Like most food companies, Hain Celestial has battled labor shortages, high inflation and the lapping of COVID-19 sales during its most recent fiscal quarter.
"Despite these headwinds, we were able to successfully navigate the choppy waters and deliver both the revenue and adjusted EBITDA guidance that we outlined in our last call," CEO Mark Schiller said Thursday morning. Specifically, top line sales had been predicted to drop between 11% and 14%; it fell 11.9%. The company expected margin to improve at least 100 basis points; adjusted EBITDA margin rose 296 basis points—the sixth straight quarter of margin improvement above 200 basis points, he said.
"Importantly, for the year, we delivered our Investor Day (2019) targeted EBITDA margin one year ahead of schedule," Shiller said. The company also expected 10% growth in EBITDA and reported 9.4%. "Again, in line with the guidance," he pointed out.
The entire food industry is facing the same problems as Hain, the CEO said.
"Labor shortages throughout the supply chain affected sourcing, internal manufacturing and distribution of goods to customers. As a result, these headwinds and the COVID overlap affected margins and profitability within the quarter," Schiller said. Nevertheless, EBITDA increased 16% from Q4 in fiscal 2019, before the pandemic started, and margin grew more than 300 basis points since then.
For the fourth quarter, which ended June 30, Hain Celestial reported:
- Net sales decreased 12% to $450.7 million, or 17% on a constant currency basis, compared with Q4 of fiscal 2020. Adjusted net sales decreased 8% compared with a year ago.
- Gross margin was 25%, 41 basis points lower than the same period in fiscal 2020. Adjusted gross margin was 25.7%, a 49 basis point increase from a year ago.
- Net income of $40.5 million, compared with $3.7 million in Q4 of fiscal 2020. Adjusted net income of $39.7 million, compared with $32.3 million a year ago.
- Adjusted EBITDA of $68.1 million compared with $62.2 million for the same period in fiscal 2020.
- Adjusted EBITDA margin of 15.1%, a 296 basis point increase compared with Q4 of fiscal 2020.
- Earnings per diluted share of $0.40, compared with $0.04 in the fourth quarter of fiscal 2020.
Also, the company repurchased 700,000 shares of outstanding common stock at an average price of $40.41 per share.
"We've delivered another quarter of strong results with significant continued momentum compared to the pre-pandemic period. This performance reflects the overall strength of our portfolio, that our strategies are working as intended, and that we are executing well," Schiller said.
Expectations for fiscal 2022
"We remain very bullish on our future and our (fiscal 2022) plan for many reasons," Schiller said. The company already has adjusted its prices for inflation and has seen little change in the volume of sales as a result.
Schiller is optimistic, as well, that the sourcing, manufacturing and distribution headwinds will subside in the next few months, he said. Last week, the company had one of the best shipping weeks it has experienced in several years, he added as an example.
Also, sales of the company's Get Bigger brands—including Sensible Portions, Terra, Alba, Celestial Seasonings and The Greek Gods— showed strong increases in household penetration, buying rate and velocity compared with pre-pandemic trends, he said.
Those brands are also gaining distribution points, with a 7% increase compared with Q4 of fiscal 2020 and 10% compared with Q4 of fiscal 2019.
Schiller also reported that consumption in the United States outpaced the company's deliveries, meaning retailers likely have lower-than-normal inventory and need to replenish.
"Despite the challenged macro-environment, the North America business had significant underlying momentum and health as we exited the year," Schiller said.
The company expects sales to grow in the low single digits in fiscal 2022 and adjusted EBITDA to grow in the mid to high single digits. Adjusted gross margin is expected to expand as well.
How fiscal 2021 turned out
- Net sales decreased 4% to $1.97 billion, or 7% on a constant currency basis, compared with fiscal 2020. Adjusted net sales decreased 1% compared with a year earlier.
- Gross margin was 25%, a 227 basis point increase compared with fiscal 2020. Adjusted gross margin was 25.6%, a 249 basis point increase.
- Net income was $66.1 million, compared with $25.6 million in fiscal 2020. Adjusted net income was $146.5 million, compared with $87.1 million a year earlier.
- Adjusted EBITDA of $258.9 million compared with $200 million in fiscal 2020.
- Adjusted EBITDA margin of 13.1%, an increase of 340 basis points from a year earlier.
Hain Celestial has scheduled Investor Day for Sept. 28.