PAHC-Ergebniskonferenz zu Q4 und dem Geschäftsjahr 2026: Umsatzwachstum, Prognose für 2027 und Brasilien-Risiko

Wichtigste Erkenntnisse

• Der Nettoumsatz im 4. Quartal des Geschäftsjahres 2026 stieg im Jahresvergleich um 5 % auf 396,7 Millionen US-Dollar, während das bereinigte EBITDA um 29 % und der bereinigte verwässerte Gewinn je Aktie um 35 % zulegten.
• Der Nettoumsatz für das gesamte Geschäftsjahr 2026 erreichte einen Rekordwert von 1,518 Milliarden US-Dollar, was einem Anstieg von 17 % entspricht. Das bereinigte EBITDA stieg um 39 % auf 255 Millionen US-Dollar.
• Der Bereich Animal Health blieb der Hauptwachstumstreiber. Der Jahresumsatz des Segments stieg um 21 % auf 1,162 Milliarden US-Dollar, unterstützt durch das übernommene MFA-Portfolio, Impfstoffe und Spezialfutterzusätze.
• Der freie Cashflow lag bei 10 Millionen US-Dollar, belastet durch einen Vorratsaufbau von 86,3 Millionen US-Dollar, der in erster Linie im Zusammenhang mit dem übernommenen MFA-Portfolio stand. Der Nettoverschuldungsgrad zum Jahresende betrug das 2,6-Fache.
• Das Management prognostiziert für das Geschäftsjahr 2027 einen Nettoumsatz von 1,55 bis 1,60 Milliarden US-Dollar und ein bereinigtes EBITDA von 258 bis 268 Millionen US-Dollar.
• Der Ausblick für das Geschäftsjahr 2027 geht von minimalen Umsätzen mit Virginiamycin in Brasilien aus, verglichen mit rund 27 Millionen US-Dollar im Geschäftsjahr 2026. Eine etwaige spätere behördliche Zulassung würde ein mögliches Aufwärtspotenzial für die Prognose darstellen.

Wichtigste Finanzdaten

Zum 30. Juni 2026 verfügte Phibro Animal Health Corporation über Zahlungsmittel, Zahlungsmitteläquivalente und kurzfristige Finanzanlagen in Höhe von 82 Millionen US-Dollar. Die Gesamtverschuldung betrug 738 Millionen US-Dollar, was zu einem Bruttoverschuldungsgrad des 2,9-Fachen führte. Die Nettoverschuldung belief sich auf 656 Millionen US-Dollar bzw. das 2,6-Fache des bereinigten EBITDA der letzten zwölf Monate.

Geschäfts- und operative Entwicklung

Der Bereich Animal Health erwirtschaftete im 4. Quartal des Geschäftsjahres ein bereinigtes EBITDA von 75,4 Millionen US-Dollar, was einem Anstieg von 25 % entspricht. Der Anstieg spiegelt das erworbene MFA-Geschäft, einen verbesserten Produktmix im Altportfolio und eine einmalige Zollerstattung wider, was teilweise durch höhere SG&A-Kosten ausgeglichen wurde.

Im Gesamtjahr stieg das bereinigte EBITDA von Animal Health um 37 % auf 303,6 Millionen US-Dollar. Das erworbene MFA-Portfolio trug 354,3 Millionen US-Dollar zum Umsatz bei, ein Plus von 70 %. Sein Q4-Umsatz ging aufgrund einer starken Vorjahresvergleichsbasis um 11 % auf 83,9 Millionen US-Dollar zurück; laut Management war dies jedoch erwartet worden und stellt keinen Anhaltspunkt für schwächere zugrunde liegende Trends dar.

Die Umsätze mit traditionellen MFA-Produkten und sonstigen Erzeugnissen stiegen im 4. Quartal um 11 % und im Gesamtjahr um 4 %. Der Bereich Spezialfutterzusätze wuchs im Quartal um 5 % und im Gesamtjahr um 9 %, gestützt durch die Nachfrage in der nordamerikanischen Milchwirtschaft, eine breitere globale Nachfrage sowie Verkäufe von Heimtierprodukten. Die Impfstofferlöse stiegen in Q4 um 4 % und im Gesamtjahr um 14 %, angetrieben von Geflügelprodukten in Lateinamerika und der Nachfrage in Israel und Südostasien.

Der Umsatz im Bereich Mineral Nutrition stieg in Q4 um 20 %, was die Nachfrage nach Vormischungen sowie höhere Zink- und Kupferkosten widerspiegelt. Das bereinigte EBITDA wuchs jedoch nur um 1 %, da höhere Beschaffungskosten nicht vollständig an die Kunden weitergegeben wurden. Für das Geschäftsjahr 2027 erwartet das Management ein langsameres Umsatzwachstum in diesem Segment, aber ein stärkeres EBITDA-Wachstum.

Der Jahresumsatz von Performance Products sank um 8 % aufgrund einer geringeren Nachfrage nach Inhaltsstoffen für Körperpflegeprodukte. Das bereinigte EBITDA verringerte sich um 2,5 Millionen US-Dollar auf 8,1 Millionen US-Dollar.

