Hain Celestial is reinvigorating its portfolio around on-trend protein as the US food and drinks business continues to weigh options for further disposals.
Nasdaq-listed Hain Celestial completed the divestiture of its North American snacks operations in February but president and CEO Alison Lewis has left markets second-guessing what might be next on the chopping board.
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Lewis said yesterday (11 May), after reporting another quarter of falling sales and further net losses, that Hain Celestial is still in the “execution phase” of the portfolio review launched last year.
“We are actively executing additional actions with a clear priority on further deleveraging and driving long-term shareholder value,” she told analysts on a follow-up call to discuss the third-quarter numbers.
“We see renovation and innovation-led growth critical to energising the categories with innovation rates that are accelerating across the portfolio.”
New product launches are in the pipeline to support that objective, including expanding the Earth’s Best baby and toddler brand into a “high-density nutrition” segment for older kids – Earth’s Best Big Kids Finger Food with protein and fibre.
The Greek Gods yogurt brand has also joined the trend with the roll out in April of a high-protein variant.
Celestial Seasonings is also expanding in wellness with new gut-health products set for launch this month, while Lewis said “wellness tea remains a bright spot”.
She added: “Importantly, our core business is stable with organic net sales growth across yogurt, tea, baby and kids, finger foods, and cereal. Sales pressure in the quarter was largely confined to select smaller brands and included the impact of portfolio simplification actions.”
Finance chief Lee Boyce maintained the position of not providing guidance for the year “given the uncertainty around the outcome and timing of the completion of our strategic review”.
However, looking ahead, he said Hain Celestial expects the “profile of the go-forward North American portfolio to have gross margin above 30% and EBITDA margin in the low double digits”.
Boyce added the company is almost done with its restructuring programme as part of the business reset, taking impairment charges to date to $108m, excluding inventory write-downs, of the $115-125m envisaged.
“As we continue to execute the next phases of this plan, we are advancing additional actions, including further asset sales and operational improvements,” he said. “We remain actively engaged with our lenders while we evaluate potential strategic transactions.”
In Hain Celestial’s international business, Lewis said the company saw in the third quarter “industry-wide volume softness in wet baby food, ongoing challenges in spreads and drizzles, as well as a decline in branded soup from a challenging year-ago comparison and strong private-label competition”.
Lewis gave nothing away on any potential plans to dispose of international assets despite the third-quarter performance of an 8% decline in organic sales for that business sector.
“The categories we operate in have struggled with volume as heightened geopolitical uncertainty and elevated inflation, including rising fuel prices, are contributing to a decline in UK and European consumer confidence,” she said.
However, Hain Celestial is “making bold moves with a robust end-to-end transformation of the Hartley’s brand”, while the UK soups brands of Covent Garden, Yorkshire Provender and Cully & Sully “span distinct propositions”, Lewis said.
