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Hain Celestial profits fall despite strong sales

By Sarah Hills , 27-Aug-2008

Hain Celestial has seen a drop in annual profits but it remains confident of consumer demand in the natural and organic market as sales crossed the $1bn mark for the first time.

Financial results for the natural and organic food and personal care company showed that its net income fell to $41.2m for the fiscal year 2008, from $47.5m in 2007.

However, net sales increased by 17 percent, year-on-year, to $1.06bn in 2008 from $900.4m in 2007. This was despite what it described as a “challenging economy and commodity and other inflationary pressure”.

Irwin D Simon, president and chief executive officer of Hain Celestial, said: “With consumers staying at home more and the continuing expansion of our presence in grocery, mass-market and specialty retailers, along with strong performance in the natural channel, we are seeing indications that consumers have prioritized leading a healthy lifestyle, despite the challenging economy and inflationary pressures.

“Additionally, consumers are seeking more natural and organic foods and poultry to replace more costly meat products.”

In the fourth quarter up to June 30, 2008, net income was almost halved to $6.5m from $12.1m in the same quarter in 2007. Net sales for the quarter grew 25 percent to $278.3m, from $222.3m in 2007.

Simon added that the results were driven by the successful introduction of new products, continued contribution from existing brands, and a sharp focus on improving “productivity, expense efficiency and pricing”.

He highlighted strong results in the US from brands including Arrowhead Mills, which offers a line of all-natural, organic, whole grain and gluten free foods, Spectrum, which offers natural and organic culinary oils, vinegars, condiments and butter substitutes and essential fatty acid nutritional supplements, and the dairy free beverages Rice Dream and Soy Dream.

More modest contributions were seen from Celestial Seasonings, which produces natural and specialty teas, where Simon said the company’s new leadership team is beginning to make progress.

Hain Celestial recently announced a price increase in the US which is expected to impact on results beginning from the second quarter of 2009.

Market growth

Christopher Shanahan, research analyst, chemicals, materials and food, for Frost & Sullivan, told FoodNavigator-USA.com that the company performed better than was expected compared to similar businesses currently.

He said: “The general trend among US food manufacturers is either no growth or good growth in revenue but falling net income because of costs.

“The companies that are most able to weather the storm are companies with diversified and specialized products.”

Shanahan said this was the case with Hain Celestial, and now its biggest challenge is to grow their target market. He added that maintaining the current market may also become a challenge, if there are further price increases.

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