In a press release dated February 26th, Elanco Animal Health (ELAN) reported on Q4 and FY 2023 ending December 31st. For the period, the company posted a loss of $141 million on revenue of $1,035 million with a diluted EPS of $(0.29). Although ELAN beat on the top line against Zack’s estimate of $999.7 million, EPS was far below the $0.10 anticipated. For the corresponding Q4 FY2022, ELAN lost $55 million on sales of $985 million with a diluted EPS of $(0.1). Comparing Q4 2023 with Q4 2022:
- Revenue increased by 5.1 percent
- Gross margin declined from 54.5 to 50.1 percent
- Operating margin declined from 13.6 to 11.0 percent
For FY 2023 the Company lost $(1,195 million) on sales of $4,417 million with a diluted EPS of $(2.50). During FY 2023 the Company incurred a charge of $1,042 million for goodwill impairment. Comparable figures for FY 2022 were a loss of $(78) million on sales of $4,411 million with a diluted EPS of $(0.16).
During FY 2023 sales to the livestock sector attained $2,271 million, representing 51.4 percent of total company sales. Sales to the poultry sector amounted to $$765 million. Sales of companion animal products attained $2,104 million or 47.6 percent of the Company total.
The Company recently announced the divestment of their aquaculture business to Merck Animal Health for $1,300 million in cash.
Guidance for FY 20234 included revenue of $4,450 to $4,540 million but with a net loss of $(62) to $(17) million. EPS will range from $(0.12) to $(0.03).
In commenting on results, Jeff Simmons, CEO stated, Elanco ended 2023 with momentum, returning to constant currency revenue growth for the full year and delivering 5% growth in the fourth quarter, primarily driven by our farm animal business, innovation revenue and price growth," Simmons continued, "As we look at 2024, we expect our existing portfolio to deliver constant currency revenue growth of 1% to 3%, with both pet health and farm animal expected to contribute to growth. We remain encouraged by our three late-stage pipeline products under regulatory review that have a path toward approval in the first half of 2024 and would be additive to our topline expectations in the second half of the year. Continuing our efforts to improve efficiency, today we announced a strategic restructuring to continue the shift of our investments into more significant value creation areas. We are investing to enhance our launch efforts, prioritizing cash flow improvements and meaningfully reducing leverage, from both our improving free cash flow and the expected sale of our aqua business. We believe that the investments we are making in 2024 will provide the foundation to enable sustained revenue growth over the medium and long term."
This self-adulatory statement is at variance with the reality of continued losses and shareholder disaffection.
Ancora an investment group with three percent of the equity has proposed a slate of independent candidates to the 12-person Board to replace four retiring members. Ancora has characterized the current Board and CEO as “barriers to success”.
On December 31st ELAN posted total assets of $14,362 million including goodwill and intangibles of $$9,588 million with long-term debt of $6,147 million. On February 29th the market capitalization attained $7,850 million The Company has traded over the past 52-weeks in a range of $7.88 to $16.20 with a 50-day moving average of $15.42.
On a twelve-month trailing basis, operating margin was 1.6 percent and profit margin -27.9 percent. The company achieved a return on assets of 1.4 percent and -18.2 percent on equity.
After meeting with Ancora following release of FY 2023 earnings, Elanco announced a program to enhance shareholder value. This will include a shift from livestock to higher-margin companion animal products, cancellation of 420 positions with layoffs and changes in representation and distribution to reduce costs.