HAIN

The Hain Celestial Group, Inc. (HAIN)

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Exchange: NASDAQ
Industry: Consumer Non-Durables
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The Hain Celestial Group, Inc. (HAIN)

F1Q09 (Qtr. End 9/30/08) Earnings Call

November 3, 2008 4:30 pm ET

Executives

Mary Anthes - VP, IR

Irwin Simon - President and CEO

Ira Lamel - EVP and CFO

John Carroll - EVP and CEO - Hain Celestial United States

Peter McPhillips - Executive Chairman - Hain Celestial Europe

Analysts

David Palmer - UBS

Mike Halley - Jefferies & Company

Greg Badishkanian - Citigroup

Jacklyn Rider - Lazard Capital Markets

Simeon Gutman - Goldman Sachs

Scott Van Winkle - Canaccord Adams

Shawn Tesoro - Blackrock

Andrew Wolf - BB&T Capital Markets

Bryant Chuckwin - RBC Capital Markets

Presentation

Operator

Good afternoon, my name is Erica and I will be your conference operator today. At this time, I would like to welcome everyone to The Hain Celestial first fiscal year 2009 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. (Operator Instructions) Thank you. Ms. Anthes you may begin your conference.

Mary Anthes

Thank you, Erica. Good afternoon. I'm pleased to be with you today to introduce our first quarter fiscal year 2009 Earnings Call discussion, with our financial results, which were issued earlier today.

We have several members of our management team here with us today to discuss our results. Irwin Simon, President and Chief Executive Officer; Ira Lamel, Executive Vice President and Chief Financial Officer; John Carroll, Executive Vice President and Chief Executive Officer, Hain Celestial, United States; and Peter McPhillips, Executive Chairman, Hain Celestial, Europe.

Our discussion today will include forward-looking statements, which are current as of today's date. We do not undertake any obligation to update forward-looking statements, either as a result of new information, future events, or otherwise. Our actual results may differ materially from those projected and some of the factors, which may cause results to differ, are listed in our publicly filed documents, including our 2008 Form 10-K filed with the SEC.

This conference call is being webcast and an archive of the webcast will be available on our website at www.hain-celestial.com under Investor Relations. Our call will be limited to approximately one hour. So please limit yourself to one question and a follow-up question. If time allows, we will take additional questions, and management will be available after the call for further discussion.

Now let me turn the call over to Irwin Simon, our President and Chief Executive Officer. Irwin?

Irwin Simon

Good afternoon, everybody and thank you, Mary. And I hope everybody has had the opportunity to look through our first quarter fiscal '09. It seems like we just reported our fiscal fourth quarter 2008. We are definitely in different economic times and I think we have a lot of good things to talk about what’s going on in the category and what’s going on in the marketplace, what’s going on in organic food. And if you read the New York Times or the Wall Street journal you would think not good things, but that’s not what we are hear to talk about today.

Our sales for the quarter $289.3 million versus $237.2 million up 22%, our gross margins as reported $25.9 million versus $29.5 million. On an apples-to-apples basis $28.6 million versus $30.8 million and if we took our price increase, which we enacted in august it would add two to three points. So our margins would have been up a little and Ira and John will both take you through the margins and going forward as they talk about their businesses.

Our SG&A, which we continuously focus on and will $18.2 million versus $20.2 million. When we talk about productivity; we talk about acquisition integration, we talk about efficiencies and we're really focused on that SG&A line and will continuously do that. Net income on an adjusted basis $11.4 million versus $11.9 million and earnings per share $0.28 versus $0.29 adjusted versus a year ago.

One of the good things about the company is in the good days things are going great and in tougher times how you adjust. And I think one of the great things at Hain today, we really don't have to adjust for economic times and how do we service a consumer? How do we get a demand out there for consumer?

So, I come back and say this here. We have great products and great brands. We are spreading out where our products are sold. We have a strong, strong balance sheet and I will talk about some of the things that we’ve done to enhance the balance sheet. Why I feel good about not doing certain acquisitions and being smart about acquisitions and we'll talk about that.

Sales, are strong, sales are up 22%, as you can see. Brand growth, Garden of Eatin' up 14%, WestSoy up 8.5% and that comes back and shows people reducing their milk and cake and their preference for soy, Earth's Best baby food up 28%. Our soup business Imagine Health Valley up 22%, mostly Imagine aseptic.

Our Rosetto business, which shows you consumers are back eating grains and eating carbs up 27%, and our DeBoles business is up around the same thing. Sunspire, which is an acquisition that we acquired in April, organic growth in that is up 18%.

Let's look at tea business. Tea business was up about $1 million dollars in sales. And we feel good about that as last year in this period we had a price increase and we really look to reduce our inventories out there. John is going to talk about some of the coupon things, some of the distribution drives that we're doing at store level and making sure we get the right flavors and how we are focused on tea and some of the management changes and that we have done out there. I'm really excited about tea and what we are definitely seeing in tea.

Our Personal Care, business is up 15%., our Canadian business is up 10%, our Europe business is up 22% and our UK business and this is mostly Fakenham and some lopping is down 4.6%. Peter McPhillips is on the phone, who runs our UK, Europe business and he will tell you about what we are doing in the UK. And I think you will get a good flavor from Peter and feel good about it.

I think what's important here, October finished on Friday and I think if I was at Wall Street I would be happy October finished. But we are seeing great October sales and it's continuing and see, the first month going into this being the Holiday Season, really it's good to see and we are seeing sales strong all over the place.

Our Chicken business from a FreeBird up 11%, our Plainville turkey up 9% and come back and look at this, why is a Chicken Protein business up? Antibiotic-free chicken or turkey is about $1.50 a pound, conventional is about $0.95. Our chicken is about a $1.25 a pound. But come back and look at steak today, red meat up $8 a pound and we're continuously seeing people trade down from red meat into other proteins.

So let's talk about some of our costs. We told you in the fourth quarter and early September that we would have to work through commodities and sitting here last year this time seeing where commodity is going, it like the wild, wild west out there. The good news is we feel that commodities are where they are. We're not going to have to take additional pricing and we have pricing in place to absorb those commodity costs.

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