Neogen - Earnings Call - Q1 2020
September 24, 2019
Transcript
Speaker 0
Welcome to the Neogen First Quarter Fiscal Year twenty twenty Conference Call. My name is Adrienne, and I'll be your operator for today's call. At this time, all participants are in a listen only mode. Later, we'll conduct a question and answer session. Please note this conference is being recorded.
I'll now turn the call over to John Adent. John Adent, CEO, you may begin.
Speaker 1
Thank you, Adrian. Good morning and welcome to our regular quarterly conference call for investors and analysts. Today, we will be reporting on the first quarter of our 2020 fiscal year, which ended August 31. As usual, some of the statements made here today can be termed as forward looking statements. These statements, of course, are subject to certain risks and uncertainties.
The actual results may differ from those that we discuss today. The risks associated with our business are covered in part in the company's Form 10 ks as filed with the Securities and Exchange Commission. In addition to those of you who are joining us live by telephone conference, I also welcome those of you joining us via the Internet. Following our prepared comments this morning, we will entertain questions from participants who have joined this live conference. I'm joined this morning by our Chief Financial Officer, Steve Quinlan, who will provide more detail on our results for the quarter.
Earlier today, Neogen issued a press release announcing the results for our first quarter. As stated in the release, our revenues were up 2% to approximately $101,000,000 Our net income for the first quarter was $14,700,000 or $0.28 per share compared to last year's quarterly net income of $15,200,000 or $0.29 per share. As a bit of perspective on our net income performance, those first quarter earnings last year represented a 28% increase over the prior year, and that increase was primarily the result of higher deductions relating to employee stock option exercises, which contributed to an effective tax rate of 11% for the quarter. In the quarter, we were once again challenged by currency headwinds. In a neutral currency environment, our sales would have been $1,200,000 higher this quarter.
As with other international organizations, we're committed to writing out the difficult international business climate that all U. S.-based companies now face. While some of our businesses did well in the quarter, our overall results did not meet the performance expectations that we have for ourselves. Steve will detail some very strong performances that we had in individual market segments, including our genomics and natural toxin diagnostic test kits. He's also going to address some of the areas where we had weakness.
Steve?
Speaker 2
Well, thanks, John, and welcome to everyone listening this morning. John's reported the overall sales and profit performance for the first quarter of our fiscal year. In the next few minutes, I will give you some color behind those results, and we'll start by discussing the performance of the Food Safety Group. We do continue to be impacted by fluctuations in currencies in the countries we operate in. As John mentioned, revenues would have been $1,200,000 higher for the quarter in a neutral currency environment, with the euro down 4% and the pound down 5%, each largely the result of the Brexit uncertainty.
The Chinese RMB declined 4% due in part to the continuing trade standoff with The US, and the Aussie dollar declined 7% in the quarter. And about $1,000,000 of that shortfall is in the Food Safety segment, as the majority of the international businesses report in through this segment. Revenues overall for the Food Safety segment were $51,000,000 in the 2020, and that's a decrease of 2% compared to $52,200,000 in last year's first quarter. The currency issues impacted the segment, but there were other issues within our international businesses which also affected our results. Our Brazilian operations had a 42% increase in sales of food safety diagnostic products, led by continued market share gains and aflatoxin sales during the country's corn harvest, and an 18% increase in dairy antibiotic test kit sales, but lost a large commercial lab customer testing for drugs in commercial drivers in Brazil, as that customer changed to a higher throughput method for testing.
And as we noted in last year's first quarter, we had a non recurring, about a million dollar insecticide sale to a government agency in that quarter. These two items offset the gains I discussed, and the result was a 16% decline in sales in Brazil overall in the current quarter. The lost forensic sales will impact the second and third quarters by approximately $800,000 each quarter and a lesser amount in the fourth quarter. Our European operations had sluggish results for the quarter, with revenues up one percent in local currency, primarily on the strength of a 6% increase in our England based cleaner disinfectant business. Genomics revenues, which grew at a double digit pace throughout 2019 and twenty four percent in last year's first quarter, rose 4% in the first quarter of this year.
