Streamlined operations, new product launch help Innophos prosper despite depressed sales

29-Oct-2014 - Last updated on 19-Feb-2015 at 16:20 GMT

Innophos supplies specialty phosphates for nutritional applications and industrial purposes.

Specialty phosphate producer Innophos suffered sales declines in its third quarter of 2014 as the company struggled with a supply shortage for a key feedstock and some weakness in the end markets for its customers’ finished goods. Offsetting that are operational improvements, a new product launch and the anticipated resolution of import difficulties in China that some customers were experiencing, CEO Randy Gress said.

The company experienced a significant disruption in the supply of phosphoric acid from its US supplier. Gress said by focusing on improving operations the company was able to increase profitability in the quarter even in the face of the supply challenges.

“Despite the temporary lack of phosphoric acid, our focus on operational excellence was reflected in higher levels of profitability in our business as our operating performance improved significantly over the year-ago period and our margins came in above the high end of our full year projections,” Gress said in an earnings call with analysts that was transcripted by the site seekingalpha.com.

The company’s results were depressed in the quarter by the import situation in China, one of the end markets that experienced “continued softness,” Gress said. The situation continues to drive down revenues in the sector in the short term even though relief is on the horizon.

“Our nutrition business sales were down $2 million year-over-year as our customers continue to face challenges exporting to China to the more stringent nutrition import regulations in that country. These issues have reasonably been resolved and our two largest customers that were facing that very issue have already placed orders for fourth quarter 2014 deliveries,” he said.

New product launch

Gress said innovation will also help to resolve the downward curve of revenues in the nutrtition sphere. Gress mentioned specifically the launch of a new product, NutraTab, a dietary supplement and pharmaceutical excipient that is a blend of tricalcium phosphate with guar gum. The product is meant for use in chewable tablets and high calcium supplements.

“For the nutrition of pharmaceutical markets, we have expanded our market leading range of Calcium phosphate based excipients. Our recently launched product called NutraTab is a new blend of Calcium phosphates offering greater compressibility and a higher calcium content for tablet, both important criteria when choosing an excipient. The growing demand among formulators is trending towards integrated blends such as NutraTab combining the attributes of several ingredients and we believe that this product will lend itself well to this customer need,” Gress said.

Gress said the company will continue to pursue a strategy of “building on our position in the high growth micronutrient ingredient space” as well as pursuing mergers and acquisitions.

Earnings details

Innophos recorded net sales of $209 million in the quarter, a decrease of $11 million year-over-year and sequentially, as the firm notched $220 million in net sales in the second quarter. But profitability continues to be strong, with the company reporting diluted earnings per share for the third quarter of 2014 of $0.83 compared to $0.49 for the third quarter 2013, or $0.56 after adjustments.