Hain Celestial's profits fall

Net sales for the third quarter - ended 31 March 2004 - totaled $136.9 million, an increase of almost 6 per cent over the same quarter of the prior year. However net income dropped 36.2 per cent from $7.9 million in 2003 to $5.0 million.

For the first time in several years, the group is to adjust prices across its US businesses by 4 to 5 per cent, beginning July this year.

"We have gone many years without adjusting our prices to customers, while absorbing the increases imposed on us by our suppliers and service providers. With increases in our delivery costs and increases in commodity and ingredient costs, including the costs of soy beans, vanilla, and the various oils we sell and use in the production of other products, the time has come to offset these increased costs,"​ said Simon.

The company has also entered into a new $300 million Amended and Restated Credit Agreement increasing the company's credit line by $60 million. The new facility provides the company with continuing access to capital which the company uses principally to finance acquisitions of businesses. At the present time, the company has $46 million borrowed under its credit facility.

"Importantly, most of our key brands posted positive sales gains. In the third quarter of this year we saw 21 per cent growth in our Snacks business, 6 per cent growth at Celestial Seasonings, and 24 per cent growth at Earth's Best. Our Canadian Business grew 24 per cent while our European Business grew 36 per cent,"​ said Simon.

In response to strong initial consumer response to the company's new CarbFit brand, the company made significant additional investments in its launch during the third quarter. The company has shipped approximately $10 million of CarbFit in the first four months since its national launch in mid-January. These investments, which are charged against the current quarter earnings, have been higher than anticipated.

"We are continuing with our program to introduce a total of 80 low-carb products, all of which have been developed entirely within our organization. We have made significant investments in CarbFit over the course of the year to lay a strong foundation for this brand, including expenses related to product development and start-up costs, initial marketing, advertising, and promotion. All of these impacted our earnings as we incurred them,"​ said Simon.

The CarbFit brand is now available in 17 per cent of stores across America and is expected to contribute between $20 million and $30 million to revenues at the beginning of next year.

The Hain Celestial Group​, which is a leader in 13 of the top 15 natural food categories, includes Hain Pure Foods, Soy Dream, Health Valley, Hollywood cooking oils and Estee sugar-free products.

The company predicts fourth quarter revenues to lift to between $127 million and $130 million.