Rise in consumption, expanded distribution and productivity
savings along with pricing facilitated
The Hain Celestial Group Inc
), to post strong fourth-quarter 2012 results. The company reported
adjusted earnings of 47 cents a share, which surpassed the Zacks
Consensus Estimate by couple of cents and jumped 30.6% from 36
cents earned in the prior-year quarter.
Including one-time items, earnings came in at 50 cents compared
with 28 cents a share earned in the year-ago quarter.
Revenue for the quarter rose 22.3% year over year to $350.7
million, reflecting rise in demand for natural organic products.
The company noted that consumption in the U.S. grew 14%. Including
sales of the United Kingdom private label chilled ready meals
operations (discontinued business), revenue came in at $373.8
million, up 28% year over year. The Zacks Consensus Estimate was
$366 million for the quarter.
The company registered increased consumption in core categories
with robust contribution from Earth's Best, MaraNatha, Garden of
Eatin, The Greek Gods, Imagine, Linda McCartney, Spectrum, Health
Valley and Avalon Organics. Hain Celestial also experienced solid
sales across recently-acquired brands.
Gross profit ascended 14.7% year over year to $93.4 million in
the quarter. However, gross margin contracted 180 basis points
during the quarter to 26.6% as productivity savings were more than
offset by input costs.
Adjusted operating profit jumped 26.6% to $36.2 million in the
quarter, while adjusted operating margin expanded 36 basis points
to 10.3%, indicating a 210 basis points decline in SG&A as a
percentage of sales.
The company ended the quarter with cash and cash equivalents of
$29.9 million, long-term debt of $390.3 million and shareholders'
equity of $964.6 million. Operating free cash flow shot up 152.3%
year over year to $36.8 million.
Acquisitions Driving Growth
Acquisitions have played a key part in Hain Celestial's strategy
of building market share. These acquisitions have not only widened
the company's geographical presence, but have also provided
opportunities to cross-sell products in the U.S., Canadian, and
Adding to the series, the company announced the acquisition of
leading packaged grocery brands from Premier Foods plc's, including
Hartley's, Gale's Robertson's, Frank Cooper's and Sun-Pat.
The 200 million pounds ($316 million) cash and stock deal is
expected to close by the end of October.
The acquisition is expected to be accretive to its earnings upon
completion. Moreover, it is expected to bring in incremental sales
as it provides a strong foothold to the company in the packaged
food and grocery market that is swiftly gaining ground.
Further, the company stated that it has completed the sale of
its private label chilled ready meals business and also entered
into a letter of intent to sell the Daily Bread sandwich business.
The company expects to sustain strong momentum across entire
business segments as it remains well positioned to capitalize on
the growing global demand for organic products.
The company now expects sales to be in the range of $1.600
billion to $1.615 billion in fiscal 2013 (excluding results for the
discontinued operations of private label chilled ready meals).
Earnings are expected to be in the range of $2.10 to $2.20 a
Going forward, we believe that the company will be able to
mitigate the cost pressures through increased productivity and
Moreover, Hain Celestial has undertaken a number of initiatives
to improve its performance and has put itself on the growth
trajectory. The company's Stock Keeping Unit ("SKU")
rationalization program has helped eliminate SKUs, which had lower
sales volume or weak margins. Management remains focused on
improving profitability through new product introductions while
Currently, we have a long-term 'Outperform' rating on the stock.
Hain Celestial, which competes with
General Mills Inc
Kraft Foods Inc
), holds a Zacks #3 Rank, which translates into a short-term 'Hold'
GENL MILLS (GIS): Free Stock Analysis Report
HAIN CELESTIAL (HAIN): Free Stock Analysis
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