Company able to post positive results amid difficult business environment
Neogen Corp.’s revenues for the first quarter of its 2021 fiscal year, which ended August 31, were US$109.3 million, an 8% increase compared with the previous year’s first quarter revenues of US$101.4 million.
Net income for the first quarter of Neogen’s 2021 fiscal year was US$15.9 million, or US$0.30 per share, compared with US$14.7 million, or US$0.28 per share, in the previous year’s first quarter.
“Considering the ongoing difficult global business climate, we are pleased to report increased revenues and net income as we continue to take the necessary measures to protect our employees and business — and the global food supply,” said John Adent, Neogen’s president and CEO. “Although conditions across many of our markets remain sluggish and challenging, the first quarter showed Neogen’s resilience to difficult conditions due to the diversity of our portfolio of products and services. As our food safety markets faced disruption, we continued to have strong growth in our genomics business — and we worked to meet the global demand for our biosecurity products, including cleaners, disinfectants, and hand sanitizers.”
Neogen’s gross margin was 46% of sales in the first quarter of the current fiscal year, compared with 47.5% recorded in the same period a year ago, driven by a mix shift in the Food Safety segment toward lower-margin products. Operating expenses declined 2%, due primarily to lower travel and customer facing activities worldwide resulting from the COVID-19 pandemic. Operating income for the quarter was US$18.9 million, or 17.3% of sales, compared with US$16.3 million, or 16% of sales, a year ago.
“The currency headwinds that we have faced in recent quarters continued to adversely affect our otherwise strong performances in Mexico and Brazil,” said Steve Quinlan, Neogen’s chief financial officer. “In a constant currency environment, sales would have been $2.1 million higher in our first quarter than reported. Nonetheless, our ongoing strong cash generation and position provides Neogen the flexibility to continue to invest in all available avenues to grow our businesses going forward — including short-term operational improvements and longer-term strategic moves.”
Revenues for the company’s Food Safety segment were US$54.2 million in the current quarter, compared with US$51.0 million in the prior year’s first three months. The increase was due primarily to higher sales of disinfectants, hand sanitizers and insecticides through Neogen’s international locations, the majority of which report through the company’s Food Safety segment.
Sales of Neogen’s mycotoxin tests were up slightly, as there have been no major outbreaks this year and currency pressure negated volume gains in Brazil. Sales of the company’s test for histamine, a spoilage indicator in certain species of fish after harvest, grew more than 20% as the tuna industry responded to the increase in demand for canned product due to the COVID-19 pandemic. Revenues for dairy drug residue detection products declined 33%, as customers work through distributor inventory and the company ramps up its own direct sales after ending an exclusive arrangement with a large distributor in Europe.
Revenues at Neogen’s United Kingdom operations rose 21% in U.S. dollars (17% in local currency), led by strong increases in sales of hand sanitizers, cleaners and disinfectants primarily used to fight COVID-19 in the U.K., Asia and Africa, and sales of the Raptor mycotoxin test system. In China, Neogen’s revenues more than doubled due to gains in sales across the group’s entire product portfolio, and in particular, biosecurity products as the country continues to fight COVID-19 and African swine fever. Revenues from India increased 10% in the quarter in U.S. dollars, and rose 18% in local currency.
Neogen’s revenues from its operations in Brazil and Mexico were adversely affected by currency translations into U.S. dollars. The company’s revenues in Brazil increased 38% in local currency, led by a large non-recurring sale of insecticides to a governmental health organization, bovine and porcine genomics services, and market gains on aflatoxin test kits; when translated to U.S. dollars, revenues rose 1%. Similarly, Neogen operations in Mexico recorded a 13% quarterly increase in local currency, with particular strength in cleaners and disinfectants; when translated to U.S. dollars, revenues were down 2%.
The Animal Safety segment reported revenues of US$55.1 million for the first quarter of the 2021 fiscal year, compared with US$50.4 million in the prior year first quarter. The segment’s highlights in the quarter included a 47% increase in sales of its rodenticides, as Neogen responded to a cyclical rodent outbreak in the U.S.; a 12% increase in genomics services in North America and Australia, and a 6% increase in sales of domestic insecticides, which included the August 3 acquisition of the U.S. rights to Elanco’s StandGuard Pour-on for horn fly and lice control in beef cattle.
Revenues from Neogen’s worldwide animal genomics business increased 11% in the first quarter of fiscal 2021 compared to the prior year. This was primarily the result of Neogen’s accelerating growth in companion animal genetic testing, including tests for dog parentage, breed verification, and genetic health. The growth was also aided by the recent launch of a new genomic test for whiteleg shrimp. Partially offsetting this were lower sales into the commercial dairy and beef markets, due to continued poor economic conditions and supply chain issues resulting from COVID-19 outbreaks.