PAHC 회계연도 4분기 및 2026 회계연도 실적발표회: 매출 성장, 2027년 가이던스 및 브라질 리스크

핵심 요약

• 2026 회계연도 4분기 매출은 전년 동기 대비 5% 증가한 3억 9,670만 달러를 기록했으며, 조정 EBITDA는 29%, 조정 희석 EPS는 35% 증가했습니다.
• 2026 회계연도 연간 매출은 전년 대비 17% 증가한 사상 최대치인 15억 1,800만 달러를 기록했습니다. 조정 EBITDA는 39% 증가한 2억 5,500만 달러였습니다.
• 동물 보건 부문이 주된 성장 동력을 유지했습니다. 인수한 MFA 포트폴리오, 백신, 영양 특화 제품의 호조로 연간 부문 매출은 21% 증가한 11억 6,200만 달러를 기록했습니다.
• 잉여현금흐름은 인수된 MFA 포트폴리오와 주로 관련된 8,630만 달러의 재고 증가로 인해 1,000만 달러에 그쳤습니다. 연말 순레버리지 비율은 2.6배였습니다.
• 경영진은 2027 회계연도 매출 가이던스로 15억 5,000만~16억 달러, 조정 EBITDA 가이던스로 2억 5,800만~2억 6,800만 달러를 제시했습니다.
• 2027 회계연도 전망은 2026 회계연도의 약 2,700만 달러와 비교해 브라질에서의 버지니아마이신 매출이 미미할 것으로 가정했으나, 향후 규제 당국의 승인이 이뤄질 경우 가이던스 상방 요인으로 작용할 수 있습니다.

핵심 재무 데이터

2026년 6월 30일 기준 피브로 애니멀 헬스(Phibro Animal Health Corporation)는 8,200만 달러의 현금, 현금성 자산 및 단기 투자 자산을 보유했습니다. 총부채는 7억 3,800만 달러로 총레버리지 비율은 2.9배를 기록했습니다. 순부채는 6억 5,600만 달러로 직전 12개월 조정 EBITDA의 2.6배였습니다.

사업 및 운영 성과

동물 보건 부문의 4분기 조정 EBITDA는 25% 증가한 7,540만 달러를 기록했습니다. 이러한 증가는 인수된 MFA 사업, 기존 포트폴리오의 제품 믹스 개선, 일회성 관세 환급을 반영한 결과이며, 판매관리비 증가로 일부 상쇄되었습니다.

연간 기준 동물 보건 부문의 조정 EBITDA는 37% 증가한 3억 360만 달러를 기록했습니다. 인수된 MFA 포트폴리오가 70% 증가한 3억 5,430만 달러의 매출을 기여했습니다. MFA의 4분기 매출은 전년 동기 높은 기저효과로 인해 11% 감소한 8,390만 달러를 기록했으나, 경영진은 이는 기저 트렌드 약화라기보다는 예상된 결과라고 밝혔습니다.

기존 MFA 및 기타 매출은 4분기에 11%, 연간으로 4% 증가했습니다. 영양 특화 제품은 북미 낙농 수요, 전 세계적인 수요 확대, 반려동물 매출에 힘입어 분기 기준 5%, 연간 기준 9% 성장했습니다. 백신 매출은 라틴아메리카의 가금류 제품과 이스라엘 및 동남아시아 수요에 힘입어 4분기에 4%, 연간으로 14% 증가했습니다.

미네랄 영양 매출은 프리믹스 수요와 아연 및 구리 원가 상승을 반영해 4분기에 20% 증가했습니다. 그러나 높아진 투입 원가가 고객에게 완전히 전가되지 않아 조정 EBITDA는 1% 증가에 그쳤습니다. 경영진은 2027 회계연도에 해당 부문의 매출 성장세는 둔화되겠으나 EBITDA 성장세는 강화될 것으로 전망합니다.

기능성 제품의 연간 매출은 개인 위생용품 원료 수요 감소로 인해 8% 감소했습니다. 조정 EBITDA는 250만 달러 감소한 810만 달러를 기록했습니다.

3개년 피브로 포워드(Phibro Forward) 혁신 프로그램이 6월에 공식 종료되었습니다. 경영진은 프로그램의 운영 규율과 실행 프로세스를 유지하는 한편, 2024 회계연도 기준점 대비 2027 회계연도 누적 조정 EBITDA 기여도가 약 5,000만 달러에 달할 것으로 예상합니다.