Das dreijährige Transformationsprogramm Phibro Forward wurde im Juni formell abgeschlossen. Das Management erwartet für das Geschäftsjahr 2027 kumulative Beiträge zum bereinigten EBITDA von rund 50 Millionen US-Dollar im Vergleich zur Basis des Geschäftsjahres 2024, während die operative Disziplin und die Umsetzungsprozesse des Programms beibehalten werden.

Prognose des Managements

Das Management geht davon aus, dass die Bruttomarge im Geschäftsjahr 2027 im Wesentlichen unverändert bleibt. Effizienzgewinne aus Phibro Forward und erste Vorteile aus der Schließung des Standorts Chicago Heights dürften den negativen Mix-Effekt durch die minimalen Virginiamycin-Umsätze in Brasilien ausgleichen.

Es wird erwartet, dass das SG&A-Wachstum leicht über dem Umsatzwachstum liegen wird, da das Geschäftsjahr 2026 mit einer höheren Kostenbasis endete. Zudem rechnet das Management damit, dass das EBIT-Wachstum im 1. Quartal negativ sein wird, bevor es im weiteren Jahresverlauf ins Plus dreht.

Die Schließung des Standorts Chicago Heights dürfte im Geschäftsjahr 2027 nur einen geringen Beitrag zum bereinigten EBITDA leisten. Das Management schätzt die jährlichen Einsparungen ab dem Geschäftsjahr 2028 auf 15 bis 20 Millionen US-Dollar. Die Umstellung erfordert voraussichtlich einmalige Baraufwendungen von etwa 10 Millionen US-Dollar sowie weitere Investitionen in Höhe von 10 Millionen US-Dollar.

Risiken und Schwerpunkte

• Regulierung in Brasilien: Die Umsätze mit Virginiamycin in Brasilien beliefen sich im Geschäftsjahr 2026 auf rund 27 Millionen US-Dollar. Die Prognose für das Geschäftsjahr 2027 geht von minimalen Umsätzen aus, nach Q1 von keinen Umsätzen mehr, es sei denn, es wird eine Zulassung für den therapeutischen Einsatz erteilt. Das Management bleibt hinsichtlich des langfristigen Ergebnisses optimistisch, verwies jedoch auf regulatorische und politische Unsicherheiten.
• Nettoumlaufvermögen: Die Vorräte stiegen im Geschäftsjahr 2026 um 86,3 Millionen US-Dollar. Das Management erwartet für das Geschäftsjahr 2027 einen geringeren Aufbau von 25 bis 30 Millionen US-Dollar, der hauptsächlich mit der Umstellung in Chicago Heights zusammenhängt.
• Cash-Conversion: Es wird erwartet, dass die Investitionen in den Geschäftsjahren 2027 und 2028 steigen werden, da das Unternehmen die Produktionskapazitäten für Impfstoffe in Irland und Israel erweitert. Dennoch rechnet das Management für das Geschäftsjahr 2027 mit einem deutlich höheren freien Cashflow als im Geschäftsjahr 2026.
• Standortumstellung: Die endgültigen nicht zahlungswirksamen Aufwendungen und der potenzielle Verkaufswert des Standorts Chicago Heights bleiben ungewiss.
• Kurzfristige Rentabilität: Die höhere SG&A-Kostenbasis und die normale Saisonalität im 1. Quartal dürften das EBIT-Wachstum im ersten Quartal belasten.

Wichtigste Punkte aus der Fragerunde der Analysten

Das Management geht davon aus, dass das erworbene MFA-Portfolio im Geschäftsjahr 2027 schneller wachsen wird als der Gesamtumsatz von Phibro, gestützt durch die Dynamik in Nordamerika, internationale Chancen und kombinierte Angebote in den Bereichen MFA, Spezialfutterzusätze und Impfstoffe.

Bei der Kapitalallokation nannte das Management organische Investitionen als oberste Priorität, einschließlich Impfstoffkapazitäten, Forschung zu Kombinationspräparaten, Marktexpansion und Heimtierprodukten. Die Unternehmensentwicklung (Business Development) konzentriert sich weiterhin auf Impfstoffe, Spezialfutterzusätze, Heimtiere sowie Umwelt- oder Klimaschutzchancen. Zudem plant das Unternehmen, seine Dividende beizubehalten und den Schuldenabbau fortzusetzen.

Das Management erklärte, dass sich die Lagerbestände im 4. Quartal des Geschäftsjahres 2026 stabilisiert haben. Es werden robustere Vertriebs- und Betriebsplanungsprozesse eingeführt, um das Bestandsmanagement und die Cash-Conversion zu verbessern.

Bezüglich des Bereichs Heimtiere teilte das Management mit, dass Rejensa weiterhin vom erweiterten Vertrieb profitierte. Restoris verzeichnete zwar Nachbestellungen, entwickelte sich jedoch unter den bisherigen Erwartungen, was das Unternehmen veranlasste, vorsichtigere Annahmen in die Prognose für das Geschäftsjahr 2027 einzubeziehen.

