00:03 Good day, and thank you for standing by. Welcome to the Q4 twenty twenty one Investor Teleconference for Oil-Dri Corporation of America. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] 00:30 I would now like to hand the conference over to your speaker today, Mr. Dan Jaffee, President and CEO. Thank you. Please go ahead.

00:38 Thank you, Kevin. Welcome everyone to our fourth quarter and fiscal year ending teleconference as we completed our eighty first fiscal year in business, very exciting. Joining me on the call today is Susan Kreh, CFO; Molly VandenHeuvel, COO; Jessica Moskowitz, VP and General Manager of our Consumer Products Division; Fred Kao, Vice President of Global Sales for Amlan International; Laura Scheland, Vice President and General Counsel; and Leslie Garber, Manager of Investor Relations. Leslie, will you walk us through our Safe Harbor.

01:10 Yes. Thank you. Welcome everyone. On today’s call, comments may contain forward-looking statements regarding the company’s performance in future periods. Actual results in those periods may materially differ. In our press release and in our SEC filings, we highlight a number of important risk factors, trends and uncertainties that may affect our future performance. We ask that you review and consider those factors in evaluating the company's comments and in evaluating any investment in Oil-Dri stock. Thank you for joining us. Dan?

01:42 Great. Thank you. Before I turn it over to Susan, for what I call a play-by-play, I'll give a little color on the year and I'll try not to steal too much of her thunder, but obviously, very happy with the top line growth. Overall, eight percent growth, all organic, no acquisitions during the year and then twenty percent in the fourth quarters. So you can imagine what that did, especially whatever everyone knows about global supply chains, what a great job our team did of getting all that out. 02:11 However, costs, we're in a whole new cost environment. I mean, whatever we thought we were seeing, it's way worse. And so, we were in a constant game of catch up and we just put out a news release this week about it. So, we're still playing catch up. But the good news is the strategies are working. The supply chains – it’s, my father used to always joke at, when people would ask him, how's your wife? And he would say, compared to who? And so, how is our supply chain, compared to who? 02:30 I mean, when you go to the shelf, certainly in the consumer area, you see out of stocks everywhere. And generally, you see competition more out of stock than we are, which is why I think we were up so much in the fourth quarter. So, it is tough, our challenging times, heads are down, trying to execute on price increases and cost control as we are also in the midst of really some very exciting growth opportunities in many of our businesses. So it's very challenging times, but very proud of the team. They've done a phenomenal job. We've certainly stressed one of our core values which is the W, which is work life balance. 03:24 We've definitely been leaning too much towards work and not enough towards life, these last ninety to one hundred and twenty days, but the team has stepped up and I'm very appreciative of what they've done. 03:33 So, Susan, I'm going to turn it over to you for some details, and then you can kick it back to me for Q&A.

03:41 Sounds good. Thanks, Dan. Twenty twenty one was a year of momentum, of challenges and of opportunities. We experienced momentum, as Dan was just describing, in our sales growth as full year consolidated net sales reached an all-time record high of three hundred and five million dollars or eight percent growth over the prior year. This is primarily due to higher demand of our cat litter and agricultural products, which increased by nine percent and nineteen percent respectively over the prior year. 04:17 Revenues from our Fluids Purification products were three percent higher than last year, while sales of Animal Health & Nutrition products were essentially flat. Industrial and Sports products revenues grew nine percent year-over-year, and we experienced steady sales growth of two percent from our co-packaging coarse cat litter business. 04:37 Annual consolidated gross profit was a different story, as Dan mentioned, and it decreased by three point five million dollar year-over-year, as we experienced that the significant challenges of market based inflation. Commodity-based cost increases caused our cost of goods sold per manufactured ton, a key financial metric for Oil-Dri to increase approximately eight percent compared to the prior year with a very significant portion of those cost increases occurring in the back half of the year. 05:10 Packaging costs, which include resin-based jugs and pails as well as pallets, experienced the most dramatic increase at nineteen percent year-over-year, followed by natural gas, which increased fifteen percent year-over-year. Domestic freight which has been under pressure due both to rates and availability increased thirteen percent. These increases were only partially offset by operating cost reductions and efficiencies that Molly and the entire supply chain team worked hard to achieve during fiscal twenty twenty one. 05:48 Selling, general and administrative expenses for the year decreased eight percent from…

13:05 All right. Thank you, Susan. And Kevin, at this time, we'd like to open up the lines and as you mentioned, and as always, ask your most important question first, and then go back into the queue so that everybody has a chance to ask at least one question.

13:22 Thank you. [Operator Instructions] Our first question comes from the line of Ethan Star, a Private Investor. Ethan, you may ask your question.

14:02 Good morning. What progress are you making in marketing and selling Varium and NeoPrime? What feedback are you getting from the trials? And when do you think we might see increased sales of these products?

