Hain Celestial: Reports Q4 and Fiscal Year 2021 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, 2021.

President and CEO Mark L. Schiller commented, «We are very proud of our solid fourth quarter and full fiscal year 2021 results. In spite of the many challenges our industry faced this past year, we continued to successfully execute against our transformation plan, delivering robust full year margin expansion and strong adjusted Ebitda growth. Heading into 2022, we expect another strong year with adjusted net sales growth, margin expansion and adjusted Ebitda growth even in this challenging environment of high inflation and labour shortages.»

Financial highlights

Summary of Fourth Quarter Results from Continuing Operations:

  • Net sales decreased 12 percent to USD 450.7 million, or 17 percent on a constant currency basis, compared to the prior year period.
  • When adjusted for foreign exchange, divestitures and discontinued brands, net sales decreased 8 percent compared to the prior year period.
  • Gross margin of 25.0 percent, a 41 basis point decrease from the prior year period.
  • Adjusted gross margin of 25.7 percent, a 49 basis point increase from the prior year period.
  • Operating income of USD 41.6 million compared USD 25.3 million in the prior year period.
  • Adjusted operating income of USD 53.0 million compared to USD 47.9 million in the prior year period.
  • Net income of USD 40.5 million compared to USD 3.7 million in the prior year period.
  • Adjusted net income of USD 39.7 million compared to USD 32.3 million in prior year period.
  • Adjusted Ebitda of USD 68.1 million compared to USD 62.2 million in the prior year period.
  • Adjusted Ebitda margin of 15.1 percent, a 296 basis point increase compared to the prior year period.
  • Earnings per diluted share (EPS) of USD 0.40 compared to USD 0.04 in the prior year period.
  • Adjusted EPS of USD 0.39 compared to USD 0.32 in the prior year period.
  • Repurchased 0.7 million shares, or 0.7 percent of the outstanding common stock, at an average price of USD 40.41 per share.

Summary of Fiscal Year 2021 Results from Continuing Operations:

  • Net sales decreased 4 percent to USD 1,970.3 million, or 7 percent on a constant currency basis, compared to the prior year.
  • When adjusted for foreign exchange, divestitures and discontinued brands, net sales decreased 1 percent compared to the prior year.
  • Gross margin of 25.0 percent, a 227 basis point increase over the prior year.
  • Adjusted gross margin of 25.6 percent, a 249 basis point increase over the prior year.
  • Operating income of USD 107.4 million compared to USD 56.0 million in the prior year.
  • Adjusted operating income of USD 199.5 million compared to USD 140.0 million in the prior year.
  • Net income of USD 66.1 million compared to USD 25.6 million in the prior year.
  • Adjusted net income of USD 146.5 million compared to USD 87.1 million in the prior year.
  • Adjusted Ebitda of USD 258.9 million compared to USD 200.0 million in the prior year.
  • Adjusted Ebitda margin of 13.1 percent, a 340 basis point increase compared to the prior year.
  • EPS of USD 0.65 compared to USD 0.25 in the prior year.
  • Adjusted EPS of USD 1.45 compared to USD 0.84 in the prior year.
  • Repurchased 3.1 million shares, or 3.0 percent of the outstanding common stock, at an average price of USD 34.87 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 fourth quarter were USD 253.3 million, a decrease of 15 percent compared to the prior year period. When adjusted for foreign exchange, divestitures and discontinued brands, net sales decreased 12 percent from the prior year period.

Segment gross profit in the fourth quarter was USD 59.6 million, a 29 percent decrease from the prior year period. Adjusted gross profit was USD 62.4 million, a decrease of 25 percent from the prior year period. Gross margin was 23.5 percent, a 446 basis point decrease from the prior year period, and adjusted gross margin was 24.6 percent, a 313 basis point decrease from the prior year period.

Segment operating income in the fourth quarter was USD 23.8 million, a 25 percent decrease from the prior year period. Adjusted operating income was USD 29.6 million, a 24 percent decrease from the prior year period.

Adjusted Ebitda in the fourth quarter was USD 34.8 million, a 20 percent decrease from the prior year period. As a percentage of sales, North America adjusted Ebitda margin was 13.7 percent, a 92 basis point decrease from the prior year period.

North America net sales in fiscal year 2021 were USD 1,104.1 million, a decrease of 6 percent compared to the prior year. When adjusted for foreign exchange, divestitures and discontinued brands, net sales decreased 2 percent from the prior year. On an adjusted basis, the decrease was primarily driven by pantry stocking in the prior year as a result of stay-at-home orders at the beginning of the Covid-19 pandemic and a large program with a wholesale club which was not repeated in the current year.