Vollständiges Transkript der Telefonkonferenz

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Fibro Animal Health Corporation 4th Quarter 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

I would now like to turn the conference over to Glenn David, Chief Financial Officer. Please go ahead.

Glenn David

Thank you, Regina. Good day and welcome to the Fibro Animal Health Corporation earnings call for our fifth fourth quarter and full year ended June 30th, 2026. My name is Glen David and I'm the Chief Financial Officer of Fibro Animal Health Corporation. I'm joined on today's call by Donnie Bentime, resident and chief executive officer, and Larry Miller, chief operating officer. Today, we will cover financial performance for our fourth quarter and full year 2026, and provide financial guidance for our fiscal year ending June 30th, 2027. At the conclusion of our remarks, we will open the lines for your questions. I would like to remind you that we are providing a simultaneous webcast of this call on our website, pahc.com. Also, on the investor section of our website, you will find copies of the earnings press release in annual form 10-K, as well as the transcript and slides discussed and presented on this call.

Our remarks today will include forward-looking statements, and actual results could differ materially from those projections. list and description of certain factors that could cause results to differ, I refer you to the forward-looking statement section in our earnings press release. Our remarks include references to certain financial measures which were not prepared in accordance with generally accepted accounting principles or U.S. GAAP. I refer you to the Non-GAAP Financial Information section in our earnings press release for a discussion of these measures. Reconciliations of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures are included in the financial tables that accompany the earnings press release. We present our results on a GAAP basis and on an adjusted basis. Our adjusted results exclude acquisition related items, unusual non-operational or non-recurring items, including stock-based compensation, other income expense as separately reported in the consolidated statement of operations, including foreign currency losses gains net. and income taxes related to pre-tax income adjustments and unusual or non-recurring income tax items.

Now, let me introduce our President and Chief Executive Officer, Donnie Bentime, to share his opening remarks. Thanks, Glenn, and good morning, everyone. Fiscal 2026 was a strong year for Fibro. we delivered record net sales of more than $1.5 billion and increased adjusted EBITDA by 39% to $255 million. In the fourth quarter, sales grew 5% and adjusted EBITDA grew 29%. More importantly, these results reflect a company that's executing better, operating more efficiently, and positioning itself for long-term growth. Let me spend a few minutes discussing the key themes behind those results. We experience continuous sales momentum throughout the year.

Our total legacy business grew 10% in the fourth quarter and 7% the full year. Minimal Nutrition delivered particularly strong performance, with sales increasing 20% in the quarter and 11% for the year. Growth came from multiple parts of the portfolio and reflects the benefits of serving a diverse set of customers, and end markets. Animal health, our core business, remains the primary growth engine. Our legacy animal health business grew 8% in the quarter and 7% for the full year. Legacy MFA's increased 11% during the quarter, while nutritional specialties and vaccines grew 5% and 4% respectively. For the full year, legacy MFA increased 4%, nutritional specialties increased 9%, and vaccines increased 14%.

Sales from the Acquired's OSSFA portfolio were down 11% in the quarter, largely reflecting a difficult comparison against a strong prior year period. The result was in line with our expectations and internal planning. For the full year, the portfolio grew 70% and beyond the strong sales of the acquired products themselves, we are extremely pleased with both the integration and the strategic benefits the acquisition is bringing to the company, which we believe will continue to play out across our entire portfolio in the years to come. Now that we have completed a full fiscal year with the integrated business, we do not expect to continue reporting the acquired portfolio separately. Before turning to fiscal 2027 guidance, let me touch on two important business updates. First, June marked the formal conclusion of FIBRA Forward, our three-year transformation program. While the program has for the most part ended, the capabilities they created remain embedded throughout the organization.

The stronger execution, accountability, and discipline developed through FibroForward continues to shape how we run the company today. Based on our current outlook, the expected cumulative EBITDA contributions from the program reaches approximately $50 million in fiscal 2027 compared with our fiscal 2024 baseline. Second, we announced yesterday the planned closure of our Chicago Heights manufacturing facility following a comprehensive review of the manufacturing network added through the MFA acquisition. This was a difficult decision, particularly because of the impact on our employees, and is certainly not a reflection of their dedication or performance. I believe leadership requires balancing multiple responsibilities. We have a responsibility to our employees to treat them with honesty, respect, and fairness. We also have a responsibility to our customers, shareholders, and the long-term health of the business.

Those responsibilities occasionally require difficult decisions and this is one of them. This action better aligns our manufacturing footprint with the future needs and supports stronger long-term returns. Our focus now is on supporting employees, maintaining customer service, and managing the transition responsibly. One of the key uncertainties we considered developing our fiscal 2027 outlook is the regulatory status of Virginia MISIN in Brazil. We continue to work constructively with Brazilian regulatory authorities and remain very optimistic regarding the long-term outcome. However, we have assumed only a minimal contribution from Virginia Mice and Sales in Brazil in our planning for this fiscal year. As a result, a favorable outcome will represent upside to our expectations rather than something required to achieve our outlook.

