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BALCHEM CORPORATION Reports Operating Results (10-Q)

August 03, 2012 | About:
10qk

10qk

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BALCHEM CORPORATION (BCPC) filed Quarterly Report for the period ended 2012-06-30.

Balchem Corporation has a market cap of $987.6 million; its shares were traded at around $34.15 with a P/E ratio of 26 and P/S ratio of 3.4. The dividend yield of Balchem Corporation stocks is 0.5%. Balchem Corporation had an annual average earning growth of 18% over the past 10 years. GuruFocus rated Balchem Corporation the business predictability rank of 4-star.

Highlight of Business Operations:

Net sales for the three months ended June 30, 2012 were $79,014 as compared with $74,687 for the three months ended June 30, 2011, an increase of $4,327 or 5.8%. Net sales for the Specialty Products segment were $12,457 for the three months ended June 30, 2012, as compared with $12,026 for the three months ended June 30, 2011, an increase of $431 or 3.6%. Approximately 59% of this increase in sales was from ethylene oxide products for medical device sterilization, resulting primarily from modest price increases to offset rising raw material costs. The balance of the increased sales is principally a result of higher sales from propylene oxide for use in the fumigation of certain nut meats and spice fumigation. Net sales for the Food, Pharma & Nutrition segment were $11,776 for the three months ended June 30, 2012 compared with $10,897 for the three months ended June 30, 2011, an increase of $879 or 8.1%. This result was primarily due to a $1,288 increase in sales of human choline products for both food applications and the supplement markets. Partially offsetting this was an 8.2% decrease in sales in the food market, principally due to lower volumes sold of encapsulated ingredients for certain flavor markets. Also offsetting the increased sales was lower sales of calcium products, which were down approximately $102, a result of our having sold this business in late 2010, but which was still winding down in 2011. Net sales of $54,781 were realized for the three months ended June 30, 2012 for the Animal Nutrition & Health segment, as compared with $51,764 for the prior year comparable period, an increase of $3,017 or 5.8%. The ANH specialty ingredients, largely targeted to the ruminant and companion animal markets, realized 36% sales growth from the prior year comparable period. The improvement was due to volume increases, as some regional improvement in dairy economics supported greater demand, particularly for our rumen

Operating expenses for the three months ended June 30, 2012 were $7,759, as compared to $7,702 for the three months ended June 30, 2011, an increase of $57 or 0.7%. This was principally due to increased outside research of $173 and costs of $160 related to the Product sales suspension, partially offset by lower consultancy fees of $178, primarily incurred to study acquisition opportunities, and decreased advertising of $65. Operating expenses were 9.8% of sales or 0.5 percentage points less than the operating expenses as a percent of sales in last year's comparable period. During the three months ended June 30, 2012 and 2011, the Company spent $947 and $733 respectively, on research and development programs, substantially all of which pertained to the Company s Food, Pharma & Nutrition and Animal Nutrition & Health segments.

months ended June 30, 2011, an increase of $766 or 5.4%. Earnings from operations as a percentage of sales (“operating margin”) for the three months ended June 30, 2012 remained flat at 18.8% when compared to the three months ended June 30, 2011. The Company is continuing to focus on leveraging its plant capabilities, driving efficiencies from core volume growth, broadening product applications of human and animal health specialty products into both the domestic and international markets, as well as capitalizing logistically on the Company s varied choline production capabilities. Earnings from operations for the Specialty Products segment were $4,849, an increase of $307 or 6.8%, primarily due to the above-noted higher sales of ethylene oxide and propylene oxide and a favorable product mix. Earnings from operations for Food, Pharma & Nutrition were $3,389, an increase of $557 or 19.7%, due largely to the above-noted increased sales of human choline products and the sale of the non-core calcium carbonate product line in the fourth quarter of 2010, which was still generating an operating loss in 2011. Partially offsetting this was lower sales volumes in the food market. Earnings from operations for Animal Nutrition & Health decreased by $98 to $6,587, a 1.5% decrease from the prior year comparable period, principally due to the aforementioned increases of certain petro-chemical raw materials used to manufacture choline and the impact of the Product sales suspension, partially offset by higher overall Animal Nutrition & Health sales volumes.

