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The Hain Celestial Group, Inc.’s HAIN posted first-quarter fiscal 2022 results, with sales and earnings surpassing the Zacks Consensus Estimate. However, the top and bottom line declined on a year-on-year basis.
Quarterly performance was affected by tough year-over-year comparisons, thanks to elevated demand conditions stemming from the pandemic in the prior-year quarter. Divestitures and brand discontinuations were other headwinds. Management highlighted that the company’s first-quarter performance continued to be affected by industry-wide inflation and labor headwinds.
Despite the challenges, Hain Celestial will continue to focus on boosting its strength as a global healthy food and beverage company. The company is confident regarding its business growth momentum in the long run. That said, management reaffirmed its guidance for fiscal 2022.
Shares of this organic and natural products company increased 4.7% during the trading session on Nov 9, following the quarterly results. This Zacks Rank #2 (buy) company’s shares have increased 15.6% in the past three months compared with the industry’s rise of 0.9%.
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Quarter in Detail
Hain Celestial posted adjusted earnings of 25 cents a share, which came ahead of the Zacks Consensus Estimate of 24 cents. The bottom line declined 7.4% from 27 cents reported in the prior-year quarter.
Net sales came in at $454.9 million that surpassed the consensus mark of $443.7 million. The top line declined 9% year on year on a reported basis and 11% on a constant-currency (cc) basis. Upon adjusting for foreign exchange, divestitures and discontinued brands, net sales were flat year on year. Overlapping of pandemic-led volume surge witnessed in the prior-year quarter affected the top line. Divestitures and brand discontinuations hurt sales by 11%. Currency acted as a tailwind and benefitted sales by 2%.
Adjusted gross profit amounted to $108.7 million, down 9.6% from $120.3 million in the prior-year quarter. Adjusted gross margin fell 24 basis points (bps) year on year to 23.9%.
Adjusted operating income was $34.3 million in the reported quarter, down 11.6% from $38.8 million in the year-ago quarter.
Adjusted EBITDA declined 13.8% year on year to $47.3 million. Adjusted EBITDA margin contracted 61 bps to 10.4%.
The Hain Celestial Group, Inc. Price, Consensus and EPS Surprise
The Hain Celestial Group, Inc. price-consensus-eps-surprise-chart | The Hain Celestial Group, Inc. Quote
Net sales in the North America segment fell 5% year over year to $265.5 million. On adjusting for currency movements, divestitures and discontinued brands, net sales declined 1%. The downside was caused by the lapping of elevated at-home food consumption and strong hand sanitizer sales in the prior-year quarter due to the pandemic.
Segment adjusted operating income declined 41% to $20.5 million. The segment’s adjusted EBITDA amounted to $24.1 million, down nearly 38%. Adjusted EBITDA margin contracted 486 bps to 9.1%.
International net sales declined 13% year over year to $189.4 million. Foreign exchange aided sales by nearly 4%, while divestitures marred the same by 19%. On adjusting for foreign currency fluctuations, divestitures and discontinued brands, net sales increased 2% year over year.
Segment adjusted operating income rose 46% to $25.2 million. Adjusted EBITDA was $32.4 million, up 21% year over year. Adjusted EBITDA margin expanded 487 bps to reach 17.1%.
The company ended the reported quarter with cash and cash equivalents of $29 million, long-term debt (excluding current portion) of $345.4 million and total shareholders’ equity of $1,348.8 million.
Cash provided by operating activities from continuing operations was $37.6 million and operating free cash flow from continuing operations was $19.8 million in the reported quarter.
In August 2021, the company’s board approved an additional share repurchase plan worth nearly $300 million. The new buyback plan was commenced in the same month, after the company completed the 2017 authorization.
In the first quarter, the company repurchased 4.5 million shares for $175.6 million, excluding commissions. As of Sep 30, 2021, the company had $206.8 million remaining under the 2021 authorization.
For fiscal 2022, the company continues to expect low single digits growth in adjusted net sales, year on year. This includes foreign exchange related benefits worth 20 bps as well as negative impact of 600 bps from divestitures. The company anticipates modest expansion in adjusted gross margin in fiscal 2022. Adjusted EBITDA is expected to grow in the mid- to high-single-digit range, year on year.
Considering high demand witnessed in the first half of fiscal 2022, stemming from the pandemic, the timing of price increases and other factors, the company continues to expect adjusted net sales to be down low to mid-single digits in the first half of fiscal 2022. For the second half of the fiscal, adjusted net sales is expected to be up in the mid- to high-single digit. For the first half of fiscal 2022, the company expects adjusted EBITDA to decline in the mid-single digit range. For the second half, adjusted EBITDA is expected to be up low-double digits.
As part of the company’s full-year outlook and persistent pressures from industry-wide supply chain headwinds, the company updated its cost of goods inflation to be north of 6%. Management plans to undertake pricing actions to mitigate the impacts of inflation over time.
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