These increases were partially offset by declines in culture media revenues, lower sales of our products to detect spoilage organisms due to a large equipment sale in the first quarter of the prior year, and relatively clean crops after a mild DON outbreak last year in France. After converting to US dollars, revenues for the European operations declined by 4% for the quarter. Asia and Latino America, our business based in Mexico City, had strong 36% growth in sales of our food safety products, led by mycotoxin kid sales due to an aflatoxin outbreak in corn in Mexico. Sales rose broadly across all of the diagnostic product lines. Sales of cleaners, disinfectants, rodenticides, however, dropped 32% due in large part to lower demand and delayed orders from larger customers and distributors.
And this resulted in an overall increase in revenues of 5% for the quarter for this group. Our operations in China were negatively impacted by the African swine fever outbreak in that country, which resulted in lower genomic testing for pork in the quarter and contributed to an 18% decline in revenue in China. Our domestic food safety business only grew by 5% for the quarter, but there were some nice areas of growth within the business. Revenues for our industry leading product line to detect inadvertent allergen contamination, which includes diagnostic tests to determine the presence of milk, peanuts, and processed soy, among others, were up 11% domestically in the quarter. TreeNut and Gliden test kit sales were particularly strong, up 4517% respectively for the period.
We've continued to strengthen our allergen test kit portfolio and recently added new tests for contaminants such as coconut. Our AccuPoint line, which is used to detect general sanitation and cleanliness in food processing environments, had a strong 12% increase in disposable sampler revenues during the quarter. Our domestic natural toxin product line product sales decreased 3% compared to last year's first quarter, due in part to the late planting of corn and other grains this spring caused by the severe weather, which has delayed the harvest of these crops. We believe that as the crops mature, we'll see an uptick in these sales in the second and third quarters. Revenues for our test to detect the presence of antibiotics in milk declined by eight percent in the quarter due primarily to lower demand from a large European distributor.
Our domestic culture media business declined 13% in the quarter. A number of our larger customers, particularly those in animal vaccine production, have pushed their orders for these products to the second quarter and second half of the year due to weakness in their markets. Finally, we were unable to ship a number of readers for our product line to detect spoilage organisms such as yeast and mold due to back orders of a key part with one of our equipment suppliers. This resulted in an approximately $400,000 shortfall in reader sales for the quarter. These readers are expected to ship in the second quarter.
The Animal Safety segment continues to be adversely impacted by the ongoing trade impasse between The US and China, which has disrupted our markets. However, it recorded revenues of $50,400,000 for the quarter, up 6% over the $47,400,000 achieved in last year's first quarter. This growth was driven by a 24% increase in service revenue at our domestic genomics testing and bioinformatics business located in Lincoln, Nebraska, with continued strength in the commercial beef and dairy cattle markets and market share gains in the companion animal parentage and wellness testing markets. Worldwide, genomics revenues rose 17%, with additional growth in Brazil, Australia, and Canada, offset by lower sales in China. Animal care products sold out of our Lexington, Kentucky based manufacturing and distribution center, such as small animal supplements, wound care, and antibiotics were up 10%, and vet instruments, such as disposable syringes and marking products rose 9% for the quarter.
Now, these gains were partially offset by lower sales of life science products, the result of lower forensic kit sales to commercial labs, and higher promotional rebates. Rodenticide sales declined 8% in the quarter due primarily to lower rodent pressure in certain areas of the country. And domestic cleaner and disinfectant sales were essentially flat and insecticides rose 6% in the quarter. Gross margins were 47.5% for the quarter compared to 46.9% in last year's first quarter. The improvement here is due to increased margins at our domestic genomics operations in the Animal Safety segment and a shift in product mix in the Food Safety segment toward products which have higher gross margins and lower sales of lower margin products such as culture media and biosecurity products.
Overall, our operating expenses rose 6% on the quarter compared to last year's first quarter. Sales and marketing expenses increased 2%, in line with revenue growth for the quarter. General and administrative expenses rose 5% for the quarter due primarily to higher depreciation expenses resulting from our continuing investments in information technology infrastructure, stock based compensation, and increased legal fees. Research and development expenses increased $869,000 or 31% over the prior year, as we continued development spending on a number of new products, which are scheduled to be launched in late fiscal twenty twenty and early fiscal twenty twenty one. The $3,800,000 we spent this quarter is similar to the $3,600,000 we spent in the 2019, and we expect this run rate to continue throughout fiscal twenty twenty.
