Hain Celestial Group Earnings Call Nuggets: Inflation Impacting Guidance and Integrating Ella’s
Inflation Impacting Guidance
Gregory Badishkanian – Citigroup: Just my first question is just with respect to guidance. So, could you kind of breakout maybe what your assumption is for commodities and maybe organic sales growth by the different – by the U.K. and U.S. and different big regions?
Ira J. Lamel – EVP and CFO: Greg, we ran about 4%, 4.5% inflation in the fourth quarter. So, when we looked at developing our guidance with that same rate into our commodity exposure. We certainly – Steve will certainly report as we move forward every quarter what the inflation experience has been just as I’ve been doing. What was the second part of what you asked in addition to inflation?
Gregory Badishkanian – Citigroup: Organic sales growth by major geographic region?
James R. Meiers – President Hain Celestial Personal Care and Chief Supply Chain Officer, Grocery, Snacks and Personal Care: So, Greg as I said, each one it was around high single-digits and that’s organic growth in brands that we’ve owned over a year.
Gregory Badishkanian – Citigroup: And would you expect that in fiscal 2014, is that kind of the…
Irwin D. Simon – Founder, President, CEO and Chairman: If you look at our budget, half of our budget is organic sales growth. The other half is coming from our acquisitions that we acquired. So, exactly it’s high single-digit, low double-digit and the rest of the acquisitions…
Gregory Badishkanian – Citigroup: And just another question in terms of maybe opportunity on the U.K. side in terms of margins. I think this quarter, it was around 9.3% and in the U.S. side it’s around 15%. Is there any impediment to getting too closer to 15% range, over the next several years and what do you think the opportunity is there for margin improvement?
Irwin D. Simon – Founder, President, CEO and Chairman: So, Greg, let me take it first and I can – also from Ira, number one is we only integrated and we acquired the grocery business eight months ago. So, get the synergies and savings and halfway through the year, we eliminated a lot of the unprofitable products. The other thing is from a margin standpoint, losing Tesco with soup being our Celestial Seasonings tea business with the high margins and high growth, that hurt us on a margin in the U.K. So, and fresh, there is lower margins on fresh. Do, I think we will get to the U.S. margins, we’ve got some work to do, but do I think that margins will improve dramatically in the U.K.? Yes, they will.
Ira J. Lamel – EVP and CFO: Yeah, let me just amplify that a little bit. The operating margin coming in from Daniels when we bought it, basically was the same as what we are here at Hain if you remember, there was a reduction in gross margin, but also a reduction in SG&A because their SG&A basis is quite a bit lower than our consolidated rate was at the time, but looking forward, one of the things that’s very important is getting the Fakenham plant completed and getting to the full run rate, getting through its stride in the dessert business that we’re going to be doing for the retailer in the U.K. We don’t have that yet in any measure in our quarterly results. So, you will see kind of a step increase in operating margin over time.
William Chappell – SunTrust Robinson Humphrey: I guess the first question just looking at the guidance, I’m just trying to understand, when you’re talking about the SG&A going from 16.4% in ’13 to 16.3% in ’14, I guess it looks a little conservative. I’m just trying to understand is there anything in terms of new product launches or something else that I’m missing, because I would think it’s more of the carryover of both integrating Ella’s and some of the back office and other productivity – I know productivity is more gross margin, but other cost savings that should help improve that number?
Irwin D. Simon – Founder, President, CEO and Chairman: So, there’s a couple of things, Bill. I think it’s going to take us time to integrate Ella’s in the business and we continue to reinvest back in the business. I mean, we’re in a great category and we feel investing in our brands, bringing more consumers over from the conventional category is the big opportunity here. And you heard what I said before, natural organic is growing 5 times the size. So, a big part of our SG&A number reinvesting back in the business. The other big thing is, we grow our Ella’s and grow BluePrint and grow our Histon brands. Around the world – we’ll be investing dollars around the world to do that.
William Chappell – SunTrust Robinson Humphrey: And then switching back to that question on kind of the commodity outlook. I mean I realize that your commodities don’t move as quickly as conventional ones. But would you expect as you get to the back half of the fiscal year to see some relief and – or are you also kind of taking more pricing right now to offset the near-term matters?
James R. Meiers – President Hain Celestial Personal Care and Chief Supply Chain Officer, Grocery, Snacks and Personal Care: Bill, it’s Jim Meiers. So, yes, in terms of the commodity outlook based on what we kind of peg the market at, we basically took pricing to help offset that as well as productivity. One of the key – as I mentioned in my delivery, there’s three key areas that we saw the largest inflation and that was on almonds, chia and in the dairy area. So the key is going to be the almond crop doesn’t come until the fall and then that will determine what happens in the back half. But at this point we haven’t laid out in our budget.
Irwin D. Simon – Founder, President, CEO and Chairman: Bill, we’ve taken a little bit of pricing. Nothing substantial. From a Company worldwide, little over 1% and it takes time to get that pricing out there, or it takes time to get that pricing improve, but we have taken little bit of pricing. But one of the big things that’s important that has changed tremendously at Hain, and three weeks ago Jim Meiers led productivity group around the world. And today with the (indiscernible) team, with the Daniels team with the team in Houston, with the team in Europe with the team in Canada and the team in the U.S., I mean, we’re one of the largest procurers of organic fruits and vegetables around the world today, and as we combine our efforts on sourcing out there – and it’s tremendous when couldn’t get rise or organic rice and how someone is buying it from Pakistan or buying it from somewhere else where we can get it a beater quality and a cheaper product and it’s amazing what we buy in ingredients. So, commodities are commodities and we can’t change where they come out, but I tell you what from source and supply and buying at better pricing, we now have one of the best productivity plans in place to be able to get supply and get better pricing.
A Closer Look: Hain Celestial Group Earnings Cheat Sheet>>