Hain Celestial Bottom-Line Outdoes - Analyst Blog

The Hain Celestial Group Inc. (HAIN), which distributes, markets and sells various natural and organic foods as well as personal care products, recently posted fourth-quarter 2010 results.
 
The quarterly earnings of 26 cents a share outdid the Zacks Consensus Estimate of 24 cents, and surged 23.8% from 21 cents delivered in the prior-year quarter. On a reported basis, including one-time items, earnings came in at 16 cents a share compared with 3 cents earned in the year-ago quarter.
 
Quarterly Performance
 
Revenues for the quarter marginally dropped by 0.2% to $222.8 million from $223.3 million delivered in the prior-year quarter. Management hinted that despite a challenging economy the company was able to post healthy sales aided by North American and Continental European operations.
 
The prior-year quarter revenues exclude $35.5 million of sales related to Hain Pure Protein (HPP). Including HPP sales, revenues for the quarter tumbled 13.9% year over year. Effective June 30, 2009, Hain has not been incorporating HPP’s results due to the reduction in its ownership interest to 48.7% from 50.1%.
 
Management also indicated that sales climbed 4.6% during the quarter and exclude HPP sales and food-to-go sales to Marks and Spencer of $10.2 million.
 
Cost of sales dropped 22.1% to $164.8 million. Consequently, gross profit rose 22.9% to $58 million, whereas gross profit margin for the quarter expanded 780 basis points to 26%. On an adjusted basis, gross profit margin contracted 70 basis points to 26.2%.
 
Key Acquisitions
 
Acquisitions have been a key part of Hain Celestial’s strategy to build market share. Acquisitions have not only enhanced its geographical presence, but have also provided opportunities to cross-sell products in the U.S., Canadian, and European markets.
 
Hain Celestial completed the acquisition of World Gourmet Marketing, including its Sensible Portions brand of Garden Veggie Straws, Pita Bites and other snack products. The company also acquired Churchill Food Products Limited that manufactures and distributes food-to-go products in the United Kingdom. Following the end of the quarter, the company purchased The Greek Gods brand.
 
Financial Aspects
 
Hain Celestial generated free cash flows of $28.4 million during the quarter and $59.6 million during fiscal 2010. The company’s balance sheet remains healthy, with debt being 29.4% of shareholders’ equity of $765.7 million. The company also lowered its borrowings under its credit facility by $33.4 million during the year. The company ended the quarter with cash and cash equivalents of $17.3 million and long-term debt of $225 million. Capital expenditures for the quarter and fiscal year were $4 million and $11.4 million, respectively.

Guidance
 
Hain Celestial expects fiscal year 2011 earnings in the range of $1.24 to $1.31 per share and revenues between $1,025 million and $1,050 million.