With that context, our fiscal 2027 guidance reflects confidence in the underlying business while taking a prudent view of known uncertainties. We expect debt sales of $1.55 billion to $1.6 billion. adjusted EBITDA of $258 million to $258 million, and adjusted diluted EPS of $3.41 to $3.59. In closing, as I begin my tenure as CEO, my priorities are straightforward. Serve our customers, advance innovation, improve operating performance, allocate capital with discipline, and create long-term value for all stakeholders. We enter fiscal 2027 with a broader portfolio, a more profitable animal health business, and a stronger operating model. I believe the actions we are taking today are setting the stage for us to exit fiscal 2027 in an even stronger position, with a more competitive company, a more efficient asset base, and an additional opportunity to create value. We've made significant progress over the last several years, but I believe our best opportunities remain ahead of us.

With that, let me turn the call back to Glenn. Thanks, Donnie. And starting with our Q4 performance on slide 4, consolidated net sales for the quarter ended June 30, 2026, with $396.7 million, reflecting an increase of $18.1 million, or a 5% increase over the same quarter one year ago. the animal health segment grew 2%, while mineral nutrition grew 20%, and the performance product segment grew by 1%. GapNet income and diluted EPS increased 26% driven by the successful integration of the new MFA business, increases of demand, improved gross margin due to favorable mix and lower input costs and the net impact of tariff recoveries partially offset by increased SG&A due to higher employee related costs. After making our standard adjustments to GAAP results, including acquisition-related items, foreign currency losses, and certain one-off items, the fourth quarter adjusted EBITDA increased $14.3 million, or 29%, versus prior year. Adjusted net income increased 37% and adjusted diluted EPS increased 35%. Increased gross profit driven by sales growth and an improved adjusted tax rate was partially offset by higher adjusted SG&A and higher adjusted interest expense. Moving to the full year, consolidated net sales for the year ended June 30th, 2026 were $1,518,000,000, reflecting an increase of $221.9 million, or a 17% increase over the prior year.

The animal health segment grew 21%, while mineral nutrition grew 11%, and performance products decreased by 8%. Gap net income and diluted EPS increased significantly, driven by the successful integration of the new MFA business, the positive impact of our FibroForward initiative, and favorable gross profit due to higher product demand in the animal health segment, which were partially offset with increased SG&A due to higher employer related costs and higher interest expense. After making our standard adjustments to GAAP results, including acquisition related items, foreign currency losses, and certain one-off items, full year adjusted EBITDA increased $71.3 million, or 39%. Adjusted net income and adjusted diluted EPS both significantly increased as well. Increased gross profit driven by sales growth was partially offset by higher adjusted SG&A and higher adjusted interest expense. Moving to segment level financial performance, the animal health segment posted $297.6 million net sales for the quarter, an increase of 5.1 million, or 2%, versus the same quarter prior year. Within the animal health segment, we reported legacy MFA net sales increase of $11.7 million, or an increase of 11%, primarily due to increased demand for certain antimicrobials sold by our ethanol performance business.

The new MFA business had sales of $83.9 million in the quarter, a decrease of $10.6 million, or 11%, driven by a strong comparative order in Q4 2025. Nutritional specialties net sales increased $2.5 million, or 5%, due to increased dairy demand in North America. Vaccine net sales growth of $1.5 million, or 4%, primarily due to continued growth of poultry products in Latin America and higher international demand, particularly in Israel. Animal Health adjusted EBITDA was $75.4 million, a 25% increase driven by the new MFA business, higher gross profit from improved mix in the legacy business, a one-time tariff recovery in the quarter, partially offset by higher SG&A. Moving to full year performance for animal health on SPI-7. The animal health segment posted $1,162,000,000 of net sales for the year, an increase of $199.4 million or 21% versus the prior year. Within the animal health segment, we reported legacy MFA and other net sales growth of $18.2 million or 4% due to demand for certain MFAs in Mexico and Southeast Asia and for products sold by our ethanol performance business, including antimicrobials and processing aids used in the fermentation. industry.

The new MFA business contributed $354.3 million in sales, growing 70% versus the prior year. Nutritional specialties net sales increased $15.8 million, or 9%, due to increased worldwide demand, particularly in North America and South America, and higher companion animal sales. Vaccine net sales growth of $19.3 million, a 14% increase, driven by continued growth of poultry products in Latin America and an increase in domestic and international demand in Israel and Southeast Asia. Animal Health adjusted EBITDA was $303.6 million, a 37% increase driven by the new MFA business, gross profit from improved mix in the legacy business partially offset by higher sgna Moving on to fourth quarter financial performance for our other business segments on slide 8. Starting with mineral nutrition, net sales for the quarter were $77 million, an increase of $12.8 million, or 20%, due to a combination of demand for premixes and an increased cost of underlying commodities like zinc and copper. Looking at our performance product segment, net sales of $22.2 million, an increase of $0.1 million, or 1%, primarily as a result of increase in demand for copper-based products offset by lower demand to the ingredients used in personal care products. Mineral Nutrition adjusted EBITDA increased 1% versus prior year with revenue growth offset by higher input costs, while Performance Products adjusted EBITDA was up 12%.

