The Hain Celestial Group Inc. (HAIN), which distributes, markets and sells various natural and organic foods as well as personal care products, posted healthy first-quarter 2012 financial results.
The quarterly earnings of 29 cents a share came a penny ahead of the Zacks Consensus Estimate, and climbed 16% from 25 cents delivered in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 26 cents compared with 21 cents a share earned in the year-ago quarter.
Quarterly Performance
Revenue in the quarter increased by 13.3% to $292.4 million from $258 million delivered in the prior-year quarter. The revenue also came ahead of the Zacks Consensus Estimate of $288 million. The improvement in Hain Celestial’s first-quarter 2012 revenue was aided by healthy performances across United States, Canadian and European operations as well as its recent acquisitions.
The company noted that consumption in the U.S. grew 7% during the quarter with a 12% increase in sales.
The company registered robust contribution from Grocery, Celestial Seasonings, and personal care. Hain Celestial also experienced solid sales across recently acquired brands, Sensible Portions snacks and The Greek Gods yogurt.
Despite a rise of 13.1% in cost of sales, gross profit upped 13.9% to $79.8 million in the quarter, whereas gross profit margin improved 13 basis points to 27.3%, reflecting favorable product mix and productivity savings, partly offset by higher input costs.
Financial Aspects
The company ended the quarter with cash and cash equivalents of $29.4 million and long-term debt of $230.5 million, which is 20.9% of shareholders’ equity of $874.9 million. During the quarter Hain Celestial generated operating free cash flow of $35.3 million.
Guidance
Hain Celestial forecasts revenue between $1,455 million to $1,480 million and earnings in the range of $1.63 to $1.73 per share for fiscal 2012. The current Zacks Consensus estimate is $1.69 for fiscal 2012.
Growth Plans in Place
Acquisitions have been a key part of Hain Celestial’s strategy to build market share. These acquisitions have not only widened the company’s geographical presence, but have also provided opportunities to cross-sell products in the U.S., Canadian, and European markets.
Following its growth plan, Hain Celestial recently announced the acquisition of U.K.based marketer and manufacturer of fresh and frozen foods, Daniels Group.
The acquisition offers Hain Celestial a gateway to a sturdy food and grocery market that is swiftly gaining ground. Currently, the frozen category represents more than 50% of food sales in U.K.
Further, the company stated that it is experiencing healthy sales in its natural and organic category and plans to spread out the supply of certain Daniels brands through the rest of Europewith the expertise of Daniels’ strong management team.
Moving ahead, Hain Celestial provides an underpinning for an excellent investment through its robust sales and earnings growth. Further, the company’sstrategic initiatives to enhance its portfolio of global brands by acquiring Danival, the manufacturer of certified organic food products with facilities in France, and GG UniqueFiber, the manufacturer of all natural high fiber crackers in Norway, is paying off well.
Moreover, Hain Celestial has undertaken a number of initiatives to improve its performance and put itself on the growth trajectory. The company’s Stock Keeping Unit (“SKU”) rationalization program has helped to eliminate SKUs, which had lower sales volume or weak margins. Management focuses on improving profitability through new product introductions while reducing costs.
However, the company faces strong competition in the natural and organic foods market and the personal care products segment. Competition is encountered on several attributes – product quality, brand recognition and loyalty, price, product innovation and promotion. This may dent the company’s sales and margins.
Currently, we have a long-term Neutral rating on the stock. Hain Celestial, which competes with General Mills Inc. (GIS) and Kraft Foods Inc. (KFT), holds a Zacks #1 Rank, which translates into a short-term Strong Buy rating.
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