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Sales up, but costs keep Hain's income down

01-Sep-2004

Natural foods group Hain Celestial Group has reported a mixed bag of results for fiscal 2004, announcing a healthy 17 percent increase in sales over the year, though net income was down on 2003.

The group reported a net income of $27.0 million, or $0.74 per share, for the full year - a slight dip compared to the $27.5 million, or $0.79 per share, reported in the previous year. However, Hain's sales faired better, growing to $544.1 million, a 17 percent increase over prior year sales of $466.5 million.

This pattern was replicated in the fourth quarter with an identical 17 percent increase in sales over the same period in 2003. But again the group saw a slight decrease of $1.7 million in net income, coming in at $5.1 million, or $0.14 per share, in the last few months of the year.

"We are pleased to see a 17 percent increase in net sales for the full year, a significant increase in a challenging year," said Irwin Simon, the president and CEO of Hain. "We saw growth across our business units with standout results from Snacks, Canada and Europe, continued growth from Earth's Best, and renewed growth from our Westsoy non-dairy brand.

Ira Lamel, executive vice president and chief financial officer at Hain, told NutraIngredientsUSA that high commodity costs, especially increased transport costs, and last year's strike by grocery workers on the West Coast, had provided the most difficult hurdles for the company.

More positively, over the last twelve months, the company believes that its relatively new CarbFit brands have become more familiar to consumers, making them "a balanced complement to our existing portfolio of healthy and natural foods." And, Simon expressed his satisfaction at the way recent acquisitions, such as Ethnic Gourmet, Rosetto frozen food and the body care business Jason Natural Products had been brought into the group's fold.

"CarbFit will be a $12 million to $15 million rather than a $100 million brand for us, but we have a particular place in this market as we are the only low-carb totally natural product on the shelf of a health food store," said Lamel.

Looking ahead, the company plans to benefit from the price increases it introduced in July, which average about 4 percent across the states. Lamel said that customers seem to understand why this was necessary and that the company would consider carrying out a similar increase elsewhere in the world if it were deemed necessary for the business.

Based on this and new ventures such as the recently signed contract with McDonald's - the fast food chain will begin a 50-store test of the McVeggie Burger, made exclusively for them by Yves Veggie Cuisine, in Manhattan in September, after its success in other regions - Simon is upbeat for the coming year.

"As we look forward to fiscal 2005, we are providing earnings guidance for the full year of $0.92-$1.01 per share on revenues of $650 to $670 million," he said.

Lamel added that the McDonald's contract is important for the company as very few non-McDonald's branded products are allowed to be sold under the golden arches, giving Yves Veggie a high profile placement.

Hain acquired Jason Natural Products in June as part of its long term plans to acquire an overall body care business worth circa $100m.

"Natural and organic body care fits perfectly with our natural and organic foods," said Lamel at the time. "The consumer is becoming more and more aware of what we eat and what we put in our bodies."

This acquisition followed hot on the heels of Hain's purchase of the Ethnic Gourmet brand of frozen meals and the Rosetto brand of frozen Italian products from Heinz in May.

The Heinz sale added to Hain's other frozen food brands, such as Rice Dream and Soy Dream frozen desserts, Kineret frozen foods and frozen entrees offered under the Hain brand, creating a $45-50 million presence in the frozen food category, and a platform for further growth in this expanding category.

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