14:12 Well, I think I mentioned in the -- was in the fourth or the third quarter that we're -- third quarter that we're hoping for some activity in the second quarter, which is coming up. So, I'll stick with that for now. As you know, I'm not going to get into too many details, but it's still very positive, but I will tell you, that we're in such a dynamic cost environment that, yes, we are still doing a lot of things for the future. But our heads are down, just trying to execute, trying to get product out the door, trying to get trucks to show up, trying to get pallets to put our products on top of, trying to get all the additives that we need. Everything is under just unbelievable pressure, and I'm sure you're seeing it in all the articles you read. So, I will say still long-term very bullish on Animal Health. We did hire a couple of more people to help fill out the team during the quarter. So it continues to validate that they're seeing what -- those who joined us before them saw that we really do have one of the best solutions. 15:13 I don't know, if you saw in the most recent month or two, but the EU now has mandated that all imported meat be antibiotic-free and therefore, that causes repercussions throughout their supply chain. There are major importer from Brazil. And so then that ripples into Brazil. So, anyway, all good news further down the call, but I don't want to get into too many details because it's just not productive. But it's all happening and it's all good.

15:47 I’ll get back in the queue. Thank you.

15:48 Thank you, Ethan.

15:53 The next question comes from the line of Robert Smith of the Center. Robert, you may ask your question.

16:03 Yes. Good morning, everyone. Dan, you know that I've been investing member of the Oil-Dri family for a long time, now more than twenty five years. So I just want to share with you that in the greater part of the last decade, we've been missing an action so to speak from the, one of the greatest bull markets in history. And in part, I feel that's because we're missing in action from Investor Relations and sharing the story with the investment community. You're a small cap stock. There are numerous ways that means of getting your story out. You have a transformative story to tell about animal health and the future of the company. A great story, but you've got to tell it. And I hope that you'll give much greater consideration for doing that?

17:10 Well, Bob, you and I can debate this all you want, and it's just going to make me look worse. But the facts of the facts, I mean we're trading at sixteen point five times earnings. What do you think our multiple should be? If I been out in The Street hawking the stock, where do you – you think we should trade at twenty? We are not a growth stock, I mean, we hope to be, but we're a value stock. We pay a good dividend, high yield. So what do you think our multiples should be?

17:36 The multiple is not that important. It's the future earning power of the company and the transformative business. So what I’m…

17:43 Yes, but the multiples reflective of that.

17:42 I’m suggesting to you that, if The Street knew about your animal health potential the stock would be close to the sixties than thirty five.

17:53 All right. But I mean given what they can see, I hear you, but we're going to keep agreeing to disagree. And for better or for worse Ned Jannotta, who took us public back in nineteen seventy one and served on our Board for years and has revered in the investment world, the managing partner of William Blair. Absolutely, hammered to me, he said, between hawking your stock and getting expectations out in front of your performance, all you're going to end up doing is disappointing somebody. Put your head down and run the business, and they will find you. 18:22 And I think our multiple is very relevant. I think we are well priced. When we start to deliver on animal health, it will move, but to get it going in front of that performance, to me, I don't see the value of that. So don’t…

18:40 Dan, the stock market -- the stock market is a discounting mechanism. No one is buying a stock on present day’s value. They want to see the future. You've got a story to tell about your future, tell it?

18:52 Well, then I'm going to ask you again, what do you think our multiple should be? If it were at six or eight, I'd be agreeing with you, it's at sixteen point five.

19:06 The multiple – average multiple market in the mid-twenties now. So what I'm suggesting is…

19:10 For small caps?

19:13 If you told the story this stock would be closer to sixty dollars than thirty five. That's my story.

19:19 All right. Did you have a question or took the cap?

19:26 Well, I do have a question. Thanks for asking me. So my question is, can you tell us anything further about the trials, where are the several trials being held and the timeline, so when they might come to greater fruition?

19:45 Well, unfortunately, we are out of time. So I would have gotten into that. No, I’m just kidding, Bob. No, I will not be telling you where the trials are being held. We go through this every single quarter. You guys push me to have a longer teleconferences but the question seem to be the same. And I have to keep giving you the same answer. In football, as my analogy, it doesn't seem to help to yell to the competition. What plays you're going to run. So, no -- I will not be telling you where our trials are. But -- so, thank you for your question.

20:18 Okay. Thank you.

20:23 The next question comes from the line of John Bair of Ascend Wealth. John, you may ask your question.

20:30 Thank you. Interesting banter there. I guess, if Bob is disappointed. There is an option as to what he can do with his holdings. But in any case, congratulations on actually having a profitable quarter, not as well as you would like or any of us would like, but given the backdrop of commodities, I was frankly concerned that perhaps that wouldn't be the case. So Kudos in that regards. 21:00 My question is, first question is read recently that the swine and port prices in consumption in China has decreased due to the Asian flu impact and a shift by consumers to consume more poultry. And so my question is, have you seen an increase in demand for your poultry related product versus swine products in China? Or has the swine product sales remained consistent or actually increasing? In other words, have they been cannibalized by an increase in interest in poultry consumption?

