Hain Celestial (NASDAQ: HAIN) - a green company, because it produces environmentally friendly products, bioadditives, sports nutrition and other goods, designed for a healthy lifestyle. It is one of the largest manufacturers of products for healthy eating in the world.
About company
In Russia, the company's shares are traded on the St. Petersburg Stock Exchange under the ticker HAIN and are classified as foreign securities from the unquoted part of the list. The initial procedure for listing the company's shares passed on the American trading floor NASDAQ, currency - dollar.
history of the company. The company was founded in 1926 in Stockton., California, called Hain Pure Food by Harold Hain, who was interested in the production of carrot juice.
Since its foundation, the company has gone far beyond the production of only this product and almost immediately proceeded to expand the range of natural, environmentally friendly food products with minimal heat and other processing, completely free from preservatives, flavor enhancers and other artificial ingredients.
Since 1955, the company has been producing environmentally friendly vegetable cooking oils.. By 1983, the company's product range was already more than 300 food products exclusively on a natural basis., free of artificial ingredients. By that time, the company's products were already sold throughout the United States., and also in Austria, Uk, Germany and Japan. Hain Pure Food represented then a small, but a promising company in terms of financial results.
Since the mid-90s, the group has been actively expanding, by acquiring other companies of a similar profile. In 1997 entered into an agreement with Weight Watchers Gourmet Food, subsidiary H. J. Heinz, on the joint production and sale of soups, snacks and other food. This deal was beneficial for both parties.: Weight Watchers regained profit volumes, observed prior to takeover by Heinz Corporation, and Hain Pure Food became the leading manufacturer and distributor of dietary foods. Added to the Weight Watchers line 30 new products.
But, despite the active expansion of the number of "daughters", in the 2000s and 10s, the company had a disparate collection of brands, she saved on staff, which even led to, that her NASDAQ stock threatened to be delisted. But the priority was no longer given so much to the acquisition of companies, how much innovation, and Hain began to gradually emerge from the crisis.
In 2018, Mark Schiller took over as President and CEO of Hain., decided to restructure the work of the company radically. At that time, the company still - due to past achievements - managed to maintain its place as the leader of the American market for organic products for a healthy lifestyle., but in the tenths, competition from General Mills and Nestlé steadily increased, who saw such products as a risk hedging tool.
The era of startups and crowdfunding has also made its own adjustments: a significant number of healthy lifestyle startups have also emerged as a competitive threat to Hain. In addition, in 2018 the regulator found, that since 2014 the company had incorrectly accounted for income and they needed to be revised. Hain shares began to fall.
Total for the last 25 years the group bought 55 companies. Brands refer to 37 categories, over the past three years they have been streamlined. At the time of Schiller's arrival to leadership from 60 more than a third of the company's brands were unprofitable, 10 brands accounted for about two-thirds of sales.
In recent years, top management has abandoned non-core activities, which somewhat reduced the percentage of unprofitable brands. In 2019 the group sold 20 brands, unprofitable or with doubtful profitability. The biggest ones were Tilda Rice, Arrowhead Mills, Hain Pure Protein. The number of product items was reduced from 2500 to 1500. Was eliminated 40 distribution centers.
As a result of repeated expansion of the product range, the average number of products in the group, placed on the shelves in every store, increased by almost 10%. We did not focus on online sales, and for sales in convenience stores, fixed price stores and pharmacies, as a result, by 2021, even despite the coronavirus, 60% Hain products were sold through these channels.
Composition of the group of companies. The Hain Celestial Group includes 50 companies. Most of the group's subsidiaries are located in the US state of Delaware, where is it registered. The second place is equally occupied by the state of California and Belgium..
Geographic distribution of subsidiaries
| Number of enterprises | Region share | |
|---|---|---|
| USA, Delaware | 20 | 40% |
| USA, California | 7 | 14% |
| Belgium | 7 | 14% |
| United Kingdom | 4 | 8% |
| Netherlands | 3 | 6% |
| USA, New York | 3 | 6% |
| USA, Nevada | 1 | 2% |
| France | 1 | 2% |
| USA, Texas | 1 | 2% |
| Canada, Nova Scotia | 1 | 2% |
| Germany | 1 | 2% |
| USA, Colorado | 1 | 2% |
| Total | 50 | 100% |
Means of production. Most of the group's manufacturing facilities are located outside of the United States, and in the UK. Probably, this can be associated with the results of the takeover of a large British company Orchard House, which, prior to the takeover, significantly influenced the local food market and the ability to promote the group’s interests there.
