Hain Celestial(HAIN) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net sales increased by 1.4% year-over-year to $457 million, with foreign exchange reducing reported net sales by approximately 440 basis points [33] - Adjusted gross margin was 19.4% in Q4, approximately 630 basis points lower than the prior year period [35] - Adjusted EBITDA in Q4 was$ 35.4 million, down from $68.1 million in the prior year [37] Business Line Data and Key Metrics Changes - North American sales grew by 17% overall compared to the same period in 2021, with adjusted net sales increasing about 6% [12][38] - Growth brands in North America delivered adjusted net sales growth of more than 8% in Q4, with significant momentum in the second half of the year [39] - International sales were down 19% in Q4, driven by softness in the plant-based non-dairy beverage category and lost co-manufacturing contracts [42][44] Market Data and Key Metrics Changes - In the UK, adjusted net sales declined by 0.9%, but this was a 60 basis point sequential improvement versus Q3 [42] - The plant-based beverage category in Europe saw a significant deceleration in growth, impacting sales expectations [44] - Inflation in North America is expected to be mid-teens, driven by high prices for vegetables and oils, particularly due to the Ukraine conflict [86] Company Strategy and Development Direction - The company is transitioning from Hain 2.0, focused on cost-cutting, to Hain 3.0, which emphasizes higher growth through distribution and innovation [27][62] - The company plans to continue simplifying its portfolio while building capabilities and reducing costs, aiming for consistent stable growth [28] - Pricing actions have been taken to offset inflation, with 90% of planned increases already communicated and accepted by retail partners [80][53] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a difficult business environment due to COVID challenges, high inflation, and supply chain disruptions [8] - There is cautious optimism regarding the macro environment, with early signs of improvement in inflation and consumer behavior [31] - The company expects low single-digit top-line growth in fiscal '23, with more significant growth anticipated in the second half of the year [26][57] Other Important Information - Operating cash flow was negative$ 19 million in Q4, with a full-year operating cash flow of $80 million [47] - The company repurchased 0.5 million shares at an average price of$ 26.13 per share, totaling approximately $13 million [50] - The leverage ratio was 3.9x as of June 30, 2022, near the top end of the stated range [60] Q&A Session Summary Question: Why was the guidance range widened for fiscal '23? - Management indicated that the widening of the range reflects the volatile environment in Europe and the challenges in forecasting [71] Question: What is the outlook for plant-based products in Europe? - Management noted that the plant-based beverage category has seen a decline, but they remain confident in the long-term trajectory of the category [73] Question: What is the company's approach to pricing in fiscal '23? - Management clarified that they are covering visible inflation with pricing and are prepared to take further pricing actions if necessary [80] Question: How is the company addressing supply chain issues? - Management stated that most supply chain disruptions are expected to be resolved by the end of Q1, with a focus on improving productivity [93] Question: What are the expectations for marketing spend in fiscal '23? - Management indicated that marketing investments will be modest due to inflation pressures, but they remain committed to supporting brand growth [89] Question: What is the company's strategy regarding plant-based capacity expansion? - Management confirmed that they are not expanding capacity in plant-based products at this time, pending a clearer outlook for the category [92]