As best I can tell, ODC has the only lightweight litter made only from clays. The Tidy Cats lightweight litter entry is so light, that many people in reviews say that the cats track the litter around the house. I've checked the Tidy Cats website, and the reviews used to be chronological in order. Now it seems that the reviews are organized so that more favorable ones appear first. Plus, the Tidy Cats lightweight litter is ridiculously expensive - they will not attract much of a market at that price point. The Fresh Step lightweight litter is just hitting shelves now, so we'll see how that does. I wonder what, if anything, Church & Dwight is going to do about a lightweight litter product?
By far the most interesting part of the CEO's dissertation on the conference call, was when he talked about the possibility of providing the lightweight litter, as a private label option. That could be huge. As he said, ODC has a strong percentage of the coarse private label market, but that is a declining category of litter, and I'm guessing the revenue is about $150-$200 per ton. I'm sure if ODC offered private label customers the lightweight litter, the revenue would be significantly greater than $150-$200 per ton.
As far as the conference calls being only half an hour, I think the problem is that there are rarely any new participants asking questions. If you have serious questions to ask, I would encourage you to get on the call and ask, so that the company is persuaded to lengthen the conference calls.
There are two reasons to own the stock:
Fresh & Light
Unfortunately, neither one of them has much traction. My main concern is that they don't have the marketing muscle to launch a major consumer brand. The big boys will just come in and steal their lunch, leaving them with small market share and relatively huge marketing expenses. No matter how great the product.
Not sure what is going on with Animal Health, but a huge disappointment the last two quarters.
Half of 12% was the acquisition they made. Also, Fresh and Light is likely cannibalizing sales of regular Cat's Pride, that is the thrust of what they say is going on in the industry. Still, CC could be more enlightening and if you are going to limit call to 1/2 hour (why?), then your answers should be less verbose, not that there were many questions. They cited inefficiencies, but sales aren't up that much and this has been going on for several quarters. B to B was bad also.
I'm as surprised as you are that ODC is up nicely this week, but I'm certainly not going to complain about it. Perhaps people who sold prior to the earnings release, driving the price down, were pessimistic, and now that the uncertainty around Q4 earnings is gone, people are buying again???
Regarding price/book value, ODC's book value is understated, as the value of their reserves on the books is at the original purchase price, and not the value today. Cat litter may be considered a commodity product, but many of ODC's other products are not commodity products.
instead of using it for their cats. What else would explain a stock trading at 25 times trailing earnings and two times book. In a commodity business when their last good quarter was a year ago.
F&L up 41% Q over Q? Segment sales were up 12% so you know it's a small base, even after a year and a half. It looks like they are giving it away, as segment income retreated from $1.4 mil last year to $5 thousand.
I couldn't find anything positive in 10-k details, although I guess gas prices are falling, and they are investing in China office and expansion of purification capability - hopefully they still need it. Fresh and Light seems to be doing well, but I don't see anything about price increases.
Some excerpts from 10-k
Our agricultural chemical carrier products have experienced competition from new engineered granular technologies in the agricultural and horticultural markets.
As of July 31, 2014, 2013 and 2012, our backlog of orders were valued at approximately $7,401,000, $8,503,000 and $4,741,000, respectively.
Advertising expenses were approximately $8,886,000, $7,975,000, and $10,846,000 for the years ended July 31, 2014, 2013 and 2012, (my note: trade promotions like coupons subtracted from sales, not in advertising)
Research and development costs of approximately $2,587,000, $2,620,000 and $2,006,000 were charged to expense as incurred for the fiscal years ended July 31, 2014, 2013 and 2012, respectively.
Stripping costs included in cost of sales were approximately $4,179,000, $2,187,000, and $2,031,000 for the fiscal years ended July 31, 2014, 2013 and 2012, respectively. The increase in stripping costs in fiscal 2014 reflect increased tons mined and extraction of clay reserves that required more overburden removal.
Another lousy earnings report. Maybe nobody will notice on a long weekend. The way this market is acting this looks like its going back to the teens again. a 4 percent yield might be the place where the stock price stops going down.
In my experience, ODC generally avoids an earnings release on federal holidays, so it should appear this evening. I don't think there's any hold up on the earnings release. ODC decided a few years ago to delay the earnings release/conference call until after the 10-Q/10-K has been filed. That said, I really have no idea what to expect as far as Q4 earnings go.
ODC investor page has cc on Oct 14 so I infer earning will be released oct 13. Does ODC have Columbus Day off?.
I wonder what the hold up on the release is? Could reflect some potential big news, but I suspect it is something very mundane.
New web site for Cat's Pride. O'Reilly Auto has a video promoting ODC "garage guard", kind of a rug to protect floors, can be easilty cut to be used in car, under plants as well as in garage.
By the way, I'm glad to see you're able to post new messages here - I've been trying to do so, but as soon as I click on the "Post" button, they seem to disappear. At least I can post replies successfully!
Yes, it is pretty difficult to forecast earnings for ODC. However, I prefer a company with a long-term focus as opposed to one that tries to manage earnings every quarter. That said, I think ODC management is not insensitive to the need for decent earnings. While FY2014 earnings through three quarters are lower than last year's results, the earnings are better than almost any other year in ODC's history.
Regarding animal health, I think long term it will be a big positive for ODC. So while last quarter was unfortunate, you can't always predict these things.
With the exception of the CEO, I don't think management at ODC is that high priced. Of course, management expenses will increase with the addition of the COO, but I think the hiring of the COO is a big positive over the long term.
I think ODC can successfully launch Fresh & Light, plus they get some benefit from the commercials run by Nestle Purina for their own lightweight litter, which thankfully is overpriced and so lightweight that cats track it all over houses. I was just looking at the Tidy Cats website the other day, and it used to be that reviews of the lightweight litter were in chronological order (most recent first), which resulted in plenty of negative reviews showing up first. Now mostly positive reviews show up first, but they are anywhere from recent to several months old - one has to go pretty far back to find negative reviews.
Plus, keep in mind that ODC controls its own minerals, thus they can probably be the lowest cost producer of lightweight litter. While Tidy Cats does make its own litter, I don't think that's the case for their lightweight litter.
The stock is certainly more reasonable than it was 9 months ago. Earnings, however, remain an absolute mystery with this company.
Who new animal health was going to stink it up last quarter?
High priced managerial talent. Higher energy and freight costs. Hard to know.
Will Fresh and Light fulfill its promise? Or is it just too expensive for a small company like this to launch?