Joseph: We’re exporting more from the U.S. than we’re importing

Key Concepts:

• Tariffs and their impact on global businesses
• Mitigation strategies for tariffs
• Uncertainty in the macro environment and its management
• Long-term investment vs. short-term agility
• Guidance for companies and the role of CFOs
• Impact of tax policies on innovation and capital expenditure
• Animal health business and its resilience
• Consumer confidence and its effect on the animal health market
• Operational growth and foreign exchange (FX) impact
• Recession resistance of the animal health industry

Tariffs and Global Business Impact:

• 41% of CFOs surveyed believe tariffs will directly impact their costs.
• Zoetis, a global animal health company, views tariffs as dynamic and continues to monitor them.
• Zoetis has a diversified global base, with just over 50% of its business in the US.
• 60% of Zoetis' manufacturing footprint is in the US, and most of its intellectual property resides there.
• Zoetis exports more products from the US than it imports.
• The company employs substantial mitigation strategies and scenario planning to manage tariff impacts.
• The animal health industry is considered resilient and capable of managing tariffs.

Managing Uncertainty and Long-Term Investment:

• Zoetis expresses significant confidence in the future of the animal health space.
• The industry is relatively young with fertile ground for unmet needs.
• The company focuses on long-term investments despite short-term uncertainties.
• Zoetis balances short-term agility with long-term strategic investments.
• As an innovation-led and purpose-driven company, Zoetis continues to invest in areas of unmet need.
• The company remains cautious in the near term while pursuing long-term growth.

Guidance, Tax Policies, and Capital Expenditure:

• CFOs play a key role in helping CEOs develop company guidance.
• Tax rates significantly influence company guidance.
• Many CFOs are confident in the extension of the Trump tax cuts.
• Policies supporting innovation, such as extending tax cuts, immediate expensing of R&D, and bonus depreciation, are favored.
• These policies drive growth and support long-term investments in R&D and manufacturing footprint.
• The 2017 tax cuts have helped drive growth for Zoetis.

Animal Health Business Overview:

• Zoetis had a strong start to the year.
• Consumer confidence saw a dip in early Q1 and is being observed again.
• Despite consumer confidence fluctuations, Zoetis posted 9% operational growth in the quarter.
• The company maintained its organic operational growth despite FX headwinds.
• The animal health business is considered recession-resistant.
• During the Great Recession in 2009, the animal health industry grew by about 3%, while most industries declined.
• Zoetis' innovation drives even greater growth for the company.

Conclusion:

Zoetis is navigating the dynamic landscape of tariffs and economic uncertainty by leveraging its global diversification, focusing on long-term investments in innovation, and maintaining agility in its operations. The company views the animal health industry as resilient and recession-resistant, supported by policies that encourage innovation and capital expenditure. Despite fluctuations in consumer confidence, Zoetis has demonstrated strong operational growth, driven by its commitment to addressing unmet needs in the animal health market.