ACETO Corporation Q4 net sales down 7.6%
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Net sales for the fourth quarter of fiscal 2016 were $135.4 million, a decrease of 7.6% from $146.6 million reported in the fourth quarter of fiscal 2015.
Total company gross profit was $34 million, a decrease of 17.3%, compared to $41.2 million in the fourth quarter of fiscal 2015. Gross margin for the fourth quarter was 25.1% compared to 28.1% in the prior year period.
Human Health segment sales were $52.7 million, a decrease of 18.2%, compared to $64.5 million for the fourth quarter of fiscal 2015. The revenue decrease was primarily due to greater price competition at Rising Pharmaceuticals and the inclusion of a $9.5 million favorable sales adjustment in the prior year’s fourth quarter.
Nutritional product sales both in the U.S. and abroad were roughly unchanged versus the prior year’s period. Gross profit for the Human Health segment was $16.7 million, a decrease of 33.0%, compared to $24.9 million for the fourth quarter of fiscal 2015.
Gross margin for the fourth quarter was 31.7%, compared to 38.7% in the prior year period reflecting the increased price competition partially offset by improved product mix in Nutritionals.
Pharmaceutical Ingredients segment sales were $42.5 million, an increase of 11.3%, compared to $38.2 million for the fourth quarter of fiscal 2015. The segment’s sales gain was driven by a rise in sales of APIs sold abroad.
Gross profit in the quarter was $7.9 million, an increase of 13.7%, compared to $6.9 million for the fourth quarter of fiscal 2015. Gross margin for the fourth quarter was 18.5%, compared to 18.2% in the prior year period.
Performance Chemicals segment sales were $40.2 million, a decrease of 8.6%, compared to $43.9 million for the fourth quarter of fiscal 2015, primarily due to reduced sales of specialty chemicals for pigments, coatings and dye intermediates versus 2015, as well as reduced selling prices in specialty chemicals due to the devaluation of the Chinese Renminbi.
Gross profit was $9.5 million, an increase of 1.5%, compared to $9.3 million for the fourth quarter of fiscal 2015.
Gross margin was 23.5% for the fourth quarter compared to 21.2% in the prior year period reflecting a more favorable agricultural product mix and the decline in costs of specialty chemical products sourced from China due to the devaluation of the Chinese currency and apparent lower raw material costs at many of our suppliers.
Total selling, general and administrative expenses were $20.4 million compared to $16.8 million in the same period last year, a 21.4% increase. Selling, general and administrative expenses in the current quarter included a $1.3 million environmental remediation charge related to the Arsynco property.
Selling, general and administrative expenses in the prior year benefitted from a $3.5 million reversal of contingent consideration related to the acquisition of PACK Pharmaceuticals and included a $1.6 million environmental remediation charge related to the Arsynco property.
Research and development expenses in the fourth quarter totaled $1.7 million compared to $2.7 million in the prior year period. The majority of R&D expenses are milestone based, and will fluctuate quarterly.
Operating income totaled $11.9 million, a decrease of 44.7% versus $21.6 million for the fourth quarter of fiscal 2015. Net income was $6.8 million, or $0.23 per diluted share, compared to net income of $13.6 million, or $0.46 per diluted share, for the comparable quarter of fiscal 2015.
Non-GAAP Adjusted Net Income was $10.3 million in the fourth quarter, compared to $14.0 million in the prior period, a 26.7% decrease. Non-GAAP Adjusted Earnings per Share were $0.35, compared to $0.48 in the year ago fourth quarter, a 27.1% decrease.
Full year financial review
Net sales for the twelve month period ended June 30, 2016 were $558.5 million, an increase of 2.1% from $547.0 million reported for the twelve month period ended June 30, 2015.
On a constant euro currency basis, net sales increased by 4.0% in fiscal 2016. Total company gross profit was $142.8 million compared to $135.4 million in fiscal 2015, an increase of 5.4%. Gross margin for fiscal 2016 was 25.6% compared to 24.8% in the prior year.
Human Health segment sales were $228.0 million, an increase of 1.2%, compared to $225.3 million for fiscal 2015. The sales increase was primarily due to an increase in sales at Rising.
Nutritional product sales both in the U.S. and abroad were relatively unchanged versus the prior year. Gross profit for the Human Health segment was $77.9 million, an increase of 2.8%, compared to $75.7 million for fiscal 2015.
Gross margin in the 2016 year was 34.2%, compared to 33.6% in the prior year period. The increase in gross margin was primarily due to price increases experienced in the prior year on certain Rising products.
Pharmaceutical Ingredients segment sales were $161.0 million, an increase of 7.8%, compared to $149.3 million for fiscal 2015. Gross profit was $28.8 million, an increase of 7.8%, compared to $26.7 million for fiscal 2015. Gross margin for fiscal 2016 was 17.9%, unchanged from the prior year period.
The segment’s sale increases was primarily due to higher sales of APIs sold abroad, offset somewhat by a decline in sales of intermediates. The segment’s gross profit increase was due to higher sales of APIs sold abroad and a more favorable product mix of domestic API sales.
Performance Chemicals segment sales were $169.5 million, down 1.7% compared to $172.4 million for fiscal 2015. The sales decline was due to lower sales of domestic specialty chemicals, and reduced selling prices in specialty chemicals due to the devaluation of the Chinese currency, as well as the drop in oil prices, resulting in reduced customer pricing, partially offset by higher agricultural product sales.
Gross profit was $36.2 million, an increase of 9.5%, compared to $33.0 million for fiscal 2015, due to a more favorable mix of both specialty chemical and agricultural product sales and the decline in costs of specialty chemical products sourced from China due to the currency devaluation. Gross margin was 21.3% for fiscal 2016 compared to 19.1% in the prior year.
Total selling, general and administrative expenses were $76.8 million compared to $73.2 million in the prior year, a 5.0% increase. As a percentage of sales, SG&A increased modestly to 13.8% from 13.4%.
Selling, general and administrative expenses included increased stock-based compensation expense, corporate business development expenses, and an environmental remediation charge related to Arsynco. Research and development expenses were $7.9 million compared to $5.9 million last year.
Operating income totaled $58.0 million, compared to $56.3 million for fiscal 2015. Interest expense in fiscal 2016 was $7.0 million compared to $4.0 million in the prior year reflecting amortization of the debt discount associated with the offering of Convertible Senior Notes.
Net income was $34.8 million, or $1.18 per diluted share, compared to net income of $33.5 million, or $1.14 per diluted share, for fiscal 2015. Non-GAAP Adjusted Net Income was $44.4 million compared to $38.9 million in the prior period, a 14.2% increase.
Non-GAAP Adjusted Earnings per Share were $1.50, compared to $1.33 in the year ago period, a 12.8% increase. ■