경영진 가이던스

경영진은 2027 회계연도에 매출총이익률이 대체로 보합세를 유지할 것으로 예상합니다. 피브로 포워드를 통한 효율성 향상과 시카고 하이츠 시설 폐쇄에 따른 초기 수혜가 브라질 버지니아마이신 매출 미미로 인한 부정적 믹스 효과를 상쇄할 것으로 전망됩니다.

2026 회계연도가 높은 비용 기반으로 마감됨에 따라 판매관리비 증가율은 매출 성장률을 소폭 상회할 것으로 예상됩니다. 경영진은 또한 1분기 EBIT 성장이 음(-)(역성장)을 기록한 후 연남은 기간 동안 양(+)(성장)으로 돌아설 것으로 예상합니다.

시카고 하이츠 시설 폐쇄가 2027 회계연도 조정 EBITDA에 미치는 이익은 소폭에 그칠 것으로 예상됩니다. 경영진은 2028 회계연도부터 연간 1,500만~2,000만 달러의 비용 절감이 이뤄질 것으로 추정합니다. 공장 전환에는 약 1,000만 달러의 일회성 현금 비용과 추가로 1,000만 달러의 자본적 지출이 필요할 것으로 예상됩니다.

리스크 및 주요 관심 분야

• 브라질 규제: 2026 회계연도 브라질 내 버지니아마이신 매출은 약 2,700만 달러였습니다. 2027 회계연도 가이던스는 치료 목적 사용 승인을 받지 못할 경우 1분기 이후 매출이 없거나 미미할 것으로 가정하고 있습니다. 경영진은 장기적인 결과에 대해 낙관적인 태도를 유지하고 있으나 규제 및 정치적 불확실성을 언급했습니다.
• 운전자본: 2026 회계연도에 재고가 8,630만 달러 증가했습니다. 경영진은 주로 시카고 하이츠 전환 작업과 관련하여 2027 회계연도에는 2,500만~3,000만 달러 규모의 소폭 재고 증가를 예상하고 있습니다.
• 현금 전환: 회사가 아일랜드와 이스라엘에서 백신 생산 능력을 확장함에 따라 2027 회계연도와 2028 회계연도에 자본적 지출이 증가할 것으로 예상됩니다. 그럼에도 불구하고 경영진은 2027 회계연도 잉여현금흐름이 2026 회계연도보다 크게 증가할 것으로 전망합니다.
• 시설 전환: 시카고 하이츠 부지의 최종 비현금성 비용과 잠재적 매각 가치는 여전히 불확실합니다.
• 단기 수익성: 높아진 판매관리비 집행률과 일반적인 1분기 계절성이 1분기 EBIT 성장에 부담을 줄 것으로 예상됩니다.

애널리스트 Q&A 하이라이트

경영진은 북미에서의 모멘텀, 해외 시장 기회, MFA·영양 특화 제품·백신에 걸친 복합 제품군 제공에 힘입어 인수된 MFA 포트폴리오가 2027 회계연도 피브로 전체 매출보다 빠르게 성장할 것으로 기대합니다.

자본 배분과 관련해 경영진은 백신 생산 능력, 복합 제품 연구, 시장 확장 및 반려동물 제품을 포함한 자체 투자를 최우선 순위로 꼽았습니다. 사업 개발은 백신, 영양 특화 제품, 반려동물, 환경 및 기후 관련 기회에 계속 집중하고 있습니다. 아울러 회사는 배당을 유지하고 부채 감소를 지속할 계획입니다.

경영진은 2026 회계연도 4분기에 재고 수준이 안정화되었다고 말했습니다. 재고 관리 및 현금 전환 개선을 위해 보다 견고한 영업 및 운영 계획 프로세스가 도입되고 있습니다.

반려동물 제품과 관련해 경영진은 리젠사(Rejensa)가 유통망 확대에 따른 수혜를 지속적으로 입고 있다고 언급했습니다. 레스토리스(Restoris)는 재주문이 발생하고 있으나 이전 기대치에는 미치지 못하는 성과를 내어, 회사가 2027 회계연도 가이던스에 더 보수적인 가정을 반영하게 되었습니다.

실적발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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.

질의응답

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.

[Call has ended.]