Hain Celestial has predicted the first half of its next financial year will continue to be affected by moves to streamline its product range and by supply challenges in its infant formula business.
Chief financial officer Lee Boyce told analysts yesterday (27 August) the Earth’s Best brand owner is expecting “to pivot to growth in fiscal 2025” but the first two quarters are likely to flag compared to the back half.
He said the company expects the opening quarter to see “negative organic net sales growth at a similar rate of decline year-over-year as in the fourth quarter of fiscal 2024”.
In the fourth quarter, three months that ran to the end of June, Hain Celestial saw its net sales fall 2% on an organic basis.
Meanwhile, the second quarter is predicted to grow at a “flattish” rate, Boyce said, as the company continues its Hain Reimagined 2027 strategy.
“Factors contributing to the cadence of the year include promotional activity in snacks that have shifted into the fiscal third quarter from the fiscal first quarter, which will be a headwind in the first quarter, but not impact the full year.
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“As we mentioned on our last call, our portfolio simplification initiatives will have a year-on-year impact predominantly in the first half. And as [CEO] Wendy [Davidson] mentioned, our infant formula supply will be recovering over the first half of the year with full supply supporting our Earth’s Best business growth in the back half,” he said.
For its fiscal 2025, Hain Celestial is expecting net sales growth to be “flat or better”. Adjusted EBITDA is forecast to grow mid-single-digits while gross margin is estimated to increase by “at least 125 basis points”.
Meanwhile, in the twelve months to 30 June 2024, net sales fell 3% year-on-year to $1.74bn, while the fourth quarter alone was down 6% at $419m.
Davidson described Hain Celestial’s infant formula division as a “pain point” since she joined in 2023.
She however said during yesterday’s earnings call: “I feel very good about where we are in supply. We do, across our formula, we have multiple supply options and toddler formula and we’ve got some location redundancy in our infant formula.
“We’re actually holding a little bit more inventory of our core SKUs in infant formula as they become available so that we give ourselves a little bit of cushion as we go forward as well.”
The company’s baby food division saw full-year organic net sales decline 11% on the previous year, which was “driven primarily by infant formula supply”, it said.
The infant formula division suffered particularly in North America, where the company generally returned worse numbers than its International division.
For fiscal 2024, group organic net sales in North America decreased 6% compared to the prior year to $1.06bn, while adjusted EBITDA was $99m compared to $123m.
The business blamed both its infant formula and personal-care units for the struggles, as the company continues to trim the latter division.
Davidson outlined plans earlier this year to further streamline the portfolio “as part of ongoing brand maintenance”.
Baby food, meal prep, snacks and beverages were included in that newest endeavour, which the CEO said last week was aimed at creating a “winning portfolio of brands” amid plans to “materially simplify our footprint”.
Meanwhile, Hain Celestial’s International business saw its net sales fall 4.2% in the fourth quarter, compared to a US decline of 7.8%.
Alexia Howard, analyst at AllianceBernstein, said: “This suggests the private label oat milk business in Europe has recovered nicely, although as we enter FY25 we expect EBITDA growth to be driven by North America as the business improves sequentially throughout the year.”
Hain Celestial saw its total net loss for the year improve from $117m to $75m this year, while adjusted EBITDA fell from $167m to $155m.
Adjusted earnings per share fell to $0.33 compared to $0.50 last year.
Mizuho Securities analyst John Baumgartner said: “We surmise that, following a very challenging FY24, initial FY25 guidance should be very achievable, but execution will be paramount to rebuild investor confidence in sustainable growth and establish Hain as a beat and raise story.”