Corporate expenses increased $1 million driven by higher employer-related costs and strategic investments. Moving on to the full year of financial performance of our other business segments. Starting with mineral nutrition, net sales for the year were $282.3 million, an increase of $29.1 million or 11 percent due to increases in demand for copper, zinc, and trace minerals. Mineral nutrition adjusted EBITDA was $21.7 million, reflecting a year-on-year increase of $0.8 million, or 4%. Looking at our performance product segment, net sales of $73.5 million for the year reflects a decrease of $6.6 million, or a decrease of 8%, as a result of lower demand for the ingredients used in personal care products. Adjusted EBITDA was $8.1 million, a decrease of $2.5 million versus the prior year. Corporate expenses increased $8.4 million due to higher employer-related costs and strategic investments.

Turning to key capitalization related metrics on slide 10. We generated $10 million of positive free cash flow for the 12 months ended June 30th, 2026. generated $69 million of operating cash flow and invested $59 million in capital expenditures. Cash flow was negatively impacted by inventory growing $86.3 million in fiscal year 2026, primarily in the newly acquired MFA portfolio. Cash and cash equivalents and short-term investments were $82 million at the end of the year. Our gross leverage ratio was 2.9 times at the end of the fourth quarter based on $738 million of total debt and $255 million of trailing 12-month adjusted EBITDA. Our net leverage ratio was 2.6 times at the end of the fourth quarter based on $656 million of net debt and $255 million of trailing 12-month adjusted EBITDA. Returning to dividends, consistent with our history, we paid a quarterly dividend of $0.12 per share, or $4.9 million in aggregate.

Let's turn to slide 11, which lays out our guidance for fiscal year 2027. As Bounty mentioned, included in this guidance are benefits related to our FIBRO Forward Income Growth Initiative that will help drive additional EBITDA and margin growth, and this guidance reflects a prudent view of known uncertainties, most notably the regulatory status of Virginia Myosin in Brazil. Minimal sales of adjunct myosin in Brazil negatively impacts revenue growth in the year and has a much greater impact on EBITDA growth due to the higher margin profile of the product and unabsorbed overhead. In addition, the closer of our Chicago Heights facility will have a small benefit to adjusted EBITDA in fiscal year 2027, with the majority of the benefit in fiscal year 2028 and beyond estimated to be between $15 to $20 million on an annual basis. Please note that during the transition period of fiscal year 2027, we will be building some additional inventory at the site, inventory growth in fiscal year 2027 for the company will be significantly less than fiscal year 2026. Our guidance for fiscal year 2027 is as follows. Net sales of $1,550,000,000 to $1,600,000,000.

This represents a growth range of 2 to 5% and a midpoint of approximately 4%. Total adjusted EBITDA of $258 to $268 million. This represents a growth range of 1% to 5% and a midpoint of approximately 3%. an adjusted effective income tax rate of approximately 20%. The improvement versus fiscal year 26 is driven by an anticipated favorable mix of earnings. Adjust the net income of $140 to $147 million. This represents growth of 6% to 11% with a midpoint of approximately 9%. Gap Net Income assumes constant currency and no gains or losses from FX moves.

In addition, Gap Net Income does not currently reflect any one-time costs related to the Chicago Heights Plan closure. While we don't provide quarterly guidance, I do want to remind everybody that Q1 tends to be a low order in terms of absolute revenue dollars. As we were building the infrastructure to support the newly acquired business in fiscal year 2026, we ended the year at a higher SG&A base that will carry forward into fiscal year 2027. Due to this dynamic, we expect Q1 EBIT growth to be negative and then positive for the rest of the year. In closing, we are excited about the strong performance we saw throughout fiscal year 2026 and the momentum we are carrying forward into fiscal year 2027.

Operator

With that, Regina, could you please open the lines for questions? Thank you. We will now begin the question and answer session. To ask a question, press star and the number one on your telephone keypad. Our first question will come from the line of Aaron Wright with Morgan Stanley. Please go ahead.

Unknown Speaker

My question, so the first one I guess is, how do you think about that underlying new MSA business? It dropped down kind of in the quarter, but you've been doing really well with that before. Is there anything to call out in terms of timing? I know you've mentioned the tough comp, but was there anything timing last year to call out on that front And what are you expecting then in terms of that growth across that business into 2027? I know you won't be breaking that out, but just conceptually, how should we think about it? Thanks.

Glenn David

Thanks for the question, Aaron. So the Q4 decline in the Zoueta Semi-Faith Portfolio was something we always anticipated and expected as part of our forecasting. And really is driven by the difficult comparator to Q4 in last year versus any negative underlying growth trends. We really continue to believe this portfolio will outpace the overall revenue growth. growth for Fibro in fiscal year 2027. And some of the positive drivers are continued strong momentum in North America. And we also do expect some positive growth drivers in international as well. In addition, I also want to remind we did have a negative impact on revenue in Q2 of fiscal year 2026 due to returns related to the tier three market transitions, which will help revenue growth in fiscal year 2027. So it won't have any impact on gross profit or EBITDA.

