HAIN

The Hain Celestial Group, Inc. (HAIN)

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

F2Q09 (Qtr End 12/31/08) Earnings Call

February 04, 2009, 4:30 am 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

Analysts

Christine McCracken - Cleveland Research Company

Andrew Wolf - BB&T Capital Markets

Edward Aaron - RBC Capital Markets

Scott Van Winkle - Canaccord Adams

Blakely

Terry Bivens - JP Morgan

Greg Badishkanian - Citigroup

Presentation

Operator

Good afternoon, my name is Britney, and I will be your conference operator today. At this time, I would like to welcome everyone to The Hain Celestial Second Quarter 2009 Earnings Call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you.

Ms. Mary Anthes you may begin your conference.

Mary Anthes

Thank you, Britney. Good afternoon. I am pleased to be with you today to introduce our second quarter fiscal year 2009 earnings conference call discussion of our financial results, which were released earlier today.

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

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

Thank you, Mary. Hi, everybody, good afternoon I know it's tough out there, but I got a lot of good things to take us through and John does also and Ira and some of the good things happening in our businesses and where we have some of our challenges, but again on our solid foundation.

Sales for the quarter up 14.2%, Ira will take you through gross margins, highly reconciled gross margins, but I think we will see the improvement in the business with the gross margin and some of the commodity. Our Sonic businesses in chicken and the UK how they affected us.

One of the things, what I would like to do is be upfront in predicting commodity prices and new trends, but we have really focused on our SG&A. Our SG&A in the quarter of 15.4, versus 17.5 some of it came from the higher sales in poultry, but we have really focused on cost in this company.

Our cash in the quarter was $50 million, our free cash 9.4, so I sit back today. Now we are not calling washing in for TARP money or anything like that. Our liquidity, our balance sheet, our working capital where we really focused on our cash conversion, it's really strong in today's day and age really to have that.

The number one thing is we all look what's going on out there, people are trading down. Absolutely, there is some trading down on there, what’s going on out there as I said on the CNBC, we don't live in the cave and we always expected it and that's why we positioned the company where it is.

Our average grocery product is $3.89, our average personal care products is $8, but what we are continuously seeing health is our concern. And health is a concern when it comes to low-sodium gluten free, calorie products and we see people are not trading down from a health standpoint. People want to be healthy to keep working.

We are seeing very much more people in the family's values and eating at home where the average meal at home is $5 a person versus $12 a person than eating out. Concerns of obesity and a lot of other things are really important. So, we are not seeing trading down, we are seeing inventory reductions, and we are seeing pantry deductions, which we will talk about there.

John will talk to you about grocery frozen snack and tea, our Earth's Best business babies got to eat, babies will continue to eat and are eating organic baby foods. So between formulae, baby food, diapers up 37% not too many brands growing at 37% today and that’s bringing new users in every nine months and that’s anywhere from $0.89 to $0.99 a Jar of baby food.

Soup business is strong up 12%, our rice and milk business up 15% and that’s Almond Dream and I am taking away a lot of John’s script as he has got all good things to tell you. But this shows you our consumption in our businesses out there in a lot our grocery businesses.

Just one other thing I want to point out is Arrowhead Mills where people are back cooking and baking up strong too. What I got to do is congratulate the Celestial team under Peter Burns and John and the group out there. What a great turnaround on Celestial up 3%. And what we are seeing consumers know the brand, look at the new packaging and are not buying the higher price, and John will talk to you about that in a little while,

So, I am telling you all this good stuff what happened in the second quarter. Our US business is good. Our US business is strong. You heard (inaudible) talk today about inventory reductions, you can certainly talk about inventory reductions. It’s something that we can't control. It’s a little scary because at the stock, it will create at a stocks and as everybody tries to get down to 40 days, 50 days I think. There are some challenges out there but that’s something that every retailer is doing.

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