Balchem Corporation announced strong financial performance in the second quarter of 2024, with sales growth and record earnings. Consolidated revenues reached $234 million, up 1.2% from the previous year, driven by strong sales in the Human Nutrition & Health and Specialty Product segments. The company achieved record earnings from operations of $46 million, a 6.9% increase, and adjusted EBITDA rose by 5% to $62 million. Net income grew by 6.5% to $32 million, resulting in earnings per share of $0.98. Balchem’s new product launches, including Optifolin+, have contributed to its 20th consecutive quarter of year-over-year growth in adjusted EBITDA.
Key takeaways from the earnings call include the company’s confidence in long-term growth, expectations of a stronger second half of 2024, and revenue growth projections from Optifolin+ in the range of $20-30 million over the next three to four years. Despite challenges in the Animal Nutrition & Health segment, Balchem’s diverse portfolio and strategic market positions support its positive outlook for the future.
The company’s steady performance, strong market positions, and strategic product launches position Balchem for continued success in its market segments. Despite challenges in certain segments, Balchem’s overall outlook remains optimistic. Our portfolio of businesses is showing strong performance in the Human Nutrition & Health segment, particularly in our minerals and nutrients business, where consumer demand remains high for our unique portfolio of products. However, our Animal Nutrition & Health segment is facing challenges in line with the broader animal feed additives market. We believe that we have reached the bottom in the first half of 2024 and anticipate a modest improvement in the second half, driven by better dairy economics and a new product launch.
Our Specialty Product segment, focused on performance gases, continues to perform well in a stable market. Overall, Balchem is pleased with our market positions and value propositions, allowing us to navigate through volatile times in recent years. We have achieved 20 consecutive quarters of year-over-year growth in adjusted EBITDA, despite global market turmoil, thanks to the exceptional performance and contributions of the entire Balchem team.
In May of this year, Balchem introduced a new product, Optifolin+, a choline-enriched, bioactive reduced folate ingredient that supports cellular health. This launch expands our existing range of products and enhances the value we provide to customers, aligning with our vision of promoting a healthier world.
Turning to our financial results, the second quarter was solid for Balchem, with sales growth, record earnings, and record adjusted EBITDA. Our net sales increased by 1.2%, driven by strong performance in the Human Nutrition & Health and Specialty Product segments. Gross margin dollars were up 7.3%, with a gross margin% of 35.5% of sales, primarily due to a favorable mix and lower manufacturing input costs.
Operating expenses increased slightly, but earnings from operations and adjusted EBITDA grew compared to the prior year. We continued to reduce debt and closed the quarter with a strong cash position. Our effective tax rates were slightly higher than the previous year, and net income and earnings per share increased.
Segment-wise, the Human Nutrition & Health segment saw a 9% increase in sales and delivered record earnings, driven by strong sales in minerals and nutrients. The Animal Nutrition & Health segment experienced a decrease in sales due to lower demand in key markets. Our Animal Nutrition & Health segment reported earnings from operations of $3 million, a decrease of 64.9% from the previous year. This decline was mainly due to lower sales, partially offset by reduced manufacturing input costs. Adjusted earnings from operations for this segment in the second quarter were $3 million, a decrease of 61.1%. The segment has been facing challenges in the animal feed additives market, with soft demand in Europe and competition from low-cost imports. However, there has been some stabilization in European demand and improvement in dairy economics in North America. The second half of 2024 is expected to be slightly better, with the launch of a new rumen-protected product.
On the other hand, our Specialty Products segment saw a 7.2% increase in quarterly sales to $35 million, primarily driven by higher sales in the performance gases business. Record earnings from operations of $11 million, a 20.8% increase from the previous year, were achieved, supported by higher sales and lower manufacturing input costs. Adjusted earnings from operations for this segment in the second quarter were $12 million, a 17.1% increase. The company is pleased with the performance of Specialty Products and expects demand to remain strong.
Overall, Balchem had a solid second quarter, showing resilience in various market conditions. The company remains confident in its long-term growth outlook. The new product, Optifolin+, is expected to tap into the folic acid market and generate $20-30 million in revenue over the next few years. Margins have improved due to a combination of factors, including lower input costs and operational efficiency. The company aims to continue optimizing margins in the second half of the year. I believe that by taking a step back and looking at our past conversations, we can see that our margins were squeezed during the inflationary period due to increasing raw material costs. However, as we entered a deflationary period, we have seen our margins improve. We have been able to pass some price increases to customers, but not all of it, resulting in an uplift in margins. Additionally, the favorable mix in our portfolio, with higher margin products performing well, has also contributed to our improved margins. Moving forward, we expect some moderation in margin rates as we give back some raw material deflation to customers, and as our animal nutrition segment improves. However, we anticipate that our margins will stabilize at or above historic rates.
Regarding our new product launch in Animal Nutrition & Health, we have introduced an encapsulated rumen-protected amino acid that we believe will gain share in an established market. We have just started selling the product and anticipate it will contribute significantly to our revenue in 2025.
In response to your question about the Optifolin product, I want to clarify that while there is a similarity in name with OptiMSM, the technology used is unique to Optifolin and not connected to OptiMSM. The use of choline in the technology has proven beneficial for solubility, and we see potential for developing additional franchises using this technology in the future.
As for our key franchises in the Human Nutrition & Health space, including VitaCholine, K2Vital, OptiMSM, and Optifolin+, it is difficult to predict which will be the most significant contributors going forward. Each of these brands has its strengths and potential for growth, and we are excited to see how they perform in the market. As we move forward, there may be a question for Martin regarding when there might be more detailed reporting on the individual sales of key brands in future periods.
Ted Harris mentioned that currently, the Albion Minerals line is the largest opportunity for the company. He also highlighted the significant market potential for chelated minerals, especially within the Albion brand, which is expected to remain the largest opportunity in the future. The choline and K2 businesses are currently of similar sizes, but the choline franchise is anticipated to have greater growth potential in the long term due to its broad therapeutic benefits.
Martin added that there are no current plans to break out sales by brand due to commercial sensitivity and competition concerns. Regarding the effective tax rate, it is expected to remain around 22% for the second half of the year, in line with previous estimates.
Overall, the company appreciates the support and looks forward to reporting Q3 2024 results in October. They will also be participating in the H.C. Wainwright Annual Global Investment Conference in September.