Operating income for the first quarter was $16,300,000 compared to $16,500,000 in last year's first quarter. And expressed as a percent of revenues, operating income was 16% exactly compared to 16.5% last year, with the decline the result of the higher R and D spending level. We recorded $1,500,000 in interest income for the quarter compared to $930,000 last year. This reflects our higher cash and marketable securities balances and higher interest rates on those balances. Foreign currency losses totaling $117,000 in the first quarter compares to $386,000 in losses in the same period last year.
Our pretax profit was $17,700,000 compared to $17,100,000 in last year's first quarter. And our effective tax rate for the first quarter was 17% compared to 11.1% in last year's first quarter. Last year's effective rate was unusually low due to $2,300,000 in tax benefits recognized from the exercise of stock option. This year the comparable number was $769,000 As I've mentioned on previous calls, the volume of option exercises can result in large fluctuations in the effective tax rate for the comparative periods. On the balance sheet, our net receivables balance declined by 4% compared to year end, and our collection period was sixty four days for the first quarter.
Inventory increased by $1,700,000 or 2%. We're focusing significant effort this year on improving our inventory turns and have objectives and programs in place at each operation to make that happen. We generated $23,700,000 in cash from operations during the quarter, invested $4,000,000 of that in property, plant, and equipment, and additional amounts to license technology. I'll stop here to say that we realize that we need to accelerate the organic growth performances of our business. There were a number of areas in the business which performed well in the quarter, which were obscured by one time factors and other market noise.
We continue to be excited about the remainder of the year and appreciate your support. At this point, I'll turn it back to John for further comments.
Speaker 1
Thanks, Steve. Although we didn't reach all the financial goals we had set for ourselves in the quarter, we were able to solidify some partnerships that we believe will help drive our future performance. Earlier this year, FDA Deputy Commissioner Farikiana spoke about a new era of smarter food safety. He said that this new era would be an enhancement to FSMA and focus on utilizing new and emerging technologies to make our food supply safer. The blueprint for the new era would address several areas, including traceability, digital technologies, and evolving food safety platforms.
I believe in this vision, and at Neogen, we're leading the way in several areas. First, we signed a partnership with Corvium, the leading producer of food safety and risk management software. The success that we've had in developing a marketing food safety test has led to an almost overwhelming amount of data that our customers must sort through to protect their customers and businesses. This platform will help our food safety diagnostic customers aggregate, analyze, and act on that data. The combination of world class testing products with a world class food safety and risk management system will allow our customers to reduce their food safety risk.
The new Neogen Analytics platform will help our customers make quicker data driven decisions. For example, let's say a tester receives a positive result using our Listeria Right Now test. What caused that result? Was it a one time event that resulted from a transient problem that can be solved by a single repeated sanitation effort? Or is it a systemic problem that the company must address to permit operational changes?
The software will help our customers determine the extent of the problem and provide a digital record for their remediation and mitigation efforts. We continue to investigate new and novel blockchain, artificial intelligence, and machine learning solutions to enhance our Neogen Analytics platform and help our customers identify and eliminate food safety issues. We feel that providing products and services in an integrated and easy to use platform will continue to drive Neogen's market leading status. Additionally, last week we announced a collaboration with International Genetic Solutions to make our market leading identity beef profile even better. Beef cattle producers use the product to select the best animals for their breeding programs.
That selection is now absolutely critical as replacement members represent an investment of about $2,000 per head to the cost of development and the lost sale opportunity. As part of this partnership, Neogen will benefit from access to information that will improve the IGENITY B profile. And IGS will endorse and promote the use of the product and important seal of approval from one of the largest genetic evaluation services in the world. We believe that we've only just begun to realize the tremendous potential that our genomics technology can offer the livestock and companion animal industries, as well as food processors. We've continued our genomics laboratory expansions in China, Brazil, and Canada, and have just broken ground on an expansion at our flagship operation, Lincoln, Nebraska.
We're doing all that we can to satisfy the accelerating demand for genomic services. As Steve mentioned, while our overall performance for the quarter did not meet our goals, we feel good about where we're going from here. We continue to be well positioned in our growing markets with the right people and products and with the organizational strength to reach anywhere in the world where need exists. We believe our continued worldwide dedication to food and animal safety will allow us to provide the results that our customers, shareholders and employees have come to rely upon. I'm excited about our future and look forward to stronger performances going forward.
