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Strong 1Q for HAIN

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Rise in consumption, expanded distribution and productivity savings facilitated The Hain Celestial Group Inc. (HAIN - Free Report) to post first-quarter 2013 adjusted earnings of 40 cents a share, up 33.3% from the prior-year quarter’s earnings of 30 cents. Moreover, earnings came ahead of the Zacks Consensus Estimate of 39 cents.  

Including one-time items, earnings came in at 42 cents compared with 28 cents a share earned in the year-ago quarter.

Key Numbers

Net sales from continuing operations surged 25.4% year over year to $359.8 million, reflecting rise in demand for natural organic products. The company noted that total consumption grew 9%. Including sales of the United Kingdom private label chilled ready meals operations (discontinued business), revenue came in at $372 million compared with $292.3 million in the year-ago quarter. The Zacks Consensus Estimate was $371 million for the quarter.

The company registered elevated consumption in core categories with robust contribution from Earth's Best, MaraNatha, Terra, Garden of Eatin, The Greek Gods, Sensible Portions, New Covent Garden Soup Co, Johnson's Juice Co, Cully & Sully, Linda McCartney, Spectrum, Arrowhead Mills, Alba Botanica and Europe's Best. Hain Celestial also experienced solid sales across recently-acquired brands.

Gross profit ascended 19.3% year over year to $95.2 million during the quarter. However, gross margin contracted approximately 130 basis points during the quarter to 26.5%.  

Adjusted operating profit jumped 29.8% to $32.9 million in the quarter, while adjusted operating margin expanded approximately 30 basis points to 9.1%, indicating an approximate 170 basis points decline in SG&A as a percentage of sales.

The company ended the quarter with cash and cash equivalents of $36.2 million, long-term debt of $360.2 million and shareholders’ equity of $1,008.9 million.

Acquisitions Driving Growth

The company recently completed the earlier announced acquisition of leading packaged grocery brands –Hartley's, Gale's Robertson's, Frank Cooper's and Sun-Pat – from Premier Foods plc.

Acquisitions have played a vital role in Hain Celestial’s strategy of building market share. These have not only widened the company’s geographical presence, but also provided opportunities to cross-sell products in the U.S., Canadian, and European markets.

The company expects the deal to be accretive to its second quarter 2013 results. Moreover, it is expected to result in incremental sales since it will provide the company a strong foothold in the packaged food and grocery market, which is swiftly strengthening its grip.

As the buyout has now been completed, Premier Foods will be a part of the Hain Daniels Group and is expected to generate sales of about $180 million for the 8 months period closing on June 30, 2013. Moreover, it will add approximately 25 cents, excluding the charges related to acquisition, to the earnings.  

In a separate story, the company announced that it has agreed to acquire the New York based BluePrint. However, the financial terms of the deal were not disclosed. The company expects to close the deal by the end of calendar year 2012.


The company hopes to sustain strong momentum across entire business segments as it remains well positioned to capitalize on the growing global demand for organic products.

Alongside, the company anticipates sales to be in the range of $1.780 billion to $1.795 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 $2.35 to $2.45 a share.  

Going forward, we believe that the company will be able to mitigate the cost pressures through increased productivity and efficient pricing.

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 reducing costs.

Currently, we have a long-term ‘Neutral’ recommendation on the stock. Hain Celestial, which competes with General Mills Inc. (GIS - Free Report) holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.


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