Hain Celestial has slashed its organic growth target just days after the US food company revealed further portfolio simplification measures.
Issues with baby formula and snacks, along with the personal care part of the business, have prompted Hain Celestial to predict negative organic growth of 3-4% for the 2024 fiscal year as that metric fell 3.7% in the third quarter.
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As recently as February, organic growth was envisaged by the tea and alt-dairy drinks maker at 1% “or more”, which in itself represented a cut from the positive 2-4% previous outlook.
Finance chief Lee Boyce said today (8 May) the third-quarter results “were below our expectations” as Hain Celestial also trimmed its adjusted EBITDA range to $150-155m, from the $155-160m in February. That also marked a cut from the prior estimate of $155-165m.
“Our infant-formula business did not recover as expected as our supplier did not meet their commitment, execution in our snacks business did not meet our standards, and stabilisation of our personal-care business is taking longer than expected,” Boyce explained as the factors behind the less upbeat outlook.
The performance in the North America business area was also cited as problematic as both reported and organic growth fell 6.5% to $268.1m.
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By GlobalDataThat was steeper than the 4.8% second-quarter decline in the region’s organic growth but an improvement from the 9.3% decrease in the opening three months.
Lower North America sales in baby foods and personal care were blamed.
Boyce added: “While we are pleased with the progress we are making to strengthen the focus of our business and unlock fuel to build our capabilities, we are not satisfied with the speed of the return to growth in our North America business.
“We are aggressively addressing personal-care stabilisation through portfolio and operating footprint consolidation, we are working closely with our formula supplier to ensure a full recovery beginning in the second half of 2024, and we have realigned the commercial business in North America with a series of leadership changes and a clear plan to accelerate our execution in the region.”
Speaking to Just Food in April last year, then newly-appointed president and CEO Wendy Davidson had ruled out any disposal of the personal-care business, which was revealed among the five core product areas as part of her Hain Reimagined 2027 strategy. The others are baby food, snacks, meal-prep, including meat-free, and beverages.
However, Davidson outlined plans last week to further streamline the portfolio “as part of ongoing brand maintenance”.
Baby food, meal prep, snacks and beverages are 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”.
The comments surfaced despite the disposal in April of the Thinsters cookies brand – part of the snacks portfolio – to J&J Snack Foods.
In today’s third-quarter announcement, Davidson said: “Eighty per cent of our business delivered 3% growth year-to-date, and we are aggressively working to accelerate growth in the balance of our portfolio, addressing headwinds in baby formula with our supplier, and reshaping our personal-care business.”
Hain Celestial’s results elsewhere were more positive, with adjusted EBITDA up 17.5% in the third quarter at $43.8m. Net losses also improved, to $48.2m from a $115.7m loss a year earlier.
The gross margin increased 60 basis points to 22.1% and was 90 points higher on an adjusted basis at 22.3%.
A loss in diluted earnings per share narrowed to $0.54, from $1.29.
“We are still in the foundational year of our multi-year transformation and with the team in place, we remain confident in our ability to reach the full potential of our Hain Reimagined strategy,” Davison said today.
