Neogen profits rise on corporate tax cut

LANSING — The food and animal safety testing firm Neogen Corp. reported higher revenue and net income in its third fiscal quarter ended Feb. 28.

Revenue was $78.1 million for the quarter, up from $74 million a year earlier. Net income was $16.6 million or 32 cents a share, up from $10.3 million or 20 cents a share a year earlier.

For the nine months, revenue was $244.3 million, up from $223.2 million in the same nine months of the prior fiscal year. Net income was $45.6 million or 89 cents a share, up from $31.3 million or 62 cents a share a year earlier.

The company said it benefited in the quarter from tax changes approved in December, resulting in an effective tax rate of 4 percent for the quarter, vs. 34 percent in the prior year, which saved the company some $4.7 million.

“We are pleased to report solid third quarter performance, in which we continued to integrate recent complementary acquisitions while keeping our focus on sales growth,” said James Herbert, Neogen’s executive chairman. “In addition, during the quarter, Neogen benefitted from Washington’s long-discussed reduction of the corporate tax rate. These tax savings will allow us to continue to aggressively pursue our proven growth strategies.”

The third quarter was the 104th of the past 109 quarters that Neogen reported revenue increases as compared with the previous year — a record spanning mor than 27 years.

“We were generally pleased with our performance in the quarter, especially considering that we were facing a difficult comparison with last year’s third quarter,” said Neogen president and CEO John Adent. “The prior year’s quarter featured strong sales of mycotoxin test kits due to an outbreak of DON in crops in the U.S. and Europe, and sales of a disinfectant product line that we no longer offer. The current quarter had revenue increases in core product lines across our food and animal market segments, including strong growth in our global agricultural genomics services.”

Revenues for the company’s Food Safety segment increased 11% during the third quarter compared to the prior year quarter. Sales of Neogen’s rapid diagnostics to detect food allergens, including gluten, milk, soy and peanuts, increased 14% in the current quarter. Sales of the company’s general sanitation products increased 18% in the third quarter of the 2018 fiscal year, compared to the prior year quarter, and sales of its foodborne pathogen detection tests increased 22% — including a 43% increase in sales of tests to detect Listeria.

Included in the Food Safety segment’s current third quarter results was a 29 percent increase in sales of test kits to detect drug residues in milk. In February, Neogen launched BetaStar Advanced tests for beta-lactam and tetracycline antibiotics in milk. The new tests were developed for the U.S. market, and designed to be performed with Neogen’s new Raptor testing platform. Raptor allows testers to easily perform up to nine tests at once. The Raptor platform is also designed to work with other Neogen tests.

In the current quarter, revenues from international sources increased to 39 percent of total revenues, compared to 36 percent in the prior year quarter. Overall, international sales for the quarter increased 17 percent over the prior year, aided by acquisitions. For the current quarter, Neogen Europe’s revenues rose 15 percent in U.S. dollars, aided by growth in genomics services, Lab M sales rose 20 percent as its products have been increasingly integrated into the company’s distribution channels, Mexico-based Neogen Latinoamerica’s sales increased 19 percent and Neogen China’s revenues increased 28 percent, each on broad-based increases across its product offerings.

Neogen’s Animal Safety segment reported a revenue increase for the third quarter of 6 percent, led by growth in genomics business, an 11 percent increase in its rodent control product lines, a 19 percent increase in sales of drug detection products, a 14 percent increase in sales of detectable needles, and a 26 percent increase in sales of its animal care line of products, which includes animal wound care products, vitamin injectables, and supplements. These gains overcame lower sales of cleaners and disinfectants, which resulted from the termination of a distribution agreement in the prior year.

Neogen’s worldwide animal genomics business recorded a broad-based increase of 25 percent in the third quarter of fiscal 2018 compared to the prior year. This increase was aided in part by the September 2017 acquisition of the Neogen Australasia genomics laboratory in Australia, but was driven more significantly by increases in revenues from genomic testing of beef and dairy cattle, swine, poultry, and companion animals at our previously existing locations.

Neogen’s Food Safety Division markets dehydrated culture media and diagnostic test kits to detect foodborne bacteria, natural toxins, food allergens, drug residues, plant diseases and sanitation concerns. Neogen’s Animal Safety Division is a leader in worldwide biosecurity products, animal genomics testing, and the manufacturing and distribution of a variety of animal healthcare products, including diagnostics, pharmaceuticals and veterinary instruments.

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