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Innophos Holdings, Inc. Reports Second-Quarter 2017 Results



8/1/2017 2:07:15 PM

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CRANBURY, N.J., Aug. 1, 2017 /PRNewswire/ -- Innophos Holdings, Inc. (NASDAQ:  IPHS) today announced its financial results for the second quarter ended June 30, 2017. In a separate press release, Innophos announced today that it has entered into a definitive merger agreement to acquire Novel Ingredients, a New Jersey-based provider of dietary supplement ingredient solutions.

Highlights

  • Q2 revenue and earnings performance exceeded expectations
  • All segments showed positive year-over-year volume comparisons
  • Delivered final $2 million of $16 million procurement savings pipeline from Phase 1 Operational Excellence initiatives
  • H2 2017 on track to realize $5 million of the identified $13 million Phase 2 Operational Excellence cost savings in the areas of MRO, packaging and logistics
  • Reiterates full year 2017 revenue and earnings guidance, excluding impact of Novel Ingredients acquisition
  • The acquisition of Novel Ingredients will create a Food, Health and Nutrition (FHN) platform of nearly $0.5 billion in revenue representing 60% of total sales. The combined Company will benefit from leading, innovative technology; a broader and deeper product portfolio; and access to new market segments. Please see the Company's Novel Ingredients press release issued today for more details

"We delivered a very robust second quarter with top and bottom line results above our expectations," said Kim Ann Mink, Ph.D., Chairman, President and Chief Executive Officer. "By remaining focused on cost savings from performance improvement initiatives, we grew margins on a year-over-year basis despite continuing market pressure. As we transition into the second half of the year, we are encouraged by several recent developments, including improvements in sales volume. We are confident in our ability to deliver on a strong second half of the year and are reiterating our guidance, excluding the Novel Ingredients acquisition.

"Executing against our Operational Excellence and Commercial Excellence pillars remains paramount to our strategy," continued Mink. "We now have completed our Phase 1 Operational Excellence efforts and are on schedule to begin delivering Phase 2 savings in the third quarter. We continue to look at additional opportunities to achieve further productivity improvements in 2018 and beyond, including in the areas of manufacturing optimization and strategic supply chain enhancements.

"Under the Strategic Growth pillar, we took a significant step forward toward achieving our Vision 2022 goals with our announced acquisition of Novel Ingredients, which creates a $0.5 billion FHN platform," continued Mink.  "With an enhanced set of innovative products and capabilities that serve high-growth nutrition markets, we are strengthening our ability to deliver value to our customers, more closely aligning Innophos with consumer mega-trends such as health and wellness, energized aging, and clean labels, and advancing toward our goal to be a leading specialty ingredient solutions provider to attractive FHN markets." 

Second Quarter Results
Variance $ and Variance % in the following tables may not foot due to rounding

$ Millions except EPS

Quarter 2

2017

2016

Variance $

Variance %

Sales

179

182

(3)

(2)%

Net Income

11

12

(1)

(7)%

Adj. Net Income

11

12

(1)

(8)%

EBITDA

28

28

--

(1)%

Adj. EBITDA

30

30

--

--

Diluted EPS

0.57

0.61

(0.05)

(8)%

Adj. Diluted EPS

0.57

0.63

(0.05)

(8)%

Cash from Ops

30

45

(15)

(33)%

Free Cash Flow

23

35

(12)

(35)%

 

  • Q2 earnings performance exceeded guidance due to strong sales performance. Adjusted EBITDA of $30 million yielded a margin of 17%, up 18 basis points versus prior year.
  • Sales volume was 3% higher year over year, with all segments recording positive variances, and up 8% sequentially.
  • Operational Excellence initiatives continued to make a strong contribution with favorable input costs more than offsetting lower selling prices.
  • Net income and EPS were adversely affected by a higher effective tax rate of 34% in the quarter from a strengthened Mexican peso and general inflation.
  • Cash flow was positive with continued working capital improvements and a low capital expenditure run rate. Cash flow was down year over year due to higher working capital improvements in Q2 2016.
  • Capex was down versus the prior-year quarter despite the strategic investment in the Geismar deep well, which represents approximately 30% of total quarterly spend.

Q2 Segment Financials

Sales

2017 $ Millions

2016 $ Millions

Variance $

Variance %

FHN

92

95

(2)

(3)%

IS

67

72

(5)

(6)%

Other

20

15

4

28%

Total Innophos

179

182

(3)

(2)%

 

Adj. EBITDA

2017 $ Millions

2016 $ Millions

2017 Margin

2016 Margin

FHN

18

20

20%

22%

IS

10

11

14%

15%

Other

2

(1)

12%

(8)%

Total IPHS

30

30

17%

17%

Note: See Adjusted EBITDA reconciliation to EBITDA in the financial tables that follow

  • Sales volume was up across all segments compared with the prior-year quarter, offset by price erosion in line with expectations. FHN sales represented 51% of total Company sales.
  • FHN Q2 EBITDA margins were strong at 20%, and improved 138 basis points sequentially.
  • IS margins declined 78 basis points versus Q2 2016 due to lower average selling prices, partially offset by improved mix from product pruning and cost controls.
  • Other margins were 12%, a significant improvement compared with negative 8% for the same period last year.

Year-to-date Results
Variance $ and Variance % in the following tables may not foot due to rounding

$ Millions except EPS

YTD Quarter 2

2017

2016

Variance $

Variance %

Sales

345

371

(26)

(7)%

Net Income

22

25

(3)

(11)%

Adj. Net Income

23

25

(2)

(9)%

EBITDA

54

59

(5)

(9)%

Adj. EBITDA

58

61

(4)

(6)%

Diluted EPS

1.12

1.27

(0.15)

(12)%

Adj. Diluted EPS

1.16

1.28

(0.12)

(9)%

Cash from Ops

19

42

(23)

(54)%

Free Cash Flow

3

24

(21)

(86)%

 

  • YTD Sales variance improved sequentially by 540 basis points. H1 year-over-year comparisons were adversely affected by H2 2016 pruning actions management took on lower margin, less differentiated applications.
  • Adjusted EBITDA margin was up 19 basis points versus the prior-year period due to savings from Phase 1 Operational Excellence initiatives.
  • Average working capital improved by $30 million, or 16% versus prior year.

YTD Quarter 2 Segment Financials

Sales

2017 $ Millions

2016 $ Millions

Variance $

Variance %

FHN

183

193

(10)

(5)%

IS

131

147

(15)

(11)%

Other

31

32

(1)

(4)%

Total Innophos

345

372

(26)

(7)%

 

Adj. EBITDA

2017 $ Millions

2016 $ Millions

2017 Margin

2016 Margin

FHN

35

41

19%

21%

IS

20

20

15%

14%

Other

3

--

11%

--

Total IPHS

58

61

17%

16%

Note: See Adjusted EBITDA reconciliation to EBITDA in the financial tables that follow

  • FHN YTD sales were down 5%, primarily due to lower export sales to Health end-markets, which had an adverse effect on average selling prices and segment profitability.
  • IS YTD sales were primarily affected by H2 2016 pruning actions, resulting in improved adjusted EBITDA margins.
  • Other sales were essentially flat year over year, benefiting at the adjusted EBITDA level from the new tolling arrangement.


  • To read full press release, please click here.


Read at BioSpace.com


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