Hain Celestial(US:HAIN)2026-02-09 14:02Financial Data and Key Metrics Changes - The company reported an organic net sales decline of 7% year-over-year, driven by lower sales in both North America and international segments [15] - Adjusted gross margin decreased to 19.5%, a drop of approximately 340 basis points year-over-year, primarily due to cost inflation and lower volume mix [15][16] - Adjusted EBITDA was $24 million, down from $38 million a year ago, reflecting lower gross margins [17][18] Business Line Data and Key Metrics Changes - In North America, organic net sales declined 10% year-over-year, primarily due to lower volume in snacks and baby formula, with adjusted gross margin at 20.8%, a decrease of 440 basis points [18][19] - The international segment saw a 3% decline in organic net sales, with adjusted gross margin at 18.1%, a 200 basis point decrease [19][20] - Snacks organic net sales were down 20% year-over-year, while the baby and kids segment saw a 14% decline [20] Market Data and Key Metrics Changes - North American snacks represented 22% of the company's net sales in fiscal 2025 and 38% of the North America segment's net sales, with negligible EBITDA contribution over the last 12 months [8][12] - The core categories in North America, including tea, yogurt, and baby foods, showed stability and growth potential despite challenges in other areas [12][18] Company Strategy and Development Direction - The company is executing a strategic review aimed at simplifying its portfolio, enhancing financial flexibility, and maximizing shareholder value [5][9] - A definitive agreement was reached to sell the North American snacks business for $115 million, with proceeds intended to reduce debt and strengthen the financial position [6][7] - The focus will shift to three flagship categories: tea, yogurt, and baby and kids, while continuing to develop the meal prep platform [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround strategy, highlighting improvements in operational execution and cash flow [12][14] - The company anticipates stronger top and bottom-line performance in the second half of the year, driven by ongoing initiatives and innovation [27][29] - Management acknowledged near-term pressures but emphasized the importance of strategic actions to drive sustainable growth [12][14] Other Important Information - Free cash flow in the second quarter was $30 million, an increase of 22% compared to the previous year [22] - The company has reduced net debt by $32 million, bringing total net debt to $637 million [23][24] - The strategic review includes plans for further asset sales and operational improvements to enhance financial flexibility [25] Q&A Session Summary Question: Details on the decision to divest the snacks portfolio - Management explained that the decision was part of a strategy to simplify the portfolio and focus on categories where the company has strengths, noting that snacks had become financially challenged [34][35] Question: Reallocation of innovations post-divestiture - Management confirmed plans to mitigate stranded costs of $20 million-$25 million and emphasized that freed resources would support innovation in remaining categories [41][42] Question: Cash generation from the snacks business - Management indicated that the snacks business was not a significant cash generator, and the divestiture would improve overall cash generation capabilities [45] Question: Future growth in the baby and kids business - Management expressed confidence in returning to growth in the baby and kids segment, particularly after cycling past challenges and launching new products [84][85]