Let me stop at this point and entertain any questions from those of you who have joined the call.
Speaker 0
Thank you. We will now begin the question and answer session. If have a question, please press star then one on your touch tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If using a speaker phone, you may need to pick up the handset first before pressing the numbers.
Once again, if you have a question, please press star then one on your touch tone phone. And please stand by while we allow parties to queue up. Thank you. And our first question comes from Brian Weinstein from William Blair. Your line is open.
Speaker 3
Hi, guys. Good morning. This is actually Andrew Brackman on for Brian.
Speaker 1
Good morning, Andrew. Good
Speaker 3
Maybe we could just first start off on the food safety side. It seems like there was several moving pieces there. Maybe, you know, I I appreciate the commentary on one of these some of these being sort of one offs, but what gives you the confidence that there's not really an underlying structural demand issue there?
Speaker 1
Yeah. I think, Andrew, it's because we had we we can quantify exactly what were those issues on a one off basis. So we Steve talked about in Brazil, it was a change of a customer going to a high throughput solution that we don't offer in a Regama tender to a government agency. And a year ago, we talked about that. And I know Steve's got the details of exactly how that walk up looks.
So let him tell you a little bit, Andrew, how that walk up looks to get to a number where we feel it's more normalized.
Speaker 2
Sure, John. So Andrew, that Wogama tender was about $1,000,000 And if we just stay on the food safety side of the business, that would have been about a 2% improvement in results on that side. We talked about the currency being about $1,000,000 on that side, which again is about 2%. That forensic business that the customer switched out, that's about an $800,000 impact for the quarter, about 1%, point 1.6%. And then we had what I would characterize as equipment and distributor issues that were about another $1.4 that would have been another 2.5%.
So when you look at those, that's about an 8% differential from the food safety results that we reported. And that gets you to about 6%. And then I would tell you that there were just other results that I would characterize as being somewhat sluggish this quarter, but not systemic and didn't indicate a problem in the business. So that's why I think John and I are both excited about the future of the business and that we aren't disappointed in the quarter, yes, but still excited about the prospects going forward.
Speaker 3
Okay, that's very helpful. I don't want to put words in your mouth, I know you guys don't guide on the segment level detail, but the expectation should be that as we move into the second quarter and through the end of the year, that growth rate on the organic and reported basis should improve more to that mid to high single digit.
Speaker 1
Yeah. I mean, we'd like I said, I'm looking forward to stronger quarters. I want to get this one behind us and get going.
Speaker 3
Okay. And then just last question for me. I know we've talked in the past a little bit about the M and A strategy, but any update there on the pipeline or what you're thinking about in terms of size of deal or timing? Thanks.
Speaker 1
Size of deal, we're we're looking at a wide range from tuck ins to a bit more chunky, which we're we said we wanted to do. From a timing standpoint, on the tuck ins, I would have liked to have those done already this quarter, but it's hard to push some sellers. So those we know that those are in the queue and we're working actively on those. And we continue to work the channel. The pipeline looks good.
It's just getting some deals closed.
Speaker 2
Okay. Thanks, guys.
Speaker 1
Thanks, Andrew.
Speaker 0
And the next question comes from Paul Knight from Janney. Your line is open.
Speaker 4
Hi, John. Could you go over the genomics business a bit? You had mentioned various expansions, if you could recap that and what are customers buying? I know that you do microarray based testing, but are you offering database inquiries, etcetera? So if you could kinda go over the bricks and mortar.
And then secondly, you know, what the product offering encompasses today. Sure, Paul.
Speaker 1
So on the expansion standpoint, mean, I think the biggest one is expanding our facility in Lincoln, Nebraska. We've we've run out of room there, and we've got a a building next door that we're building out. So we're going to increase capacity there. We're moving into a brand new facility in Canada that is already lab equipped. So when we bought the Canadian business, we knew we're gonna have to expand it.
So we did that. We've increased in Brazil. We've moved that facility. Oh, boy, I think that was probably about two quarters ago. But really getting that up ramped and rolling and then increased in China.