The remaining capacities are distributed dispersed throughout the USA, Canada, Germany. The largest share of production falls on plant-based products, followed by hygiene and care products, the production of which the new President and CEO Schiller did not abandon as part of the reduction of non-core brands, apparently aware of the stable demand for these products and the fact, that after the peak of the pandemic, the market will recover.
All businesses operate under the Hain Celestial brand, but the Fakenham facility with this name operates under license from Linda McCartney Foods.
Production facilities of Hain Celestial Group
| Locality | Country | Profile |
|---|---|---|
| Boulder | USA, Colorado | Tea |
| Mountville | USA, Pennsylvania | Snacks |
| Bell | USA, California | Hygiene and care products |
| Trenton | Canada, Ontario | Plant Based Products |
| Vancouver | Canada, British columbia | Plant Based Products |
| Mrs. | Canada, Ontario | Hygiene and care products |
| Histon | United Kingdom | Non-perishable products |
| Greensby | United Kingdom | Dry soups |
| Clitero | United Kingdom | Hot desserts |
| Fakenham | United Kingdom | Vegetarian frozen and freeze-dried food |
| Troisdorf | Germany | Plant Based Products |
| Schwerin | Germany | Plant Based Products, Drinks |
Mrs.
Greensby
Clitero
Fakenham
Schwerin
Shareholders. Most of the group's shares are distributed among institutional investors and mutual funds, the largest share is held by the Californian investment company Engaged Capital.
Key figures. Mark Schiller, group chief manager, took up position in November 2018. He previously held senior management positions at Pinnacle Foods., starting his career there as head of the product divisions of Birds Eye and Duncan Hines. Before that, he worked for the world famous company PepsiCo, leading its departments. Ironically, Schiller began his career at Quaker Oats., which in 1985, when he got a job there as a marketing specialist, was Hain's main competitor.
What he earns
Brands. The Group produces the following product brands, available in USA, — there are a number of other brands abroad, which do not have any uniqueness compared to American:
- Children food. Brand Earth’s Best Organic. A line of organic baby food based on natural products, in particular those grown without the use of pesticides.
- Drinks. Brand Celestial Seasonings - herbal, fruit teas.
- Cereal products. Brands: Hain Pure Foods — pain, sugar and the like, without the use of artificial flavors and colors, preservatives; Health Valley - Diet Bars.
- Soups. Brands: Health Valley Natural Dry Soups; Imagine - soups, broths, sauces from organic natural products.
- Oils. Brands: Hollywood - sunflower and peanut butter; Spectrum - cooking oils, vinegar, spices without artificial additives; MaraNatha - Farm Organic Nut & Seed Oils.
- Milk products. Greek Gods brand - yogurt with probiotics from cow's milk, grown without the use of hormones.
- Meat substitutes. Yves brand - protein-rich products - meat alternatives without artificial additives.
- Care products. Brands: Alba Botanica - hygiene products without animal ingredients, not tested on animals; LiveClean - personal care and baby care products made from plant materials; Queen Helene - environmentally friendly cosmetics; Avalon Organics - facial skin care products, body and hair; Jason - cosmetic products without harmful substances, not tested on animals.
- Snacks. Brands: Garden of Eatin’ – corn chips; Sensible Portions - vegetable chips; Terra - root vegetable chips.
In Russia, products are represented mainly by tea.
Product sales. In 2021, as in previous years, grocery dominated the sales structure. But its share is declining, while the share of snacks and tea increased, and the share of care products has remained stable for three financial years in a row.
The increase in the share of snack sales can be attributed to a variety of factors, including with the growth of purchasing power in the Asia-Pacific region, which is the world's largest consumer of snacks. The lifting of pandemic restrictions in many countries could provide further demand, since snacks are usually bought in stores, not delivery services.
The group of companies has quite an extensive line of snack brands, to meet rising demand. The tea line contains more than 100 items and is able to meet the growing demand for healthy drinks amid health concerns in the context of COVID-19. The listed facts are the strengths of the group, attractive for investors.
Sales structure by years
| 2019 | 2020 | 2021 | |
|---|---|---|---|
| Grocery | 72% | 69% | 67% |
| Snacks | 14% | 15% | 16% |
| Care products | 10% | 10% | 10% |
| Tea | 5% | 6% | 7% |
Financial indicators. IN 4 In the first quarter of 2021, all financial indicators of the group increased compared to the same period of the previous year.. Earnings per share increased the most, showing phenomenal growth.