21:43 Sure. Hey, John. Great question. And Fred, you take it, but start with the swine because you and I have been in a lot of conversations about that, what's going on with swine in Asia, in general and China in particular? And then talked about the other areas that we may be able to see some benefit of our products going into?

22:02 Okay. Sure, Dan. John, its very, very good question, right? So as I'm in China right now. I think I can answer that pretty well. Maybe I’ll start with the swine. The ASF, African Swine Fever has really taking its toll on the Chinese swine market. The reason I'm saying that is not because of there's is not enough pork meat in the market actually the reversed. There's too much pork meat floating around because they were able to get populations back from where it was back in twenty eighteen before ASF. Now, they actually had the same population with the peak population by three years ago. And now the reason the prices is so bad is exactly what you mentioned John is, when poultry meat or other meat came in as a substitute for the last three years, people got used to a better taste of healthier products and because of that swine market is not going to rebound back to where it was kind of like one of the things I've heard in the past is, when you get used to the taste, you're not going to get back to the same, the oily pork meat and that's exactly what we see in China. 23:06 And then I’ll give a little more example on that is the price. Cost of production per kilo of pork meat is roughly three dollar to four dollars, let's say, close to four dollars. They're selling a four point thirty right now per kilo at farm gate. So all the meat producers are losing a lot of money because of that. So to answer your second part of your question, poultry market is definitely being very stable. They -- I mean the price has remained on a profitable level. Now -- until maybe about two weeks ago, it kind of dropped below it, but the recent last three or four days, it came back up again to where the breakeven price needs to be. And that shows how important the poultry sector is going to be in case of swine market not doing so well. And also give us a great confidence that, that strategy we put over quarters ago, that we're going to focus on poultry market front. 24:01 And then, the last thing I want add to it is the dairy market in China maybe the only animal product that’s produced in China that's had a very, very stable price ever since the pandemic. So people eating less meat because of lesser meals eating outside, but dairy consumption and [indiscernible] consumption have remained pretty steady throughout the last few, I said that – I say at least last eighteen months. Hope, I answered your question, John.

24:30 Yeah. So I guess -- so you are seeing an increase in demand for your poultry related animal health products. Is that what I'm hearing?

24:41 That's correct. Yes. We do see increased because of poultry market is being pretty stabilized and they know -- stabilizing mean that prices remain stabilized last year the population of poultry has increased tremendously in the last three years, so that's a really good sign.

24:57 Is that a trend that translates into other geographical areas as well?

25:04 We’re seeing some of that in Asia. Yes, definitely we’re seeing some of that trend in Asia, but it's quite difficult to project that. Just because if you look at Asia, the predominantly poor consumption countries are China, Vietnam, Philippines, Japan and Thailand, right? So in these countries, definitely, we've seen some of that, but the difficult thing to see is, they don't really have a same effect as ASF has pulled through China in the last three years. So, we are not quite seeing that this year, if that makes sense.

25:40 The next question comes from the line of Ethan Star, a Private Investor. Ethan, you may ask your question.

25:46 Yes. I prefer to avoid if open into discussions on investor relations on these calls. My question is, could you please -- could you please give more detail on the increase in sales of both your branded and private label cat litter? And also I'm wondering to what extent was revenue growth in the last year due to price increases versus increase in tons sold?

26:04 Jessica, you take the first one, and then I'm not sure I have the data for the second one, but if Susan does that's great. Jessica?

26:14 I do it.

26:15 Okay, go ahead. So, Jessica, you go first.

26:20 I think you're on mute.

26:23 I’m not on mute.

26:22 Jessica, is on mute.

26:23 Jessica, you might be on mute.

26:26 Thank you. Thanks, Ethan for the question. The growth in cat litter has been driven duly by both organic growth driven by overall growth in people having cats and pets overall additionally, reflecting new customer acquisitions. So bringing on new private label lightweight customers and new customers and then also by overall building the branded business and the launch of new items of fifteen pound -- under our fifteen pound, which is our best performing line.

27:08 Great. Thank you.

27:11 And Susan, do you have -- Yeah. How much was pricing and how much was volume?

27:20 Right. Hey, Jessica. I think you need to mute.

27:24 Yes. The volume accounted for half of the growth, and then the rest was pricing and improved mix. The volume was half over the revenue growth.

27:39 That's all the time, we have for the Q&A session. I will now turn the conference over to Mr. Dan Jaffee. Thank you.

27:47 Well, thank you, everybody. Again, we're very happy with the demand again validating not only our successful strategies, but also our ability to get stuff out the door. I mean, I’m sure as you do retail check, you see a lot of empty shelves out there, very dynamic times. We are going to continue to get prices up, control our cost and get as much out the doors. We can in the next ninety days, and no one has a crystal ball, but no one, that I'm talking to, things this is going to hand any time in the next ninety days. Meaning this is going to be the new reality for at least a year, maybe even into two years. So, appreciate your support and patients and we'll be back with you in ninety days as for the next teleconference. Thank you.

28:40 This concludes today's conference call. Thank you for participating. You may now disconnect.