Wednesday, 28. October 2020
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Hain Celestial Reports Q4 and Fiscal Year 2020 Financial Results

Lake Success / NY. (hc) The Hain Celestial Group Inc., a leading organic and natural products company with operations in North America, Europe and India providing consumers with A Healthier Way of Life, reported financial results for the fourth quarter and fiscal year ended June 30, 2020. The results contained herein are presented with the Hain Pure Protein and Tilda operating segments being treated as discontinued operations.

Mark L. Schiller, Hain Celestial’s President and Chief Executive Officer, commented, «We are pleased to report profitability at the high-end of our expectations for the fiscal year. Our results were strong because of our team’s execution of our transformational strategic plan, which resulted in strong margin improvement and operating cash flow generation. In this dynamic operating environment, we believe we will maintain our positive momentum and remain committed to sustainable long-term growth as we deliver on our four key pillars for growth – portfolio simplification, capability building, cost control and sales acceleration.»

Financial Highlights(1)

Summary of Fourth Quarter Results from Continuing Operations(2)

  • Net sales increased 1 percent to USD 511.7 million, or 3 percent on a constant currency basis, compared to the prior year period.
  • When adjusted for Foreign Exchange, Divestitures, discontinued brands and Stock Keeping Unit (SKU) rationalization3, net sales increased 7 percent compared to the prior year period.
  • Gross margin of 25.4 percent, a 658 basis point increase from the prior year period.
  • Adjusted gross margin of 25.3 percent, a 257 basis point increase from the prior year period.
  • Operating income of USD 25.3 million compared to an operating loss of USD 2.6 million in the prior year period.
  • Adjusted operating income of USD 47.9 million compared to USD 34.4 million in the prior year period.
  • Net income of USD 3.7 million compared to a net loss of USD 7.3 million in the prior year period.
  • Adjusted net income of USD 32.3 million compared to USD 19.9 million in prior year period.
  • Adjusted Ebitda of USD 62.2 million compared to USD 49.4 million in the prior year period.
  • Adjusted Ebitda margin of 12.1 percent, a 237 basis point increase compared to the prior year period.
  • Earnings per diluted share (EPS) of USD 0.04 compared to a loss of USD 0.07 in the prior year period.
  • Adjusted EPS of USD 0.32 compared to USD 0.19 in the prior year period.
  • Repurchased 0.1 million shares, or 0.1 percent of the outstanding common stock, at an average price of USD 24.97 per share.
  • Net cash provided by continuing operations of USD 92.8 million compared to USD 21.0 million in prior year period.
  • Operating free cash flow4 from continuing operations of USD 78.9 million compared to USD 0.3 million in prior year period.

Summary of Fiscal Year 2020 Results from Continuing Operations(2)

  • Net sales decreased 2 percent to USD 2,053.9 million compared to the prior year.
  • Net sales decreased 1 percent on a constant currency basis compared to the prior year.
  • When adjusted for Foreign Exchange, Divestitures, discontinued brands and SKU rationalization3, net sales increased 3 percent compared to the prior year.
  • Gross margin of 22.7 percent, a 374 basis point increase over the prior year.
  • Adjusted gross margin of 23.2 percent, a 257 basis point increase over the prior year.
  • Operating income of USD 56.0 million compared to operating loss of USD 32.5 million in the prior year.
  • Adjusted operating income of USD 140.0 million compared to USD 109.9 million in the prior year.
  • Net income of USD 25.6 million compared to net loss of USD 53.4 million in the prior year.
  • Adjusted net income of USD 87.1 million compared to USD 62.1 million in prior year.
  • Adjusted Ebitda of USD 200.0 million compared to USD 165.1 million in the prior year.
  • Adjusted Ebitda margin of 9.7 percent, a 189 basis point increase compared to the prior year.
  • EPS of USD 0.25 compared to a loss of USD 0.51 in the prior year.
  • Adjusted EPS of USD 0.84 compared to USD 0.60 in the prior year.
  • Repurchased 2.6 million shares, or 2.4 percent of the outstanding common stock, at an average price of USD 23.59 per share.
  • Net cash provided by continuing operations of USD 156.9 million compared to USD 39.3 million in prior year.
  • Operating free cash flow4 from continuing operations of USD 96.0 million compared to negative operating free cash flow of USD 36.4 million in prior year.

Segment Highlights From Continuing Operations

Historically, the Company had three reportable segments: United States, United Kingdom and Rest of World. Effective July 1, 2019, the Company reassessed its segment reporting structure, pursuant to which the Company’s Canada and Hain Ventures operating segments, which were included within the Rest of World reportable segment, were moved to the United States reportable segment and renamed the North America segment. Additionally, the Europe operating segment, which was included in the Rest of World reportable segment, was combined with the United Kingdom reportable segment and renamed the International reportable segment. Accordingly, the Company now operates under two reportable segments: North America and International. Prior period segment information included herein has been adjusted to reflect the Company’s new reporting structure.

North America

North America net sales in the fourth quarter were USD 298.6 million, an increase of 5 percent compared to the prior year period. When adjusted for Foreign Exchange, Divestitures, discontinued brands and SKU rationalization3, net sales increased 13 percent from the prior year period.

Segment gross profit in the fourth quarter was USD 83.6 million, a 65 percent increase from the prior year period. Adjusted gross profit was USD 82.9 million, an increase of 20 percent from the prior year period. Gross margin was 28.0 percent, a 1,021 basis point increase from the prior year period and adjusted gross margin was 27.7 percent, a 354 basis point increase from the prior year period.

