Industry destocking and lower commodity turkey sales in the US, plus a slower-than-expected recovery in the UK have been blamed for the lower sales and earnings targets at Hain Celestial.
The US-based natural and organic food maker yesterday (4 February) reduced its revenue target and cut its earnings forecast for its current fiscal year, which runs to the end of June.
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The move sent Hain’s shares tumbling and the stock closed down 5.6% overnight at US$14.53.
In the US, destocking at the Hain’s two leading distributors weighed on the company’s domestic sales during its second quarter.
Elsewhere, its Hain Pure Protein venture saw prices for its commodity turkeys fail to match costs.
Meanwhile, in the UK, the loss of a key contract with Marks and Spencer in the UK hampered Hain’s business in the market.
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By GlobalData“We still think we’re going to finish the year with a very strong core performance and go into 2011 having set ourselves up for a pretty good fiscal 2011,” CFO Ira Hamel said.
President and CEO Irwin Simon said the biggest reason for the lower guidance came from the inventory reduction in the US.
“The good news is consumption is growing at retail and that helps overall grow our sales even stronger,” Simon said.
The Hain Pure Protein venture is set to focus solely on antibiotic-free products and Simon said demand for that type of protein was already strong.
“The protein business on antibiotic-free turkey grew by 34% and chicken by 10%, so it shows you the demand for antibiotic-free,” Simon said.
In the UK, Hain has consolidated its food-to-go production at its Luton site after the loss of the M&S contract at the plant.
President and CEO Irwin Simon said Hain was “reviewing” new accounts for the Luton facility, which needed to generate some GBP8m to break-even.
“Our biggest decline in the UK was our Luton facility,” Simon said. “Luton needs new accounts. We’re in the midst of reviews with four or five major accounts. We probably have an GBP8m (US$12.6m) gap in what we need to do in Luton to break-even. Getting business at the Luton facility has come a lot slower than we had anticipated.”
However, the Hain boss praised the company’s Fakenham frozen food facility in the UK and said the business was continuing to increase listings for its Linda McCartney meat-free range.
“Our business right now in our frozen facility has gone from a GBP14m business this time last year to a GBP28m run-rate at the end of this year,” Simon said.
“Our Fakenham facility will be profitable by the end of March and, trust me, we look forward to that.”
