Hain Celestial(HAIN) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a consolidated net sales decrease of 10% year-over-year to $477 million, with adjusted net sales down 2% compared to the prior year [39] - Adjusted EBITDA decreased 5% year-over-year to$ 59.3 million, while adjusted EBITDA margin increased by 66 basis points to 12.4% [43] - Adjusted EPS increased to $0.36 from$ 0.34 in the prior year period, benefiting from a lower adjusted tax rate of 19% compared to 24% [43] Business Line Data and Key Metrics Changes - North American net sales decreased about 3% year-over-year to $275 million, but adjusted for foreign exchange and divestitures, net sales increased about 1% [44] - The snacks category delivered close to 20% net sales growth versus the prior year, while tea and yogurt products grew close to 10% compared to two years ago [46] - International net sales decreased 18% on a reported basis, but adjusted net sales growth increased around 9% compared to two years ago, driven by growth brands [49][50] Market Data and Key Metrics Changes - In the U.S., consumption for all brands in measured channels was up over 10% compared to last year and 16% versus two years ago [14] - Internationally, adjusted net sales were impacted by Brexit-related stocking and increased regulations on baby food imports in China, but overall growth was seen in specific categories like baby and soup [17][18] Company Strategy and Development Direction - The company is focused on its Hain 3.0 strategy, emphasizing distribution expansion and innovation as key drivers for top-line acceleration [29] - Recent acquisition of ParmCrisps is expected to enhance the snacks business and provide significant distribution expansion opportunities [31][93] - The company plans to invest in marketing to drive awareness and household penetration across growth brands, with a focus on long-term growth despite short-term cost pressures [29][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain and labor challenges but expressed confidence in achieving significant EBITDA growth in the second half of the year due to productivity improvements and pricing actions [68][69] - The company expects low single-digit net sales growth for the year, with mid- to high single-digit growth anticipated in the second half, driven by North America [25][56] - Management noted that while inflationary pressures are expected to continue, they anticipate a normalization of costs as supply chain issues abate [108] Other Important Information - The company repurchased 2 million shares for approximately$ 90 million and announced an additional $200 million share repurchase authorization [55] - Operating cash flow for Q2 was$ 30 million, with capital spending at $10.2 million, reflecting lower spending due to supply chain challenges [52][53] Q&A Session Summary Question: Guidance for EBITDA growth and assumptions - Management indicated confidence in productivity and volume acceleration driving EBITDA growth, with visibility on cost of goods for the second half [68][69] Question: Inventory status and assumptions for the back half - Management reported strong inventories but acknowledged some supply disruptions, expecting improvements in the second half [70][71] Question: EU energy costs and implications - Management clarified that energy costs are locked in and significantly inflationary, impacting EBITDA guidance [77][78] Question: Pricing discussions with customers - In the U.S., pricing discussions are generally positive due to recognition of inflation, while international pricing discussions are more challenging due to contracts [79][80] Question: Outlook for net sales and supply chain risks - Management expressed high confidence in North American sales momentum, while international sales are expected to normalize as the market stabilizes [87][88] Question: ParmCrisps acquisition and future plans - The acquisition is expected to contribute nominally in the second half, with significant growth potential and distribution opportunities identified [91][93] Question: Expectations for inflation and supply chain costs - Management noted ongoing pricing opportunities and efforts to mitigate supply chain challenges, with expectations for costs to normalize in the fourth quarter [104][108]