Segment gross profit in fiscal year 2021 was USD 291.4 million, a 1 percent decrease from the prior year. Adjusted gross profit was USD 300.6 million, relatively flat compared to the prior year. Gross margin was 26.4 percent, a 134 basis point increase from the prior year and adjusted gross margin was 27.2 percent, a 155 basis point increase from the prior year.

Segment operating income in fiscal year 2021 was USD 129.0 million, a 34 percent increase from the prior year. Adjusted operating income was USD 143.7 million, a 19 percent increase from the prior year.

Adjusted Ebitda in fiscal year 2021 was USD 162.0 million, a 15 percent increase from the prior year. As a percentage of sales, North America adjusted Ebitda margin was 14.7 percent, a 265 basis point increase from the prior year.

International

International net sales in the fourth quarter were USD 197.3 million, a decrease of 7 percent compared to the prior year period. When adjusted for foreign exchange, divestitures and discontinued brands, net sales decreased 1 percent compared to the prior year period.

Segment gross profit in the fourth quarter was USD 53.0 million, a 14 percent increase from the prior year period. Adjusted gross profit was USD 53.6 million, an increase of 16 percent from the prior year period. Gross margin was 26.8 percent, a 509 basis point increase from the prior year period, and adjusted gross margin was 27.2 percent, a 543 basis point increase from the prior year period.

Segment operating income in the fourth quarter was USD 29.9 million, a 104 percent increase from the prior year period. Adjusted operating income was USD 31.3 million, an increase of 38 percent from the prior year period.

Adjusted Ebitda in the fourth quarter was USD 38.3 million, a 28 percent increase from the prior year period. As a percentage of sales, International adjusted Ebitda margin was 19.4 percent, a 536 basis point increase from the prior year period.

International net sales in fiscal year 2021 were USD 866.2 million, a decrease of 2 percent when compared to the prior year. When adjusted for foreign exchange, divestitures and discontinued brands, net sales increased 1 percent compared to the prior year. On an adjusted basis, the increase was mainly due to sustained demand from the prior year with additional growth in the current year from our plant-based food and beverage products.

Segment gross profit in fiscal year 2021 was USD 200.2 million, a 16 percent increase from the prior year. Adjusted gross profit was USD 204.7 million, an increase of 17 percent from the prior year. Gross margin was 23.1 percent, a 359 basis point increase from the prior year and adjusted gross margin was 23.6 percent, a 382 basis point increase from the prior year.

Segment operating income in fiscal year 2021 was USD 38.0 million, a 31 percent decrease from the prior year. Adjusted operating income was USD 103.3 million, an increase of 40 percent from the prior year.

Adjusted Ebitda in fiscal year 2021 was USD 133.9 million, a 27 percent increase from the prior year. As a percentage of sales, International adjusted Ebitda margin was 15.5 percent, a 348 basis point increase from the prior year.

Capital management

The Company is announcing today that its Board of Directors has approved an additional USD 300 million share repurchase authorization. Share repurchases under this 2021 authorization will commence after the Company’s existing 2017 authorization is fully utilized. As of June 30, 2021, the Company had USD 82.4 million remaining under the 2017 authorization. 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 fourth quarter of fiscal year 2021, the Company repurchased 0.7 million shares, or 0.7 percent of the outstanding common stock, at an average price of USD 40.41 per share for a total of USD 27.2 million, excluding commissions, under its 2017 share repurchase authorization.

During fiscal year 2021, the Company repurchased 3.1 million shares, or 3.0 percent of the outstanding common stock, at an average price of USD 34.87 per share for a total of USD 107.4 million, excluding commissions, under its 2017 share repurchase authorization.

Fiscal year 2022 guidance

For fiscal year 2022, compared to fiscal year 2021, the Company expects:

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

Relative to fiscal 2019, the most recent pre-pandemic period, the Company expects full year adjusted net sales growth of high single digits with adjusted Ebitda and Ebitda margin growth of at least 65 percent and 500 bps, respectively.

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

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

In addition, for the first quarter of fiscal year 2022, the Company expects:

  • Net sales to be down low to mid single digits on an adjusted basis but down low double digits on a reported basis, compared to the first quarter of fiscal year 2021,
  • Net sales to be up by mid to high single digits on an adjusted basis compared to the first quarter of fiscal year 2020, the most recent pre-pandemic period,
  • Adjusted gross margin expansion, compared to the first quarter of fiscal year 2021, and
  • A mid to high teens adjusted Ebitda decrease compared to the first quarter of fiscal year 2021, given the overlap of 70 percent adjusted Ebitda growth in the first quarter of fiscal year 2021 versus prior year, lower sales due to divestitures, a highly inflationary environment and the timing of the Company’s pricing actions.

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.