Oil-Dri Corp of America Q4 FY2024 earnings call

• Board members shared perspectives on company growth, with Commissioner Emeritus Bud Selig remarking on the company's evolution over decades.
• Ultra Pet acquisition progress: Added 16 new retail banners and over 5,700 points of distribution, launched new Cat's Pride Micro Crystals, and integrated systems successfully.
• 2024 financials: Record net sales, gross profit ($125 million, up 21% from prior year), and operating income ($51.6 million, up 26% from prior year).
• Stock split proposal: Two-for-one stock split aimed at increasing liquidity and attracting broader investors, subject to stockholder approval.
• Credit facility amendment: Upsized revolving credit facility to $75 million with an accordion option to $125 million, extending termination to 2029.

Consolidated net sales for the fiscal year reached an all-time high of $437.6 million, a 6% increase over the prior year. Record revenues were achieved in Retail and Wholesale and Business to Business product groups. Domestic cat litter (excluding co-packaged items) revenue increased by 8%, while fluids purification products revenue rose by 19%. Agricultural and co-packaged coarse litter businesses declined by 17% and 4% respectively. The Ultra Pet acquisition was accretive in the fourth quarter, with the business adding distribution at 16 new retail banners and over 5,700 points of distribution for Cat's Pride and Ultra brands. New Cat's Pride Micro Crystals were launched in the fourth quarter and began shipping in early Q1.

• Anticipate similar CapEx level in fiscal 2025 as in 2024.
• Expect continued growth in fluids purification products, particularly for renewable diesel.
• Plan to maintain or improve gross margins due to focus on higher value-added product lines.
• Will continue forward purchases of natural gas in layered strips to buffer volatility.

• Market and customer impacts on agricultural and co-packaged coarse litter segments.
• Cost volatility, especially for natural gas.
• Regulatory challenges related to clay reserves and product registrations (e.g., EPA registrations for antibacterial products).

Q: Fluids purification product sales were up 19% year-over-year. Is there any particular market that has been especially strong, such as food oils or transportation fuel?

A: Renewable diesel has absolutely been driving the growth in our fluids purification division. New plants popping up all the time.

Q: What progress is Amlan making? What do you think it will take for the poultry and swine industries to adopt your product on a worldwide basis? And how are trials going with larger prospective customers?

A: There's recovery in the Ag market, trials ongoing with positive momentum. Adoption expected to continue as products are evaluated by customers.

Q: What opportunities do you see to expand distribution of silica gel crystal cat litter via new customers, private label and in Europe?

A: Focus on private label, engaged with customers for private-label products, Europe assessment ongoing. Leveraging existing retailer relationships and brand strength.

Q: Do you expect to maintain gross margins this year?

A: Markets have allowed pricing with cost increases, and growth in higher value-added products expected to help maintain gross margins.

Q: How has your vertically integrated business model contributed to your competitive advantage, particularly in terms of cost structure and product innovation?

A: Geographically situated plants reduce freight costs, providing a strategic competitive advantage.

Q: Where does debt paydown fall in the capital allocation priority chain?

A: Reinvest in business first, then dividend, then M&A, then pay down credit facility if financially beneficial.

Q: Do you expect sales growth of fluid purification products for renewable diesel to continue increasing at percentages similar to fiscal '24? And is Oil-Dri selling fluid purification products into any of the international markets for renewable diesel such as Brazil and Indonesia?

A: Expect continued growth, active in Brazil, not in Indonesia currently.

Q: Are you hedging natural gas into calendar 2025?

A: Make forward purchases of natural gas in layered strips to buffer volatility, not using traditional hedging.

Q: How is your ad spending looking in terms of being growth-oriented, which should have a high ROI versus defensive ad spend which is a lower ROI?

A: Spent on up-funnel advertising, focused on lightweight category, using IROAS metric to drive incrementality.

Q: Has your higher cat litter sales increased your overall market share percentage? And if so, has it been at the expense of competitor, brand names, private label or a combination?

A: Modestly up, growth in lightweight and crystals segments contributing to share increase.

Q: How has the uptake been with the Cat's Pride antibacterial product?

A: Pleased with uptake, now EPA-registered, more available on e-com, driving growth via digital advertising.

Q: Have you disclosed a total addressable market for your Amlan products?

A: Over $1B for mycotoxin mitigation, over $8-9B for gut health opportunities.