So on a physical standpoint, we're really increasing the square footage and the amount of tests we can run. And we need to because we've got to keep up with the demand from the customers. On the product portfolio side, we continue to grow in our Beef Identity profile product, which allows commercial producers to choose the right animals for their system. I think what's exciting about the announcement of IGS is that, you know, that's a pretty progressive group. It's made up of 12 breed associations.
They've got over 16,000,000 animal records and they had about 400,000 new animals annually. So think about using that data for us to improve the predictiveness and the effectiveness of our products. We're really excited to continue that type of relationship. We're seeing growth in market share on the dairy side and picking the dairy heifers. And then we've seen nice growth in companion, whether it's on both our wellness testing and our parentage testing.
So it's been a really nice growth story and it's continued to been a nice growth story and this quarter was no exception to that.
Speaker 4
And then lastly, John, what would be your goal on an operating margin?
Speaker 1
Want me to channel Jim? I want to channel Jim, Paul, for this? I think Jim's listening. I know he's smiling right now. I think you got to have a goal of 20 or more.
I mean, I think our business can do that. It's something that we continue to strive for. But I think what we really want to focus on is continuing to incrementally expand operating margin, and not so much say, if I hit 20%, that's the goal, because it's not the goal. I think it's we want to continue to expand operating margins and do it in a way that balances our growth. So we don't stifle growth, we don't stifle innovation, but we continue to improve that financial metric for our shareholders.
Speaker 5
Okay. Thank you.
Speaker 1
Thank you.
Speaker 0
And your next question comes from Jason Rogers with Great Lakes Review.
Speaker 6
Yes. Just wanted to follow-up on the loss of the Brazil lab customer. Wonder if you could provide any more detail as far as why they changed solutions and is there any other lab customers you have in Brazil at risk there?
Speaker 1
So you know, when that business started, that was really a great opportunistic solution that our team provided to a marketplace. We had a we had a test that really could meet the needs there, but it really wasn't our business. We didn't know those customers very well. And what happened was that Brazilian hair market grew so quickly that the customer needed, and it was the largest in that market, needed a higher throughput solution, and we just didn't offer it. So we continue to sell our test kits to other labs within that market that just don't have that same level of throughput.
And I'm not as concerned because that equipment is extremely costly from a capital layout, from a capital standpoint, and only the largest can really afford to do that type of solution. So I'm not as concerned. I think what, you know, the the the risk there going forward is if the new president decides to eliminate that regulation. And he ran on that from a campaign promise. Now he hasn't changed anything yet, but that that could be something looking forward that if he stops requiring the test, then high throughput or ours doesn't matter.
They're just not gonna test for it. All
Speaker 6
right. And then looking at the genomics market, talked about some good growth in that whole companion animal business. How large is that now as a percent of your total genomics business and how fast do you expect that to grow and how large of the market how large of a market could that be?
Speaker 1
I don't know if we've ever he's gonna have to look. I don't know if we've ever split that out. But let me talk, Jason, a little bit about how big it could be. I mean, think about kind of the tremendous growth that on the human side you had on ancestry.com or some of those other parentage types. I mean, their growth has been just phenomenal.
I think that always those type of trends always seem to trickle down to the companion segment as pets are part of the family and people want to know the history of where my dog came from and what its traits are and did it have a champion and its pedigree in the background. So I think those things are very important and it's gonna continue to grow. The other piece we're really excited about is the wellness piece. And that we're just getting started with and working on is looking at, can we help pet owners and veterinarians make better decisions around treatments if we could predict that, you know, this your puppy perhaps has tendency for hip dysplasia or for some other disease that we can find a market for that would then help you customize a diet or training program or an exercise program that's going to help mitigate that to give that to give your pet a much better quality of life. So I think those are big markets and we're just scratching the surface on them.
Speaker 6
Okay, thanks for the detail there. And just one final one, given all the increases that you're underway in genomics, wondered if you have an updated CapEx estimate for fiscal twenty.
Speaker 2
The biggest item for CapEx in the genomics business is going to be the expansion of the Lincoln facility that John mentioned. That's probably going to ultimately be about a $2,500,000 renovation or build out. And then there'll be some equipment that'll follow behind it. It may move into fiscal twenty twenty one, but it'll be about $2,500,000 of spending in this year.
Speaker 6
So where would that put CapEx overall in companywide for fiscal 'twenty?