Segment operating income in the fourth quarter was USD 31.9 million, compared to a loss of USD 2.7 million in the prior year period. Adjusted operating income was USD 38.9 million, a 57 percent increase from the prior year period.

Adjusted Ebitda in the fourth quarter was USD 43.8 million, a 46 percent increase from the prior year period. As a percentage of sales on a constant currency basis, North America adjusted Ebitda margin was 14.7 percent, a 418 basis point increase from the prior year period.

North America net sales in fiscal year 2020 were USD 1,171 million, a decrease of 2 percent compared to the prior year. When adjusted for Foreign Exchange, Divestitures, discontinued brands and SKU rationalization3, net sales increased 5 percent from the prior year.

Segment gross profit in fiscal year 2020 was USD 293.5 million, a 30 percent increase from the prior year. Adjusted gross profit was USD 300.9 million, an increase of 17 percent from the prior year. Gross margin was 25.1 percent, a 619 basis point increase from the prior year and adjusted gross margin was 25.7 percent, a 422 basis point increase from the prior year.

Segment operating income in fiscal year 2020 was USD 95.9 million, a 194 percent increase from the prior year. Adjusted operating income was USD 121.0 million, a 53 percent increase from the prior year.

Adjusted Ebitda in fiscal year 2020 was USD 140.9 million, a 43 percent increase from the prior year. As a percentage of sales on a constant currency basis, North America adjusted Ebitda margin was 12.0 percent, a 381 basis point increase from the prior year.

International

International net sales in the fourth quarter were USD 213.1 million, a decrease of 3 percent compared to the prior year period. When adjusted for Foreign Exchange, Divestitures, discontinued brands and SKU rationalization3, net sales were flat compared to the prior year period.

Segment gross profit in the fourth quarter was USD 46.3 million, a 5 percent increase from the prior year period. Adjusted gross profit was USD 46.4 million, an increase of 2 percent from the prior year period. Gross margin was 21.7 percent, a 162 basis point increase from the prior year period and adjusted gross margin was 21.8 percent, a 104 basis point increase from the prior year period.

Segment operating income in the fourth quarter was USD 14.7 million, a 19 percent decrease from the prior year period. Adjusted operating income was USD 22.7 million, a decrease of 1 percent from the prior year period.

Adjusted Ebitda in the fourth quarter was USD 29.9 million, a 3 percent decrease from the prior year period. As a percentage of sales, International adjusted Ebitda margin was 14.0 percent, a 9 basis point increase from the prior year period.

International net sales in fiscal year 2020 were USD 882.4 million, a decrease of 3 percent when compared to the prior year. When adjusted for Foreign Exchange, Divestitures, discontinued brands and SKU rationalization3, net sales increased 1 percent compared to the prior year.

Segment gross profit in fiscal year 2020 was USD 172.2 million, flat when compared to the prior year. Adjusted gross profit was USD 174.9 million, a decrease of 1 percent from the prior year. Gross margin was 19.5 percent, a 50 basis point increase from the prior year and adjusted gross margin was 19.8 percent, a 37 basis point increase from the prior year.

Segment operating income in fiscal year 2020 was USD 55.3 million, a 6 percent decrease from the prior year. Adjusted operating income was USD 73.9 million, a decrease of 1 percent from the prior year.

Adjusted Ebitda in fiscal year 2020 was USD 105.7 million, flat when compared to the prior year. As a percentage of sales on a constant currency basis, International adjusted Ebitda margin was 12.0 percent, a 32 basis point increase from the prior year.

1 This statement includes certain non-GAAP financial measures, which are intended to supplement, not substitute for, comparable GAAP financial measures.
2 Unless otherwise noted all results included in this press release are from continuing operations.
3 Refer to «Net Sales Growth at Constant Currency» and «Adjusted for Divestitures, discontinued brands and SKU Rationalization» provided herein.
4 Refer to Non-GAAP Financial Measures on the company’s web site for definition of operating free cash flow from continuing operations.

Capital Management

During fiscal year 2020, the Company repurchased 2.6 million shares, or 2.4 percent of the outstanding common stock, at an average price of USD 23.59 per share for a total of USD 60.2 million, excluding commissions. As of June 30, 2020, the Company had USD 189.8 million remaining authorization under the share repurchase program.

Sale Of Rudi’s Bakery

Effective May 1, 2020, the Company completed the divestiture of its Rudi’s business, a component of the United States reporting unit to an affiliate of Promise Gluten Free. Details of the transaction were not disclosed.

Sale Of Danival

Effective July 21, 2020, the Company completed the divestiture of Danival® to a subsidiary of Wessanen N.V. Details of the transaction were not disclosed.

Fiscal Year 2021 Guidance

Due to the uncertainty around the duration and impact of the Covid-19 pandemic, the Company is not providing specific financial guidance for fiscal 2021. For fiscal 2021, the Company expects continued margin expansion, strong double digit adjusted Ebitda growth and double digit operating free cash flow growth. The Company believes that the first half of fiscal 2021 will yield stronger net sales and adjusted Ebitda growth than the second half of the year due to its strong consumer and customer plans as well as increased at home eating occasions related to Covid-19. For the first quarter, based on actual results to date, the Company expects mid-single digit net sales growth after adjusting for divestitures and discontinued brands, and several hundred basis points of margin improvement and adjusted Ebitda growth.