And maybe Larry can add some more colors to some of the commercial drivers.

Larry Miller

Sure, thanks. In poultry, a key part of the acquisition was a very strong anticoccidial MFA portfolio that really compliments our legacy products and gives Fibro a broad set of molecules across several compound classes for strategic rotation programs. Our team has integrated these MFAs well and is promoting combined MFA, nutrition specialty product, and vaccine solutions for prevention, control, and treatment of disease. In the beef segment, we are repositioning the key acquired cattle products in feed lots as our Start Strong package. Boba Tech is a platform supporting higher feed intake, complemented by Decox for coccidiosis prevention and Oriomycin for treatment and control of bacterial pneumonia or respiratory disease. Our team is re-educating customers on how these products can help cattle start strong and protect their investments.

Unknown Speaker

Okay, that's helpful. And can you speak to just broadly underlying demand trends kind of by species group? I guess, how would you characterize that in terms of overall animal health and what do you expect in terms of animal health performance into 2027 on that front if you back out kind of obviously the virginia myosin brazil headwind on an underlying basis what are those key drivers fundamentally speaking into 2027.

Larry Miller

So again, we can we're investing in this portfolio. and the medicated feed additives and complemented with the nutrition specialties and vaccines. As you know, you know, the market demand and the meat sector and the dairy sector continue to be in in good state with good underlying demand. And animals in all species are at all time record high in value. So our customers are very motivated and interested in investing to protect the health and wellbeing of their animals. And those animals obviously that are healthy are going to perform better. So we think it's still a really good opportunity and a good market environment.

Unknown Speaker

Okay, and sorry, one quick last one for me. Just the Virginia myosin exposure, I guess anything else to call out from a regulatory perspective that we should be paying attention to, or is this just really isolated to Brazil at the moment? And can you remind us of your overall exposure to Virginia myosin?.

Glenn David

Yes, so the exposure to Vaginomycin is isolated to Brazil related to the therapeutic claims. In fiscal year 2026, we had about $27 million in sales related to Vaginomycin in Brazil. We are assuming very minimal sales in fiscal year 2027. Essentially, we had some sales, you know, in the first couple of months of the year, but we don't expect any sales post that once the therapeutic period ends. We do believe there is a chance we may get approval within that period, but to be conservative, we haven't included any sales post Q1. And we don't break out VM sales overall for the company.

Operator

Yep, just thought I'd try. Thank you so much. Our next question will come from the line of Ike Terunikis-Kova with J.P. Morgan. Please go ahead.

Unknown Speaker

Thanks and congrats on the quarter. So first just on margins, can you elaborate a bit on what you're assuming for both gross margins and SG&A and just what's a good way to think about gross margins given the dynamic. Second question is just around business development, just you know, latest thoughts on your appetite as well as type of assets you could be interested in. And then third question is just to follow up on the Brazil discussion. Just any updates on the regulatory kind of review process? Has there been any interactions with the regulators? And have any other kind of competitors potentially gotten their labels already? Just any kind of snippets you can share there. Thanks.

Glenn David

Thanks to Katarina. So I'll take the first question and let Donny address the BD and regulatory developments in Brazil. So related to margins, moving into next year, we expect gross margins to be essentially flat. Obviously, the impact of adrenomycin is negative to margins as we move. move into next year, but we will offset that with other efficiencies that we look to get through our five row forward initiative, as well as some of the gains that we do expect related to the Chicago Heights closure that will materialize into fiscal year 2027. Related to SG&A, because of the run rate that we left year 2026 with, we do expect SG&A to be a little above that of revenue growth, but not materially above.

Unknown Speaker

As far as business development is concerned, you know, I think we have a lot of opportunities internally and definitely there's a lot that we are doing in support of those. But if there are business development opportunities that compliment our internal, you know, targets, we're obviously looking and we're active. Just a reminder, you know, kind of vaccines and nutritional specialties are the two areas that we most focus on. And we've also obviously identified pets, a companion animal as an area, as well as climate. So I think those are the key areas that we're pursuing. And I think we'll do it prudently as we've done in the past and continue to invest both internally and external opportunities.

Larry Miller

Let me pass it to Larry actually to deal with the Brazil question. Yes, as Donnie mentioned, in his opening comments, we continue to work constructively with the Brazilian regulatory authorities. We remain optimistic about receiving a therapeutic use approvals, very similar indications to what we have in other leading livestock markets. And we hope and expect to have those within the 180-day transition period, which ends at the end of October. Virginimyosin is a very unique and important therapeutic product in helping our customers keep their cattle and poultry flocks healthy and protecting their investment.

Unknown Speaker

Yes, I mean, I think the issue that Brazil is facing with this particularly is the EU put in some new regular regulations as far as the ability of countries to to sell to the EU and some of them deal with with hormones and then deal with antibiotics. There were other countries. There are many other countries that sells that have permission to sell as the EU that have Virginia bison for therapeutic claims and Brazil is aware of that and understands that that you know is putting them at a competitive disadvantage if they don't do that. However, this is a very big political football right now in Brazil. There are local elections or federal elections, I guess, in the next couple of weeks, which which first round second round will be a couple weeks after that. So while we're again optimistic that we can get this done within the or cautiously optimistic we can get this done within the period of the 180 days. I think, prudently we're saying, hey, this might split post elections. because of the noise around it. And therefore, as we've discussed, we've taken it out of our fiscal 27 guidance.

