LAKE SUCCESS, N.Y. — The Hain Celestial Group, Inc. is making progress in its plan to become a smaller, more profitable business, said Mark L. Schiller, president and chief executive officer.
“The impact of these efforts are just beginning to show up in our results and will be more evident as the negative sales impact of (stock-keeping unit) rationalization and spending reductions abate in the second half this year,” Mr. Schiller said during a Feb. 6 conference call with analysts.
For the second quarter ended Dec. 21, 2019, Hain Celestial posted a loss of $964,000, which compared with a loss of $66,501,000 in the prior-year period. Adjusted EBITDA, which excludes productivity and transformation costs, stock-keeping unit rationalization, loss on sale of business and costs related to plant closures and warehouse/manufacturing facility start-up costs, was $45,047,000, up from $37,888,000.
Net sales for the quarter totaled $506,784,000, down 5% from $533,566,000 the year before.
Net loss for the six months ended Dec. 31, 2019, was $107,985,000, which compared with a loss of $103,926,000 in the comparable period. Net sales declined to $988,860,000 from $1,052,044,000.
“On simplifying the portfolio, over the last year, Hain has divested nonstrategic brands with almost $750 million in sales,” Mr. Schiller said. “In all, we’ve divested seven businesses, and we expect there will be additional noncore brands sold in the future. In addition, as previously stated, we’re also likely to shut down other brands if there isn’t a clear path to stable profitability or a logical buyer.
“On simplifying our operations, we’ve consolidated manufacturing sites, office locations and shipping locations around the world. We’ve integrated five sales forces in the United States to one. We’ve eliminated over 30 brokers in the United States and more than 30 co-manufacturers.
“On strengthening capabilities, we’ve hired a new senior leadership team in North America as well as brought on several new directors who bring significant industry experience and expertise to our board. We’ve improved forecasting, resulting in almost 5-percentage-point improvement in service and an almost 50% reduction in customer fines and penalties in the U.S. We’ve enhanced the organizational training in areas like project management, customer planning and innovation processes.
“On expanding margins and cash flows, we’ve eliminated almost $50 million of low R.O.I. (return on investment) spending in North America; discontinued approximately 500 s.k.u.s worldwide that had low-to-negative gross margins; reduced inventory by over $80 million since its peak in August of 2018; reduced our cash conversion cycle more than 14 days; eliminated $380 million of debt, resulting in leverage of roughly 3x EBITDA.
“On reinvigorating top line, we filled the innovation pipeline with ideas that solve consumer problems and will expand their categories.”
A new item launching soon is a Screamin’ Hot variety of Sensible Portions Veggie Straws, which are airy, crunchy snacks made with potatoes and vegetables.
“If you look at the salty snack category, very significant percentage of volume done in hot s.k.u.s or the flaming hot kind of s.k.u.s that some of our competitors have in the more mainstream offerings,” Mr. Schiller said. “Nobody has done it in the healthier offerings.”