Net sales for the six months ended June 30, 2012 were $155,217 as compared with $147,695 for the six months ended June 30, 2011, an increase of $7,522 or 5.1%. Net sales for the Specialty Products segment were $24,714 for the six months ended June 30, 2012, as compared with $23,319 for the six months ended June 30, 2011, an increase of $1,395 or 6.0%. Approximately 73% of this increase in sales was from our ethylene oxide products for medical device sterilization, resulting from modest price increases to partially offset rising raw material costs. The balance of the increased sales is principally a result of higher sales from propylene oxide for use in the fumigation of certain nut meats and spice fumigation. Net sales for the Food, Pharma & Nutrition segment were $22,513 for the six months ended June 30, 2012 compared with $21,927 for the six months ended June 30, 2011, an increase of $586 or 2.7%. This result was primarily due to a $2,355 increase in sales of human choline products for both food applications and the supplement markets. Partially offsetting this was a 12.9% decrease in sales in the food market, principally due to lower volumes sold of encapsulated ingredients for certain flavor markets. Also offsetting the increased sales was lower sales of calcium products, which were down approximately $318, a result of our having sold this business in late 2010, but which was still winding down in 2011. Net sales of $107,990 were realized for the six months ended June 30, 2012 for the Animal Nutrition & Health segment, as compared with $102,449 for the prior year comparable period, an increase of $5,541 or 5.4%. The ANH specialty ingredients, largely targeted to the ruminant and companion animal markets, realized 33% sales growth from the prior year comparable period. The improvement was due to volume increases, as some regional improvement in dairy economics supported greater demand, particularly for our rumen protected choline, lysine, and methionine products. However, during the second quarter 2012, the Company announced a decision to suspend sales of its AminoShure®-L, 52% lysine (the “Product”). There were no safety concerns relating to the Product; however, research indicated that the lysine bioavailability of the Product was lower than originally designed and projected, hence found to not meet our internal expectations. The sales credits issued related to this decision were approximately $1.0 million in the period. Global feed grade choline product sales decreased by approximately 1% due to lower volumes, partially offset by modest price increases, implemented globally, to partially offset rising raw material costs. The Company experienced increased sales of various choline and choline derivative products used for industrial applications, predominantly in North America, including usage in natural gas fracking. Industrial sales grew 1.4% over the prior year period with the increase coming from increased average selling prices, implemented to offset rising raw material costs. Sales for industrial applications comprised approximately 30.2% of the sales in this segment for the six months ended June 30, 2012.

Principally as a result of the above-noted details, earnings from operations for the six months ended June 30, 2012 increased to $28,500 as compared to $27,357 for the six months ended June 30, 2011, an increase of $1,143 or 4.2%. Earnings from operations as a percentage of sales (“operating margin”) for the six months ended June 30, 2012 decreased to 18.4% from 18.5% for the six months ended June 30, 2011. The Company is continuing to focus on leveraging its plant capabilities, driving efficiencies from core volume growth, broadening product applications of human and animal health specialty products into both the domestic and international markets, as well as capitalizing logistically on the Company s varied choline production capabilities. Earnings from operations for the Specialty Products segment were $9,578, an increase of $660 or 7.4%, primarily due to the above-noted higher sales of ethylene oxide and propylene oxide, and the exclusion of consulting costs related to the Aberco acquisition that were incurred during the six months ended June 30, 2011. This was partially offset by the aforementioned higher raw material costs. Earnings from operations for Food, Pharma & Nutrition were $6,098, an increase of $754 or 14.1%, due largely to the above-noted increased sales of human choline products and the sale of the non-core calcium carbonate product line in the fourth quarter of 2010, which was still generating an operating loss in 2011. Partially offsetting this was lower sales volumes in the food market. Earnings from operations for Animal Nutrition & Health decreased by $271 to $12,824, a 2.1% decrease from the prior year comparable period, principally due to the aforementioned increases of certain petro-chemical raw materials used to manufacture choline and the impact of the Product sales suspension, partially offset by higher overall Animal Nutrition & Health sales volumes.

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