But don't get too excited, since this is the result not only and not so much of profit growth, how much time spent in 4 quarter 2021 share repurchase in the amount of 0.7 million units.
Other indicators generally correspond to the pace of global economic recovery after the peak of the pandemic. Truth, a strong lag in growth of EBITDA and net profit from operating profit indicates an increase in production costs, because high supply chain costs persist due to pandemic restrictions.
Quarterly financials, million dollars
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| EPS | 0,04 $ | 0,40 $ | 900% |
| Operating profit | 25,30 | 41,60 | 64,43% |
| Adjusted net income | 32,30 | 39,70 | 22,91% |
| Adjusted EPS | 0,32 $ | 0,39 $ | 21,88% |
| Adjusted operating income | 47,90 | 53 | 10,65% |
| Adjusted EBITDA | 62,20 | 68,10 | 9,49% |
| Net profit | 37 | 40,50 | 9,46% |
If we compare the results of 2021 with the results of the previous, then net profit showed a very significant increase. This can be related to, that the peak of the pandemic is at the beginning of 2020 and in the countries of production of the group, and in export countries was accompanied by severe restrictions. All this led to an increase in the cost of production., as well as a decrease in sales due to the lockdown against the backdrop of the group’s focus on physical, not online sales.
In 2021, there were some relaxations compared to the worst period of spring and early summer 2020, which reduced the company's performance for the entire financial year as a whole.
Annual financial indicators, million dollars
| 2020 | 2021 | The change | |
|---|---|---|---|
| EPS | 0,25 $ | 0,65 $ | 160% |
| Net profit | 25,60 | 66,10 | 158,20% |
| Operating profit | 56 | 107,40 | 91,79% |
| Adjusted EPS | 0,84 $ | 1,45 $ | 72,62% |
| Adjusted net income | 87,10 | 146,50 | 68,20% |
| Adjusted operating income | 140 | 199,50 | 42,50% |
| Adjusted EBITDA | 200 | 258,90 | 29,45% |
2021 North American and International Financials, million dollars
| North America | The change | Outside North America | The change | |
|---|---|---|---|---|
| Net sales | 1104,1 | −6% | 866,2 | −2% |
| Gross profit | 291,4 | −1% | 200,2 | 16% |
| Adjusted Gross Profit | 300,6 | 0% | 204,7 | 17% |
| Operating profit | 129 | 34% | 38 | −31% |
| Adjusted operating income | 143,7 | 19% | 103,3 | 40% |
| Adjusted EBITDA | 162 | 15% | 133,9 | 27% |
At the end of 2021, the dynamics of financial results in North America and beyond compared to the previous year can be considered rather equivalent.
In Europe, anti-Covid measures are much weaker, than in the USA. For example, in Germany, where the group has its enterprises, planning to lift restrictions. In Canada, there is a new surge in the pandemic with the ensuing consequences.
For at least 1 half of the 2021 financial year in North America and Europe, the situation with coronavirus was quite similar, only recently it has changed not in favor of the USA and Canada.
Financial results from operations in North America—business operations and sales in the region—were in 4 quarter of fiscal year 2021 unsatisfactory, the values of all indicators are negative. Saves the stats, that outside the US and Canada financial indicators, other than net sales, showed significant growth.
Overall group results for the 2021 financial year, so for 4 quarter of the American fiscal year can be assessed as positive. Publication of results 4 quarter and entire financial year, undoubtedly, provides impetus for the current continuation of the stock rally and is attractive to investors.
Plans and prospects
The company plans to achieve the status of a global holding in the field of healthy nutrition. It has already achieved a leading position in this area at least in North America.
In the near future, the group plans to increase its presence in the market of meat substitutes and plant-based milk substitutes. Is planned, what will they amount to 50% sales 53% company profits. President Schiller believes, that the group should still abandon the production of care products in the future. This cannot be considered a positive factor for investors., because these goods bring a stable income, albeit without growth, but their share of revenue, at least, does not decrease.
Schiller's position on strategy for these brands is unclear: On the one side, he wants to sell them, with another, He speaks, that will invest in them until then, until they are sold. 300 projects worth $100 million are planned for 2022 and 2024.
