The Hain Celestial Group, Inc. (HAIN)

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The Hain Celestial Group, Inc. (HAIN)

Q4 2008 Earnings Call

August 26, 2008 4:30 pm ET


Mary Anthes – VP IR

Irwin Simon – President & CEO

Ira Lamel – EVP & CFO

John Carroll – EVP & CEO Hain Celestial US


Edward Aaron - RBC Capital Markets

Christine McCracken - Cleveland Research Company

Simeon Gutman – Goldman Sachs

Scott Mushkin – Jeffries & Company

Analyst - Blackrock

Gregory Bandishkanian - Citigroup

Scott Van Winkle - Canaccord Adams

Jacqueline Rider – Lazard Capital Markets

Andrew Wolf - BB&T Capital Markets

Terry Bivens - JP Morgan



At this time I would like to welcome everyone to the Hain Celestial fourth quarter fiscal 2008 conference call. (Operator Instructions) I will now turn the call over to Mary Anthes, Vice President of Investor Relations.

Mary Anthes

Good afternoon. I’m pleased to be with you today to introduce our fourth quarter and full fiscal year 2008 earnings conference call discussion of our financial results which were issued 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 of 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 defer are listed in our publicly filed documents, including our 2007 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 today will be limited to approximately one hour, so please limit yourself to one question and one 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 Simon

Thank you Mary and good afternoon everybody. I hope everybody had an opportunity to look at our fourth quarter for fiscal 2008 and our full year and our guidance for fiscal 2009. Our sales for the fourth quarter $278.3 million versus $223.3 million, up 25.2% and for the full year $1.06 billion versus $900 million and we reached that milestone of $1 billion in sales, up 17.3% and what I must point out, the $278 million has been our biggest quarterly sales ever in the history of the company.

Our gross margin for the quarter 27.9% versus 28.7% and half of that, of the 0.8 bps is coming from input costs and just fuel alone April, May and June was up 22% and we’ll show you later how we absorbed those costs and how our freight rates and fuel was flat to last year.

For the year 28.6% versus 29.1% and up 50 bps and the majority of that is coming from input costs. Our operating income for the quarter $20 million versus $18.5 million, up 8%. For the year $103 million versus $86 million, up 19.7%. Earnings per share for the quarter adjusted $0.34 versus $.025 up 36% and $1.40 versus $1.16, up 21%.

Let me talk about the quarter and let me share some of the great things. What a quarter it’s been and what it’s been and what’s happened with inflation, what’s happened with ingredient costs, what’s happened with fuel costs, what’s happened to the consumer and we’ll talk a lot about that today.

Good top line growth, good bottom line growth in the fourth quarter. We absorbed about $11 million of costs in the quarter and as you can see we were able to offset it with price increasing productivity, increase in sales. Fuel alone as you heard me say up 22%. In the quarter we absorbed the MaraNatha acquisition, we started to integrate it. We were able to cut costs but actually in the first quarter that we owned it, MaraNatha cost us some dollars but we see this as a great acquisition and we see the similar acquisition as Spectrum, Avalon, and Alba.

Pilgrim’s Pride which I’ll spend some time talking about our poultry business, same thing, we see some good things happening here in our chicken turkey business. Our Daily Bread business which will help our UK operations and seeing some good things there. We dealt with distributor inventory reductions as distributors and retailers look to bring down their inventories so in the quarter we have seen that.

We made some management changes in the UK. As you know the UK has not performed for us this year and probably one of our disappointing areas and we made some good management changes. I spent about three weeks over there in the summer and we’re seeing some good things happening.

Our Canadian business is strong, up 7%. Strong growth came in our poultry business. Our Celestial Seasonings business grew 4% in the quarter and we had great double-digit growth from brands like Garden of Eden, Imagine, Arrowhead Mills, Earth's Best, Imagine Soups, Spectrum, Avalon, Alba, DeBoles, so some good double-digit growth coming from all those.

Our European business was up 31%. Our FreeBird business which is our chicken business, up 24% and our Plainville turkey operation which we acquired last August was up 5%. So what did we do to drive out the costs, to drive top line? We’ve improved distribution; we’ve grown a lot more among mass market, supermarkets, food service, and convenience store.

We really went after sales and the consumer is still looking for healthy products and we’ll talk about that in a little while. We drove productivity in the quarter $11 million we absorbed. We really focused on our SG&A and our SG&A in the quarter was down 1.2 bps. So we really focused on costs, and on growth.

So let me talk about the brands, Celestial was up a little over 1% for the year. Up 4% for the quarter. Profits for the year on Celestial were up about 5%, so what has happened? We completed the packaging change for Celestial. There are some things we need to do on the flavor identifier. There are some other things we need to do on vertical versus horizontal.

And our big thing to do on Celestial is improve the distribution, improve shelf, really go after food service, go after some of the, fix our green tea and consolidate some of the back room as you heard me mention before John Carroll has now taken over full responsibility of the Celestial operation so we will consolidate a lot of businesses here from our US side of the business.

Big thing John is looking for next year and he’s going to talk about it, we’re going to look at some of the innovation coming out of the tea and leverage a lot of our impact with our trade versus the consumer and really how do we get the consumer there are a lot of tea choices out there. And last but not least we’re praying for a real cold winter.

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