Did Hain Celestial Group’s Earnings Rise in Fiscal 3Q16?

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Hain Celestial’s US segment

Hain Celestial Group (HAIN) operates through four segments: the United States, the United Kingdom, HPPC (Hain Pure Protein), and Rest of World, comprised of Canada and Continental Europe.

Hain Celestial’s US segment reported improved results compared to fiscal 3Q15. It recorded 3Q16 net sales of $352 million, an increase of 2% compared to 3Q15. Operating earnings for this segment dropped by 2.5% to $54 million in comparison to $56 million in fiscal 3Q15. The adjusted operating margin for the segment was 16.3%, down by 90 basis points compared to 3Q15. Celestial Seasonings’ lower sales due to unstable mix caused the decline in margin.

This segment saw growth across a variety of brands in its portfolio. This segment’s growth was impacted by soft Celestial Seasonings consumption trends.

However, consumption for the company’s top 12 brands was up 3.4%. The brands that saw growth are The Greek Gods, Jason, Alba Botanica, MaraNatha, First Best Frozen, Terra, Garden of Eatin’, Sensible Portions, Imagine Soup, Westbrae, and Sunspire.

Other segments

In the UK segment, net sales came in at $208 million, an increase of 17% compared to 3Q15. The acquisition of Orchard House, which achieved double-digit growth, contributed to net sales, which rose by 22% in constant currency terms. The company saw growth from its spreads business, and Tilda also achieved strong sales and margins. HPPC reported net sales of $114 million. Plainville Farms grew 30%, and FreeBird was up 11%. The Empire acquisition contributed to the high-single-digit organic growth.

The Rest of World segment reported net sales of $76 million. Hain Celestial’s Europe sales improved because of double-digit brand growth from Danival, Dream, Celestial Seasonings, Joya, and Natumi, a strong non-dairy business, as well as high-single-digit growth from the Lima brand. This segment’s gross margin also rose by 200 basis points.

Both these segments showed impressive sales growth of 37% and 31%, respectively. Management mentioned that the company gained from acquisitions last quarter in all its segments, and with a strong balance sheet, it will continue with the strategy of accretive acquisitions.

The company’s competitors in the industry include Snyder’s-Lance (LNCE), McCormick & Company (MKC), and Flowers Foods (FLO). They reported operating margins of 7.2%, 12.5%, and 6.0%, respectively, in their last quarters. The AdvisorShares TrimTabs Float Shrink ETF (TTFS) invests 0.84% of its portfolio in LNCE.