We do believe though very strongly that we will get the therapy to claim eventually.

Operator

Thanks. Appreciate all the color. Our next question will come from the line of Daniel Grossleit with Citi. Please go ahead.

Fragen und Antworten

Daniel Grosslight

Hi, guys. Thanks for taking the question. I want to focus a little bit on free cash flow and working capital dynamics in 27. Obviously, you mentioned you had that big inventory build in fiscal 26 due to the Zoetis MFA acquisition. And I think you mentioned that you'll still need to build some inventory in 27, but not nearly as much as you did in 26. Can you just talk to us a little bit about the working capital investment needed in fiscal 27 and, you know, what your expectations for CapEx and free cash flow conversion are into fiscal 27. Thanks.

Glenn David

Yes, thanks for the question, Daniel. I agree that free cash flow was limited in 2026 with about $10 million in free cash flow. As you mentioned, this was greatly impacted by the inventory build due to the Zoetis product portfolio of about $86 million. The good news is that inventory build did stabilize in Q4. And for fiscal year 2027, we really do expect any inventory bill to be limited for the Chicago Heights transition. We expect to be that in the range of $25 to $30 million. Also, as part of our five-year forward initiative, we have enhanced our focus on inventory as a company and begun implementing more robust S&OP processes. across the organization.

Related to CapEx, we spent about $59 million in CapEx in fiscal year 2026. We do expect this number to be higher in fiscal year 2027 and 28, as we continue to invest to grow our vaccine capacity to support the building demand in our manufacturing sites in both Ireland and Israel. There will also be some other small capital investments required to shift some of the Chicago Heights production to other internal sites, but net-net we expect significantly greater free cash flow in fiscal year 27 and fiscal year 2026.

Daniel Grosslight

Got it. That's helpful. And on the closing of the Chicago Heights facility, are you able to quantify the expected one-time cash charges related to that? And it sounds like much of the anticipated benefit is going to come through starting in the second half of the year. Is that right? And when will the benefits of that closure be fully realized here.

Glenn David

Yes, so in terms of the overall one-time cost, Dan, it's a little difficult to estimate the exact amount based on what the ultimate end will be for the site in terms of whether it's purchased as an ongoing consideration or not. In terms of some of the cash costs, we do expect cash costs. related to the site closure to be around $10 million, and then about another $10 million in CapEx. But some of the other non-cash costs, asset write-offs, things of that nature, they're still unknown as well as the ultimate purchase of value of the site as well. But cash costs, relatively smaller in terms of around $10 million cash one-time costs and then capex around $10 million as well. And then he asked about the impact. Yes, in terms of the impact between fiscal year 2027 and fiscal year 2028, as we're beginning the process right now, as we mentioned in the prepared remarks, the impact in fiscal year 2027 will be relatively minimal to adjusted EBITDA, but a small positive contribution. As we said in the prepared remarks, the ongoing impact we expect to be about $15 to $20 million, of which we expect that to materialize in fiscal year 2028 and beyond.

Daniel Grosslight

Yes, and last one for me, just sticking with the cash theme here. Gross leverage is now down to under three times. Seems like most of the major integration work with Zoetis is complete. How are you thinking about capital deployment and in particular returns to shareholders that maybe liquidity limits, which you can do on a share buyback side of things, but how are you thinking about further debt pay down, perhaps a buyback or dividend? And you already kind of touched on the M&A front, but, maybe a little bit more detail on how you're thinking about organic versus inorganic growth too. Thanks.

Glenn David

Sure, Daniel. I'll start and then I'll let Donnie add some additional color. So, A, we continue to see organic growth opportunities within the business, and that's going to continue to be our first priority. We mentioned a little bit about the elevated capex in fiscal year 27 and 28 regarding building capacity out of vaccine management. manufacturing sites in Ireland and Israel. Also some greater funding in R&D to support combination products, some market expansion, as well as supporting our companion animal business. Second priority continues to be business development and looking to expand in areas of higher growth and margins such as vaccines, environmental, companion animal. And then in terms of returning capital shareholders, we'll continue to support our dividend. We'll continue to look to pay down debt as well.

And then beyond fiscal year 2027,.

Unknown Speaker

and continue to evaluate other options. Donnie, I don't know if you have any additional comments. I'll just echo what Glenn said. I think we're pretty excited about the opportunities, as I mentioned earlier, within our portfolio. But some of that does require investment, either capital or OpEx. And that is going to be our first priority. And we think that that's the prudent way to go here.

There's a lot to do within what we have.

Operator

Thanks, guys. Thanks, guys. Our next question will come from the line of Michael Riskin with Bank of America. Please go ahead.

