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August 22, 2013

On the money: Hain looks to new financial year with confidence

An upbeat Hain Celestial has said continued sales growth in the US and in the UK, as well as productivity savings - including from the integration of recent acquisition Ella's Kitchen - will help it grow profits in the next 12 months.

By Dean Best

An upbeat Hain Celestial has said continued sales growth in the US and in the UK, as well as productivity savings – including from the integration of recent acquisition Ella’s Kitchen – will help it grow profits in the next 12 months.

Shares in Hain Celestial jumped yesterday (21 August) after the US group booked higher fourth-quarter profits and set sales and earnings forecasts that were above Wall Street estimates.

Speaking to analysts after the results were announced, president and CEO Irwin Simon said the company had capitalised for continued demand for natural and organic products in the US and had secured new business in the UK, where it is working with brands acquired over the last year.

“We continue to be optimistic about the organic and natural industry trends. When you look at the entire food industry, our organic and natural products outpace conventional products by three times. Overall, food consumption is not growing. Consumers are seeking out more and more organic and natural products versus conventional products,” Simon said.

Hain Celestial, which owns US brands like Earth’s Best baby food and Greek Gods yoghurt, said its “record” fourth-quarter sales were boosted by “outstanding” sales in the US, as well as the acquired businesses in the UK

It said it had room to grow in the US and build on the increased distribution of its products in the last financial year.

“We continue to be optimistic about the US business. Yes, we have tough comps to beat and some commodity headwinds, but we’re well prepared with a full line of innovation, a proven productivity process, plenty of distribution white space with … and we’re just in the third inning of the game,” Maureen Pitman, Hain Celestial’s chief marketing officer for grocery and snacks, said. Simon added the company expected to see organic sales growth – that is, brands it had owned for over a year – at a “high single-digit” rate.

After a series of acquisitions, including Premier Foods plc brands like Hartley’s jam, as well the recent purchase of Ella’s Kitchen, the UK has become Hain Celestial’s second-largest market.

Acquisitions boosted Hain Celestial’s sales and profits in the UK in 2012/13 but the company said it had secured new listings for brands – including the return of New Covent Garden soup to Tesco – and boosted own-label contracts, like an expanded deal to supply jam to Sainsbury’s. We now have strong momentum leading into fiscal year 2014 to help us achieve accelerated sales and profitable growth long term,” Rob Burnett, CEO of Hain Celestial’s UK arm Hain Daniels, said.

Regaining a Tesco listing for New Covent Garden soup will help margins in the UK, the company explained. However, it also insisted it had not yet fully integrated its UK acquisitions – the Premier brands, Ella’s Kitchen and juice business BluePrint. “We’re still in early stages integrating these businesses, realizing the expected synergies, savings accretion and future growth. So we believe there’s tremendous opportunities just with the acquisitions that we’ve done this year,” Simon said.

Hain Celestial generated over US$30m in productivity savings in its last financial year and wants to increase that to $40-50m in the new fiscal year. It outlined better efficiency in sourcing of organic produce and to the benefits of bringing together Ella’s Kitchen and Earth’s Best.

The company spent $70m on capex last year and plans to invest a further $35m to improve production and increase capacity.

“We’re looking at certain plants in the US today. In regards to MaraNatha and nut butters, and our Arrowhead Mills and our DeBoles pasta, we can’t keep up with demand and has suffered huge out-of-stocks this year because of it. And we’re going to have to invest more capital to support the growth,” Simon said.

He added: “The CDC recently showed some stabilisation in obesity rate in adults, the first time in a long time, and even a decline in obesity rate in children across several states, which is music to my ears. So we believe healthy eating is here to stay with a broader consumer focus on products that are organic, natural, gluten-free, non-GMO and BPA-free, just to name a few.

“Organic and natural is growing. It’s a major part of growth within the food and personal care industry today. You see this growth in companies like Whole Foods, Sprouts Farmers Market, Fairway continue to add new stores with natural organic product offerings.

“Organic and natural products are also growing with mass, specialty and Internet retailers. We believe these trends, combined with the consistent strength of our core Hain US businesses as well as our prospects in Canada, UK and Europe and Asia, support our outlook for future long-term growth.”

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