Hain Celestial: Reports Q1-2022 Financial Results

Lake Success / NY. (hc) The Hain Celestial Group Inc., a leading organic and natural products company with operations in North America, Europe, Asia and the Middle East providing consumers with A Healthier Way of Life, reported financial results for the first quarter ended September 30, 2021. President and CEO Mark L. Schiller: «We are pleased to have delivered better top line and bottom line first quarter performance than our guidance as we navigated a challenging operating environment affected by industry-wide inflation and labor challenges. In September, we held our Investor Day, during which we shared our Hain 3.0 vision and strategy for the next several years at Hain, focused on building a global healthy food and beverage company with industry-leading top line growth. We believe that we are well positioned for the future, and we expect another strong year as we continue to create shareholder value.»

Financial highlights

Summary of First Quarter Results from Continuing Operations

  • Net sales decreased 9 percent to USD 454.9 million, or 11 percent on a constant currency basis, compared to the prior year period.
  • When adjusted for foreign exchange, divestitures and discontinued brands, net sales were flat compared to the prior year period.
  • Gross margin of 23.2 percent, a 72 basis point decrease from the prior year period.
  • Adjusted gross margin of 23.9 percent, a 24 basis point decrease from the prior year period.
  • Operating income of USD 25.5 million compared USD 3.3 million in the prior year period.
  • Adjusted operating income of USD 34.3 million compared to USD 38.8 million in the prior year period.
  • Net income of USD 19.4 million compared to a net loss of USD 10.8 million in the prior year period.
  • Adjusted net income of USD 23.8 million compared to USD 27.4 million in prior year period.
  • Adjusted Ebitda of USD 47.3 million compared to USD 54.9 million in the prior year period.
  • Adjusted Ebitda margin of 10.4 percent, a 61 basis point decrease compared to the prior year period.
  • Earnings per diluted share (EPS) of USD 0.20 compared to a loss of USD 0.11 in the prior year period.
  • Adjusted EPS of USD 0.25 compared to USD 0.27 in the prior year period.
  • Repurchased 4.5 million shares, or 4.6 percent of the outstanding common stock, at an average price of USD 38.80 per share.

Segment highlights from continuing operations

The Company operates under two reportable segments: North America and International.

North America
North America net sales in the first quarter were USD 265.5 million, a decrease of 5 percent compared to the prior year period. When adjusted for foreign exchange, divestitures and discontinued brands, net sales decreased 1 percent from the prior year period.

Segment gross profit in the first quarter was USD 56.8 million, a 24 percent decrease from the prior year period. Adjusted gross profit was USD 59.2 million, a decrease of 22 percent from the prior year period. Gross margin was 21.4 percent, a 533 basis point decrease from the prior year period, and adjusted gross margin was 22.3 percent, a 476 basis point decrease from the prior year period.

Segment operating income in the first quarter was USD 16.8 million, a 49 percent decrease from the prior year period. Adjusted operating income was USD 20.5 million, a 41 percent decrease from the prior year period.

Adjusted Ebitda in the first quarter was USD 24.1 million, a 38 percent decrease from the prior year period. As a percentage of sales, North America adjusted Ebitda margin was 9.1 percent, a 486 basis point decrease from the prior year period.

International
International net sales in the first quarter were USD 189.4 million, a decrease of 13 percent compared to the prior year period. When adjusted for foreign exchange, divestitures and discontinued brands, net sales increased 2 percent compared to the prior year period.

Segment gross profit in the first quarter was USD 48.6 million, a 10 percent increase from the prior year period. Adjusted gross profit was USD 49.5 million, an increase of 11 percent from the prior year period. Gross margin was 25.7 percent, a 541 basis point increase from the prior year period, and adjusted gross margin was 26.1 percent, a 576 basis point increase from the prior year period.

Segment operating income in the first quarter was USD 24.1 million, compared to a loss of USD 15.9 million in the prior year period. Adjusted operating income was USD 25.2 million, an increase of 46 percent from the prior year period.

Adjusted Ebitda in the first quarter was USD 32.4 million, a 21 percent increase from the prior year period. As a percentage of sales, International adjusted Ebitda margin was 17.1 percent, a 487 basis point increase from the prior year period.

Capital management

As previously disclosed, the Board of Directors of the Company approved an additional USD 300 million share repurchase authorization in August 2021. Share repurchases under the 2021 authorization commenced in August 2021, after the 2017 authorization was fully utilized. The extent to which the Company repurchases its shares and the timing of such repurchases will be at the Company’s discretion and will depend upon market conditions and other corporate considerations. Repurchases may be made from time to time in the open market, pursuant to pre-set trading plans, in private transactions or otherwise.

During the first quarter of fiscal year 2022, the Company repurchased 4.5 million shares, or 4.6 percent of the outstanding common stock, at an average price of USD 38.80 per share for a total of USD 175.6 million, excluding commissions. As of September 30, 2021, the Company had USD 206.8 million remaining under the 2021 authorization.

Fiscal year 2022 guidance

For full fiscal year 2022, compared to fiscal year 2021, the Company continues to expect:

  • Low single digit adjusted net sales growth,
  • Modest adjusted gross margin expansion, and
  • Mid to high single digit adjusted Ebitda growth.

Given the elevated demand during the first half of fiscal year 2021 from the Covid-19 pandemic, a highly inflationary current environment and the timing of the price increase, among other factors, the Company expects:

  • Net sales to be down low single digit on an adjusted basis in the first half of fiscal year 2022 and up by mid to high single digit in the second half, and
  • Adjusted Ebitda to be down mid-single digit in the first half of fiscal year 2022 and up low double digits in the second half.

Notes: Adjusted net sales is defined as adjusted for the impact of foreign currency changes, divestitures and discontinued brands. All references in this «Fiscal Year 2022 Guidance» section to growth or declines in adjusted net sales or adjusted Ebitda compared to a prior period represent percentage growth or percentage decline.

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