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Hain Celestial (HAIN) Divests Its U.K.-Based Fruit Business

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The Hain Celestial Group, Inc.’s (HAIN - Free Report) transformational initiative bodes well. The strategy is aimed at simplifying portfolio, identifying additional areas of productivity, driving top-line growth and improving cash flow. The company is focused on its global strategic goals and continues to make marketing investments in key brands. Simultaneously, it is on track to simplify business to focus on areas with high-growth potential by exiting non-core assets. Progressing along such lines, management recently divested the company’s U.K. fruit business, including the Orchard House Foods Limited operations and associated brands.

Notably, this sale of the complex and non-core asset to a U.K.-based private equity firm Elaghmore, resonates well with the company’s strategic transformation efforts to further simplify its brand portfolio. Hence, this will help the company generate higher profits and cash flow. Other details of this deal remained under wraps.

Let’s Delve Deeper

We note that the company’s fruit business was adversely affected by the coronavirus pandemic. During first-quarter fiscal 2021, the foodservice-oriented fruit business continued to remain weak as several offices and restaurants were shut or had limited service. Excluding the $16-million decrease in the fruit business, international sales grew double digits in constant currency during the last-reported quarter. In fiscal first quarter, the fruit business caused a 270-basis points drag on the overall international adjusted EBITDA margins.

Hence, the divestiture of the U.K. fruit business will boost the company’s international growth profile. In addition, this will drive the company’s overall adjusted EBITDA margins. During the first-quarter conference call, management projected gross margin to expand in fiscal 2021. It had also anticipated strong double-digit growth in adjusted EBITDA along with expansion in adjusted EBITDA margins for fiscal.

Apart from the latest divestiture, the company also sold its Danival business to Wessanen N.V.’s subsidiary in July 2020. On May 1, 2020, it concluded the sale of the Rudi's Gluten Free Bakery TM and Rudi's Organic Bakery brands to an affiliate of Promise Gluten Free. Earlier, management sold two loss-making brands — SunSpire and Arrowhead Mills — for $15 million, and also divested Tilda to EBRO FOODS. Moreover, the company concluded the sale of its entire equity stake in Hain Pure Protein Corporation, which incorporates the FreeBird and Empire Kosher businesses.


 

Through these strategic divestitures, Hain Celestial focuses on simplifying its portfolio and reinvigorating sales growth via discontinuing uneconomic investments, realigning resources, minimizing unproductive stock-keeping units and brands. Moreover, well-chalked innovations, marketing and assortment optimization efforts have been supporting the Zacks Rank #1 (Strong Buy) company’s top line. It is also on track with boosting automation capabilities in plants for lowering costs, optimizing pricing and redesigning engineered products. Impressively, these endeavors have helped this natural and organic foods company to have gain 56.4% in a year versus its industry’s 3.9% growth.

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