Speaker 2
CapEx, it's going to be I'd put it somewhere in the 15,000,000 to $18,000,000 range, depending on timing of spend, somewhere in that.
Speaker 1
Okay. Thank you.
Speaker 2
You're welcome.
Speaker 1
Thanks, Jason.
Speaker 0
And your next question comes from Kevin Ellich from Craig Hallum. Your line is open.
Speaker 5
Good morning, guys. Thanks for taking the questions. Guess, let's start off with African swine fever. You guys did call out the 18% decline in revenue in China. Just wondering what the outlook is now?
And do you expect this pressure to continue? And I guess for how long?
Speaker 1
Yeah. That's a good question, Kevin. I think the pressure will continue on the genomic side a little longer because they're just unclear how they're going to go forward. And the nice thing about the diversity of our business is the puts and takes because while we had that decline there, I mean, we had increased sales of cleaners and disinfectants in China for the exact same reason. Right?
So it's negative on one side of the business. It's an opportunity on the other. And I just don't know whether China's got a good handle on how they're going to manage this disease. And not just China, I mean, everybody else to be quite honest.
Speaker 5
Right. And have you seen the impact of African swine fever spread to some of the other markets that you're in, John?
Speaker 1
Yeah. I mean, you saw South Korea just announced last week that they have confirmed cases. Know, that came from North Korea who hasn't announced, but, you know, not a shock that North Korea hasn't announced anything. I think now it's in 13 countries and it's it's been and the challenge now is I think I can't oh, Philippines was the other one, Kevin. And that one was a little concerning because now it's not just land based.
So you could see how it go from China through the Korean Peninsula through land, but now this thing, when you got to The Philippines, they had to go on a boat or a plane. So it's gonna be a little interesting.
Speaker 5
Well, hopefully, that'll be good for your cleaners and disinfectants business. That's exactly right. Right. Right. So, you know, as for the you know, it's interesting on the the the companion animal genetic testing.
Really appreciate those comments. I see you guys have your own tests, but are you doing any private label work? I mean, clearly, there's a lot of genetic test brands out there now, like Wisdom Panel, Embark. Are you doing any private label, or have you thought about doing any of that?
Speaker 1
We do. I mean, we we do help out and and do the we're the back office for some of the some of the larger ones in the industry.
Speaker 5
Okay. That's that's kinda what I was thinking. And then lastly, you know, you talked about accelerating organic growth. Clearly, appreciate the comments on the food safety side. But what other things are you putting in place to drive organic growth?
And I guess, over what time frame do you think it'll take before we see that benefit?
Speaker 1
Yeah. Well, we've got we've got new products and technology coming in the second half of the year that we're pretty excited about that, you know, it's gonna help us long term. In the back half of the year, I can't say that I'm counting on it to be a big driver for this fiscal year. We're adding salespeople. We continue to add sales teams in the right markets to continue to try to grow and find that find the marketplace.
We're constantly evaluating our distributors. I think what was interesting was we had some programs that were pretty successful in the animal safety side that got distributors interested in The US, which helped that growth. I don't think the market got any better, but I think some of the things that we offered had a positive influence on those distributors. But as Steve mentioned, got a distributor in Europe that we've been working with for a while, and we've had declining sales for two to three years, and we got to address things like that. And so, you know, those are some of the things that we've got to do to continue to drive organic growth is to continue to put more people in the field to help drive our direct sales, work with our distributor partners to help them reach the end customer, influence the end customer to pull product through their warehouses so we can drive sales that way also.
Speaker 5
Gotcha. Makes sense. Thanks for all the help. Thanks, John.
Speaker 1
Thanks, Kevin.
Speaker 0
And our next question comes from Kevin Ellich from Craig Hallum.
Speaker 1
Well, just did Kevin.
Speaker 5
I actually queued back up. I don't know if anyone else is in, John. But I
Speaker 1
Oh, go ahead, Kevin. You're back on. Alright.
Speaker 5
You know
Speaker 1
Nice to hear from you, Kevin.
Speaker 5
Yeah. Thank thank you. You talked a little bit about the, you know, the wet summer that we've had in the Midwest, and I think you said you expect sales to, know, improve here in the, you know, the next couple quarters with the corn crop coming in. Just wondering how much that affected growth this quarter if or if it had any impact.
