S.k.u. rationalization reduces Hain's net income

by Keith Nunes
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MELVILLE, N.Y. — A stock-keeping unit (s.k.u.) rationalization program also rationalized the Hain Celestial Group’s fiscal 2005 net income. Net income for fiscal 2005 was $21,870,000, equal to 60c per share on the common stock, compared with $27,008,000, or 77c per share, for fiscal 2004. Excluding the s.k.u. rationalization program charges, the company’s fiscal 2005 net income was $33,116,000, or 91c per share. Net sales for the year totaled $619,967,000 compared with $544,058,000 for fiscal 2004.

For the three months ended June 30, the company sustained a loss of $2,688,000, which compared with a net income gain of 5,080,000 for the fourth quarter of fiscal 2004. Net sales for the quarter were $151,349,000, an increase of 13,998,000 over net sales of 137,351,000 for the same period during fiscal 2004.

"In fiscal 2005 we were able to continue to grow our business by leveraging our strengths to meet growing consumer demand for natural and organic products," said Irwin D. Simon, president and chief executive officer. "Strong execution of our business strategy and sales and marketing programs increased sales by 14% and increased our net income per share, excluding charges, by 20% for the year. We are particularly proud to have accomplished this in an operating environment of warehouse consolidations and inventory reductions by our primary distributors, coupled with rising input costs for the natural and organic ingredients used in our products and soaring fuel and transportation costs."

Under the s.k.u. rationalization program, Hain Celestial expects to eliminate 500 s.k.u.s with sales of $15 million over the next 12 to 18 months. The elimination of the s.k.u.s. will realize future cost savings of approximately $2 million annually while providing gross margin by 0.50%, according to the company.

Hain Celestial executives said the company’s fiscal year 2006 guidance would be $650 million to $665 million in sales and earnings of 95c to $1.05.

"As we enter fiscal year 2006, in addition to the benefit of the recent acquisition of Zia Natural Skincare to our personal care products portfolio, we have already put in place several initiatives, including a license agreement for our Rice Dream and Soy Dream refrigerated non-dairy beverages with Stremicks Heritage Foods to broaden and increase our distribution; a joint venture in the refrigerated poultry category with antibiotic- and hormone-free Raised Right chicken; an alliance with Yeo Hiap Seng Ltd. to pursue joint interests in food marketing and product development; and the pending acquisition of Spectrum Organic Products, Inc., a leader in the healthy oils category," Mr. Simon said.

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