Against this background, further disposal of non-core assets looks relatively logical. The group is now completing the sale of its UK fruit business, Orchard House. Schiller believes, that it is part of a business simplification strategy. Most likely, in the future there will be even fewer brands, the group will become more specialized. Wherein, according to Schiller, disposal occurs mainly from assets, most affected by the pandemic. Considering, that the pandemic will end no one knows when, this seems like a pretty reasonable solution., Most likely, specialization can lead to an increase in the financial performance of the group and, respectively, Shares.
In plant-based milk replacers, produced by a group of companies, offered to invest Canadian company SunOpta. She is going to buy the Dream and WestSoy brands, manufactured and sold in Canada. The company pays $33 million for two brands. Earlier this year, SunOpta announced plans to expand its US plant, dedicated to this category.
The strategy of the group of companies to increase business in substitutes for meat and dairy products can be considered correct and attractive to investors, as global demand for these products is growing. Even in Russia, which to a certain extent lags behind global trends in healthy eating, about 47% residents aged from 16 to 40 years ready to eat plant-based meat.
Person, like other primates, does not belong to carnivorous animals and is generally able to meet the need for protein through plant ingredients. In this regard, a vegan lifestyle can be quite complete if, if a single person considers it immoral to kill animals. It is this motive that usually plays a role in choosing an alternative to meat.. This trend is growing around the world, though, certainly, This is not very consistent with the traditional diet of people.
Nevertheless, the company’s choice in favor of vegan nutrition can be considered quite successful and has a positive impact on the further dynamics of the shares. As for milk substitutes, then this direction has a number of pitfalls, but it is also promising.
You can admit, that the attempt to occupy the niche of vegan products is quite justified in the context of increasing competition in the market for environmentally friendly products, which the group may not be able to withstand: the niche of vegan products is still freer.
Risks
Competition. The group now finds itself in an extremely competitive environment, the situation has changed very dramatically since those ancient times, when its predecessor was founded. At the same time, competition is made up of both mainstream manufacturers, and highly specialized manufacturers of environmentally friendly products for healthy lifestyles. Among the competitors we can highlight:
- Grocery mainstream: Campbell Soup, Conagra Brands, Danone, General Mills, Hershey, J. M. Smucker, Kellogg, Mondelez International, Nestle, PepsiCo, Unilever.
- Care product manufacturers: Clorox, Colgate-Palmolive, Johnson & Johnson, Procter & Gamble, S. C. Johnson & Son.
- Manufacturers of eco-friendly products: Amy’s Kitchen, Chobani and Yogi Products.
Risk of mismanagement. Alas, there is a precedent, and investors will remember him for a long time. At one time, the company's president, Irwin Simon, managed to significantly develop the company's business, but in the 2000s and 2000s he made a number of mistakes, which led to a sharp decline in financial performance. Little of, attempts by the group's management to embellish financial statements in the period from 2014 to 2018 almost led to the delisting of the issuer from the stock exchange. As a result, Simon was replaced by a more cautious and less adventurous Mark Schiller.
Adventurism. It should be recognized, that the idea of repurposing a business into vegan products is not bad, given the growing competition in the field of healthy eco-food. But veganism is not widespread in all countries., where the group's products are sold, and outside the USA it is sold 52%.
In the world only 3% vegan population, 5% vegetarians and 14% flexitarians - people, limiting meat consumption as much as possible. On the other hand, largest market for vegetarian and vegan products - India, second most populous country in the world, to which the group supplies products. This reduces the risk somewhat., but still.
The policy of abandoning the production of care products can also be considered adventurous.. Their share of sales is not decreasing, Unlike, for example, from grocery, as stated above. Why cut a chicken, laying the golden eggs, at least a little, but stable, - unclear.
Coronavirus. As mentioned above, restrictions, caused by coronavirus, a decrease in the purchasing power of the population and other pandemic factors have a negative impact on the group’s financial statements. Now the risk is, that in many markets and regions, where the company has production facilities, may introduce new restrictions due to the worsening situation.
conclusions
Shares of the Hain Celestial Group can be considered promising and attractive for investors due to the growth of financial indicators. The idea of expanding our presence in the vegan market also looks promising, which shows a certain growth in developed countries. But no one canceled the risks.
Adventurism in vegan trends, the desire to cancel the production of care products as supposedly non-core products - all this increases the risk. Investors should now primarily focus on news about the re-profiling of production of the group companies, as well as news about further developments of the situation with coronavirus, mainly in the regions, where are the productions of the group.
At the same time, shares on the St. Petersburg Exchange from a technical point of view show positive dynamics, and this cannot be discounted. So the prognosis is more positive., than negative.
