American Vanguard Corp. Reports Operating Results
Nov. 5, 2010
American Vanguard Corp. (AVD) filed Quarterly Report for the period ended 2010-09-30.
American Vanguard Corp. has a market cap of $200.9 million; its shares were traded at around $7.39 with a P/E ratio of 18.7 and P/S ratio of 1. The dividend yield of American Vanguard Corp. stocks is 0.5%.
AVD is in the portfolios of Chuck Royce of Royce& Associates.
Highlight of Business Operations:
Net sales of our insecticides in the third quarter of 2010 were down by approximately 16% to $17,075 as compared to $20,437 for the comparable period in 2009. Within this segment, net sales of our cotton insectide, Bidrin, were up by nearly 46% as compared to the comparable quarter in 2009 due to increased cotton acres and stable cotton pricing. Similarly, net sales of Thimet were up about 22% quarter-over-quarter due largely to a resurgence in the use of the product for nematicidal pest control in sugar cane. However, these gains were offset by a 25% drop in net sales of our corn soil insecticides, due to the fact that customers have continued to focus on working capital levels and are electing to schedule purchases closer to the planting season. We believe that we are well positioned to place these corn-related products within the distribution chain later in the year and early in 2011. We also experienced a 40% drop in net sales of lower margin products having significant generic competition (Orthene®, permethrin and bifenthrin); this arose, in part, from a conscious decision to promote higher margin products during the period.
Cost of sales for the quarter ended at $42,880 or about 63% of net sales compared to $45,007 or about 68% of net sales for the same period of 2009. Total gross margin for the quarter was up (to 37% from 32%) for the comparable period. With respect to our crop products, gross margin for the period was 37%, up over the 32% gross margin in the comparable period of 2009. Our non-crop products had a gross margin of about 39% for the third quarter of 2010, which was significantly improved as compared to 33% from the comparable period of 2009. While we experienced improved margins on overall product lines when compared to the comparable quarter (42% in Q3 2010 vs. 35% in Q3 2009), underabsorption of overhead costs in our Axis facility reduced overall the gross margin by approximately 5%.
Insecticides were up approximately 9%, largely due to increased net sales of Counter in the first half of the year (which continues to earn market acceptance for use in nematode control on corn as well as for heavy pest pressure on sugar beets) and Thimet sales over the nine month period (due largely to increased peanut acres in the Southeast and increased use for nematicidal control on sugar cane). Net sales of our cotton insecticides increased by about 56% over the comparable period, primarily due to increased cotton acres.
Within the product group of herbicides/fungicides/fumigants, net sales in the first nine months of 2010 were down about 8% over the comparable period in 2009 ($56,248 vs. $61,317). Net sales of our herbicide products were up approximately 5%, led by our post-emergent corn herbicide, Impact, which posted an a healthy increase over the first half of the year (arising from both favorable weather conditions and a well-executed plan of distribution) but experienced a drop in the third quarter, as Midwest customers deferred procurement activity for the 2011 planting season. Net sales of our fungicides, however, were down by approximately 53% during the first nine months of 2010 as compared to the same period in 2009; this decline was due largely to PCNB, which experienced a decrease in net sales in the first half of the year arising from formulation issues, and in the third quarter of 2010 arising from the SSURO issued by USEPA for domestic product. The company continues to negotiate with USEPA to obtain relief from the SSURO, and is concurrently seeking injunctive relief in the federal district court. Net sales of our fumigants were down about 4% as compared to the first three quarters of 2009; this is due largely to inadequate supply of material for shipment in the third quarter.
Within the segment of other products (which includes plant growth regulators, molluscicides and tolling activity), we experienced an approximately 30% increase in net sales during the first nine months of 2010 as compared to the same period in 2009 ($25,596 vs. $19,682). This increase is primarily due to strong sales of our cotton defoliant Folex. Our efforts were also bolstered by increased cotton acres and the fact that we completed the acquisition of the domestic Def (tribufos) product line from Bayer CropScience in late July 2010. In addition, net sales of Dacthal were up by about 14% during the first nine months of 2010 as compared to 2009; this is due mainly to the lessening of water restrictions in the Western states, which has enabled growers to plant increased acres of vegetables and fruits on which our product is used. Further, net sales of metaldehyde (a molluscicide) were up about 14% over the comparable period due to rainy conditions in the Eastern and northern Midwestern states. It should be noted that, while we collected data compensation payments in the amount of $1,400 in the first three quarters of 2009, we made no such collection in 2010.
Cost of sales for the nine month period ended at $103,607 or about 62% of net sales compared to $102,154 or about 64% of net sales for the same period of 2009. Gross margins for the period for all products was at 38% as compared to 36% in the same period of 2009. With respect to gross margin, during the first half of 2010, we experienced improvement in absorption of factory overhead costs; at the same time, however, we recorded higher sales of our lower margin product lines (Orthene, bifenthrin and permethrin). This trend was reversed in the third quarter, during which we experienced less absorption of factory overhead costs (compared to third quarter of 2009), but lower net sales of the lower margin products.
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