that these percentages are estimates based on the available information and full integration and performance of the acquired assets. Phibro expects the portfolio to "boost profitability and EBITDA margin and be accretive to its Adjusted Earnings Per Share."
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Phibro Animal Health Corporation (PAHC) did indeed pay for the Zoetis acquisition primarily through debt obligations.
Here's a breakdown of the impact on their debt and other relevant metrics:
Was it paid for in debt obligations? Yes, Phibro explicitly stated that the acquisition was expected to be funded primarily with debt, and they had received financing commitments from a number of key relationship banks.
What % did it raise their total debt? Looking at the publicly available financial data:
- Phibro's total debt as of June 30, 2024, was approximately $525.46 million.
- After the acquisition (completed October 31, 2024), their total debt as of March 31, 2025, increased to approximately $770.02 million.
This represents an increase of roughly $244.56 million.
To calculate the percentage increase: ($770.02 million-$525.46 million)/$525.46 million˜0.465 or 46.5%.
So, the acquisition raised their total debt by approximately 46.5% from June 2024 to March 2025.
What is their debt to equity and list any other debt metrics to help determine if they are overleveraged?
Here are some key debt metrics for Phibro Animal Health:
- Debt-to-Equity Ratio:
- As of March 31, 2025, Phibro's debt-to-equity ratio was 2.67.
- This ratio increased significantly from previous periods. For instance, as of June 30, 2024, it was 2.05, and March 31, 2024, it was 2.63. The increase is clearly linked to the Zoetis acquisition.
- A debt-to-equity ratio of 2.67 indicates that for every dollar of equity, the company has $2.67 in debt. This is considered a relatively high ratio, suggesting a significant reliance on debt financing compared to equity.
- Historically, Phibro has operated with a relatively high debt-to-equity ratio, often above 2.0.
- Net Leverage (Debt / Adjusted EBITDA):
- Phibro stated that they expected to have net leverage of 3.5-4.0x Debt / Adjusted EBITDA at close of the acquisition.
- As of December 31, 2024, their gross leverage ratio was reported as 3.1x (based on $760.3 million total debt and $241.9 million Adjusted EBITDA for the trailing twelve months). This is within their stated target range post-acquisition.
- A leverage ratio in the 3-4x range is typical for some industries but can be a concern if cash flow generation doesn't keep pace.
- Interest Coverage Ratio:
- As of March 31, 2025, their interest coverage ratio was 2.54.
- This ratio indicates how easily a company can pay interest on its outstanding debt. A ratio of 2.54 means their earnings before interest and taxes (EBIT) are 2.54 times their interest expense. A higher ratio is generally better, with anything below 1.5-2.0 often raising red flags. While not extremely low, it suggests that a significant portion of their operating income is going towards interest payments.
- Cash Flow from Operating Activities:
- For the twelve months ended December 31, 2024, Phibro's cash flow from operating activities was $87.28 million. Strong and consistent cash flow is crucial for managing higher debt levels.
- Free Cash Flow:
- For the twelve months ended December 31, 2024, Phibro's free cash flow was $35.47 million. Free cash flow is the cash remaining after covering capital expenditures and is what's available for debt repayment, dividends, or other investments.
Is management making an effort to pay this down quickly?
Yes, Phibro's management has explicitly stated their intention to reduce debt and leverage. They stated a target of net leverage of below 3.0x by its fiscal year end June 30, 2027.
This commitment, along with their focus on the "Phibro Forward" initiative (aimed at unlocking additional revenue growth and cost savings), suggests a concerted effort to improve their financial position and pay down debt. The strong performance of the acquired MFA business, contributing significantly to revenue and profitability, also helps in generating the cash flow necessary for debt reduction.
However, it will be important to monitor their future financial reports to see the actual progress of debt reduction against their stated targets.
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I am ok w/ their Debt load & management has a plan to reduce it by 2027. Notice how Gemini AI includes the specific debt metrics. They appear to reconcile w/ your summaries. However your PE ratio is way too high. It s/d be 11x not 33x |