Speaker 1
I mean, there was probably a little bit of timing, Kevin, but it really I can't say that much. I mean, I know the harvest is delayed because of such a wet spring and everything's delayed. But maybe some early crop corn last year would have been in the first quarter and now it's in second, but I don't think it's that big of an impact. Most of that corn harvest is always in the second quarter anyway.
Speaker 5
Got it. Excellent. Thank you.
Speaker 0
And our next question comes from David Westenberg from Guggenheim. Your line is open.
Speaker 7
Hey, thank you for taking the question. So, you've talked about your long term growth rate around high single digits, percent with animal safety being 6% to 8% and food safety being 8% to 10%. And so just wondering, do you still see that as the long term growth rates of the business? And how confident are you that you can grow back to that rate? And do you think there might be any market dynamics over the last few quarters that might have been affecting those growth rates?
Speaker 1
So David, I think there's been some market dynamics, especially on the animal safety side, we beat that up pretty good. Mean, that's a cyclical market and we're kind of in the trough of that one and that's a tougher one to squeeze out those type of rates. Food safety, I feel very confident. I mean, there a report that came out the other day from, I think it was the Swiss Federal Institute of Technology and what was interesting about that, they talked about that meat consumption has risen by more than half in Africa and up by two thirds in Asia and Latin America. So our long term prospects, whether it's on the farm side helping those producers produce clean healthy animals or even on the food safety side is going to continue to grow.
So I think I think we've got really good opportunities. And then when we start getting some acquisitions and layering them on top, then I'm really excited.
Speaker 7
Alright. No. Thank you. And then on the acquisition front, so how would you categorize private equity right now? Do you still feel like the valuations do seem a little bit higher than they are historically?
And do you see any pickup in terms of competition for acquisition?
Speaker 1
It depends, David, how far your history goes back and looks. I mean, if you wanna if you go back, this has been a pretty there's been a lot of money in the market for the last couple years. And, yeah, the if you go back and say, you wanna look over ten years, then, yes, the rates are probably higher than the ten year average. But over the last couple years, there's still a lot of money on the sideline trying to get put to use. And so, know, maybe maybe we've done too good a story telling how great a market this is because now everybody wants to come in it.
Come on in, I'm ready to go. I mean, we be battling every day. Right? So we really believe in the team. We believe in our products.
We believe in the people we have, and we're ready to compete.
Speaker 7
Got it. All right. No. And just one last question. I know you already kind of got into it with Kevin's question, but just want to get further kind of conceptualize what the long term opportunity around ASF.
So can you maybe give maybe some feedback from customers in Asia or some way for us to think about all the opportunities? Because I mean, obviously, cleaners and disinfectants business picked up, but could this be some sort of ten year drive of multi products? I mean, just really would help us think about the upside of what that could be.
Speaker 1
Yeah, I mean, if you think conceptually, right, and you would, you would say with this type of issue, a strong efficacious product encompassed with a biosecurity program would be a benefit to Neogen in the long term with this. But, you know, you can't have one without the other. You have to have a program in which you're doing things properly to stop the spread of the disease. So I think, you know, long term CMD absolutely. I also think if you think longer term on the genomic side when they have to repopulate all those animals, it's going to be in their best interest to try to pick the best breeding stock to repopulate all those animals, whether it's in China or Romania or South Korea or Philippines.
And we work with all those companies today. So I think we have opportunities here. But it's a put and take. I mean, you're gonna have some negatives because if they're just depopulating 40%, you're not gonna process those animals. If you're not gonna process the animals, you may not use our pathogen testing.
So there are upsides to this and there are downsides. But either way, Neogen can help customers find the right solutions.
Speaker 7
Thank you very much.
Speaker 1
Thanks, David.
Speaker 0
And this concludes our question and answer session. I'll turn the call back over to John Aden for final remarks.
Speaker 1
Great, Adrian. Thank you. Thanks to all of you for joining the call today. And if you haven't already, please be sure to return your proxy votes via the mail. And whether you vote via mail or not, you're all welcome to attend our annual meeting October 3 in Lansing.
And if you have any questions about that, please contact Rod Polin. So thanks, everybody. We appreciate it.
Speaker 0
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating and you may now disconnect.