Results reflect underlying price and volume growth
Elanco Animal Health Inc.’s financial results for the second quarter of 2019 reflect underlying price and volume growth, and improved profitability through execution of the company’s targeted, three-pillar strategy focused on innovation, portfolio and productivity (IPP).
“We continue to be pleased with the delivery of our productivity agenda driving the significant increase in adjusted gross margin as a percent of sales,” said Jeff Simmons, president and CEO at Elanco. “We are encouraged by the 9% constant currency growth in our targeted growth categories and continue to make strategic investments that advance all three pillars of our strategy. While discrete external events provide headwinds to our global business, we continue to leverage our portfolio approach to respond and deliver to our expectations.”
In the second quarter of 2019, total revenue was $781.6 million, an increase of 1%, or an increase of 4% without the impact of foreign exchange rates, compared with the second quarter of 2018. Revenue, excluding strategic exits, was $754.1 million; flat with the prior year and an increase of 3% without the impact of foreign exchange rates.
Gross margin, as a percent of revenue, increased 1,050 basis points compared with the second quarter of 2018, to 54.5%. The effective tax rate was 28.5% in the second quarter of 2019.
Net income for the second quarter increased $98.7 million compared with the second quarter of 2018 to $35.9 million, or $0.10 per diluted share.
Food Animal Future Protein & Health revenue increased 2% for the quarter, driven by increased volume and price, offset by an unfavorable impact from foreign exchange rates. Without the impact of foreign exchange rates, the category grew 7%. Growth was driven by the aqua portfolio, as well as the poultry portfolio and nutritional health products.
Food Animal Ruminants & Swine revenue decreased 9% for the quarter, driven by flat prices, a decline in volume, and to a lesser extent an unfavorable impact from foreign exchange rates. Without the impact of foreign exchange rates, the category declined 6%. The company’s International business was impacted by softness in swine products due to African swine fever, particularly in Asia, the continued implementation of antimicrobial policies in certain Asian countries, and product rationalizations aligned with our productivity agenda.
In the U.S., unfavorable purchasing patterns for Rumensin were offset by favorable purchasing patterns in other cattle products, primarily Optaflexx. A global supply disruption of certain cattle products also provided a headwind in the quarter.