Michael Ryskin

Great, thanks for Susan and maybe first I'll ask on mineral nutrition. That's the season that we're Excuse me. That's done better the last couple quarters. I mean, I know you guys always talk about that being a pretty much a pass through business. and so reflecting underlying commodity pricing. But still there's been a, you know, 11% growth in 26 and 20% in the fourth quarter. Just how much visibility do you have into trends there into 2027? I guess. Kind of my question is, like, how quickly can those prices swing, and what are your assumptions there for at least the first half of the year? Do you expect this strength to continue, these elevated prices to persist? Yes.

Glenn David

Yes, so I'll start, Mike. Thanks for the question. So in terms of mineral nutrition, as you mentioned, we did have very strong revenue growth in both the quarter and the year. However, when you look at our EBITDA growth, it was much slower, right? Growing 1% in quarter and 4% for the year. That's really due to the fact that prices of some of these materials have increased significantly. So the cost to us has increased significantly and our ability to pass that price all the way to the customer wasn't at a hundred percent in this year. So the EBITDA growth didn't necessarily follow. We do expect actually stronger EBITDA growth next year with potentially lower revenue. growth not necessarily in that you know call it 11 range that we see year to date so somewhat slower revenue growth but more even the growth following forward.

Michael Ryskin

Okay, okay. That's fair. And then maybe on... On Fibro Forward, as you called out, you're sort of like wrapping that up in terms of the actions. But the you know 50 million EBITDA is a pretty impressive number for for fiscal year 27 versus the 24 baseline. So congrats on that. Just a thought on sort of like the next leg or the next opportunity there? Are there, is there a FibroForward 2.0? So what do you see going forward now that you've taken those first initial steps? Yes, so I'll take that.

Unknown Speaker

Thank you. You know, I think the company has really changed within Fiber Forward and basically how we operate is really the legacy. So there's not a transformation 2.0, but there definitely is a forward plan. for a three year planning cycle, which includes a lot of the learnings and the implementation aspects within Viro Forward. And we set ourselves some fairly lofty goals and we expect to deliver on it because we've seen that we can. So it's not going to be a formal transformation program, but there is the learnings and the way that we are operate will continue and we put together what we call a transformation office, might change to kind of more of a strategy implementation office, but we do expect to continue to reap the benefit of the way that we operate now.

Michael Ryskin

OK, and then last one if I could squeeze in. I didn't hear too much in the prepared remarks on the companion animal, you know, Regensa. Restores just would be great to get an update on that how that that's trended in the quarter and just sort of, you know, expectations for 27 at a high level. Thanks.

Unknown Speaker

I'll take that the last time actually, because Glenn's taking over this business. But the, you know, You know, actually it was called out within our nutritional specialties as far as why I was up was partly because of the companion animal. We continue to see growth, especially with Regenza, as we've brought in from initially we had one distributor. Now we've brought in that to multiple distributors and we're seeing a nice nice uptick with that with restorers. Frankly, you know it's growing. Obviously it has a zero base. It's growing. We're seeing a lot of reorders now, which is very strong, but we have not had the success that we had anticipated we are starting to see a snowball effect. So early days on that. But you know, the longer we're out there and the more kind of evidence we were able to show from real use cases, the stronger our proposition that the product you know really does what we say it does and so while disappointed with our performance last year, fiscal year and and you know in this fiscal year we've tempered our our expectations within our guidance.

We do believe that this is something that that really could.

Unknown Speaker

do very well for us as we move forward. Excellent, thank you.

Operator

Our next question will come from the line of Nevin T. with BNP Paribas. Please go ahead.

Unknown Speaker

Hi, good morning. Thanks for taking my questions. I just have one left. Do you have early thoughts on the impact of the phased Mexican border reopening for the cattle herd and for fiber? Thank you.

Larry Miller

Thanks for the question. This will initially have very modest impact on U.S. beef production in 2026 by increasing the number of cattle available to fill some of the excess feedlot capacity. And it's unlikely to have any material impact on lowering consumer prices for beef in the near future. This is being implemented in a controlled phase approach with veterinary inspection of each animal. The first port of entry opened last week for cattle coming across in Arizona, and a second will open near Chihuahua. With total imports in the next year to be projected about 12,000 cattle per month or less than 150,000 head by mid-27. That equates to about one half of 1% of the 27 million head of annual beef feedlot production. Assuming that the Mexican cattle imports resumes to what had been normal historic averages of about 1.2 million head per year, that equals about 3% of the US feedlot production.

So it does have potential to have impact. It should be noted that the beef on dairy market development and growth is having a much more significant impact on feeder cattle availability. Currently supplying about five and a half million or 20% of the million head fed for slaughter in the United States and the consistency of supply uniformity and quality is adding significant value to the US beef industry Thank you. That's very exhaustive and helpful. Thank you.

Operator

And once again, to ask a question, press star followed by the number one on your telephone keypad. And this will conclude our question and answer session. I'll hand the call back over to Glynne David for any closing comments.

Glenn David

Thank you, Regina, and thank you, everyone, for listening on today's call. We appreciate your attention, interest, and support of FibroIdom Health Corporation. Have a great day.

Operator

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

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