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Hain Celestial’s Q3 showed improved execution and cash generation, with free cash flow rising to $35 million and net debt falling by $145 million year to date. Management said the snacks divestiture helped simplify the portfolio and strengthen the balance sheet.
Sales remained under pressure, as organic net sales declined 6% overall, led by an 8% drop in international and a 3% decline in North America. Profitability also fell year over year, with adjusted EBITDA down to $26 million from $34 million.
Management is focused on refinancing upcoming debt and continuing the turnaround, but it withheld fiscal 2026 operating guidance due to strategic review uncertainty. The company expects positive free cash flow for the full year and aims to improve margins, sales stability and leverage over time.
The Hain Celestial Group (NASDAQ:HAIN) reported fiscal third-quarter results that management said reflected improved execution, stronger cash generation and progress on its turnaround plan, even as organic sales declined and international markets remained pressured.
President and Chief Executive Officer Alison Lewis said the company remains focused on “optimizing cash, strengthening the balance sheet, improving profitability, and stabilizing sales” as it works toward sustainable growth. Hain completed the divestiture of its North America Snacks business during the quarter, a transaction management said contributed meaningfully to debt reduction and a more focused North American portfolio.
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Chief Financial Officer Lee Boyce said organic net sales declined 6% year over year in the third quarter, driven primarily by the international segment. The decline reflected an 11-point decrease in volume mix, partially offset by a 5-point increase in price.
Hain reported adjusted gross margin of 21% in the quarter, down about 90 basis points from a year earlier but up approximately 150 basis points sequentially. Boyce attributed the year-over-year decline mainly to inflation and lower volume mix, partially offset by productivity savings and pricing. The sequential improvement reflected the snacks divestiture and actions such as SKU simplification, more effective trade management, targeted pricing and productivity initiatives.
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Adjusted EBITDA was $26 million, compared with $34 million in the prior-year period. Adjusted EBITDA margin was 7.8%, up from 6.3% in the fiscal second quarter. Hain posted an adjusted net loss of $1 million, or $0.01 per diluted share, compared with adjusted net income of $6 million, or $0.07 per diluted share, a year earlier.
SG&A declined 6% year over year to $59 million, primarily due to lower employee-related expenses. Boyce said stranded costs related to the snacks divestiture were “negligible” in the quarter after mitigation actions and transition services agreement proceeds.
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In North America, organic net sales declined 3% year over year. Lewis said the core business was stable, with growth across yogurt, tea, baby and kids finger foods, and cereal. Boyce said that excluding pantry brands, which include oil, nut butter and soup brands, North America organic net sales would have grown 3%.
North America adjusted gross margin was 23.4%, up 100 basis points from the prior-year period. Excluding the divested snacks business, gross margin would have been 30% in the quarter. Adjusted EBITDA in North America was $17 million, or 10% of net sales. Excluding snacks, adjusted EBITDA margin would have been 16.4%.
Lewis highlighted several innovation areas in North America. In tea, she said wellness tea sales rose in the high single digits and gained share, supported by distribution increases and demand for functional benefits. Celestial Seasonings is expanding into gut health and throat support, following launches in detox, energy and women’s wellness.
In baby and kids, Earth’s Best remains the No. 2 brand in finger foods, according to Lewis. She pointed to continued momentum behind crunchy sticks teething snacks and an upcoming launch of Earth’s Best Big Kids Finger Food, designed to extend the brand into new eating occasions.
In yogurt, Lewis said Greek Gods continued to show strong momentum, with high-teen dollar sales growth and share gains. The brand is scaling a single-serve format and launched a high-protein product in April at select grocery retailers, offering 20 grams of protein per serving.
Hain’s international business posted an 8% organic net sales decline in the quarter, driven by lower sales in meal prep and baby and kids. International adjusted gross margin fell 270 basis points to 18.5%, while adjusted EBITDA declined 12% to $20 million, or 11.7% of net sales.
Lewis said international categories have been affected by volume weakness tied to geopolitical uncertainty, inflation and rising fuel prices, which have weighed on consumer confidence in the U.K. and Europe. She cited continued industry-wide softness in wet baby food, challenges in spreads and drizzles, and a decline in branded soup due to a tough year-ago comparison and private-label competition.
Management said the decline in U.K. baby food purees has stabilized and is expected to improve as Hain laps the beginning of the slowdown, which followed a BBC documentary on nutritional content in baby food. Lewis said Ella’s Kitchen remains the No. 1 baby and kids food brand in the U.K. and Ireland, and the company plans finger foods and frozen meals innovation aligned with Office for Health Improvement and Disparities guidelines.
Hain is also preparing a relaunch of Hartley’s in June, including reformulated products, improved fruit content and flavor, a first-ever 100% fruit spread and new flavor combinations. In soup, Lewis said Hain holds the top three U.K. brands: New Covent Garden, Yorkshire Provender and Cully & Sully. Cully & Sully again grew value by double digits and gained share, while private-label soup grew organic net sales by high single digits.
Free cash flow was $35 million in the quarter, compared with an outflow of $2 million in the year-ago period. Boyce said the improvement was primarily driven by inventory performance, better accounts receivable collections and insurance proceeds.
Inventory days improved to 73, the company’s lowest level in two years, compared with 75 in the second quarter and 79 a year earlier. Boyce said each day of inventory is worth about $3.5 million. Capital expenditures were $4 million, down from $7 million a year earlier, and the company expects fiscal 2026 capital expenditures of about $20 million.
Hain ended the quarter with $44 million in cash and net debt of $505 million, a reduction of $145 million since the start of the fiscal year. The company also had $196 million of available liquidity under its revolver and leverage of 4.3 times, below its covenant of 5.5 times.
Boyce said Hain is proactively addressing its December debt maturity and remains confident it can “refinance, extend, or repay” the debt before maturity. He said the strategic review has produced a multi-stage plan focused on improving liquidity and leverage, including further asset sales and operational improvements.
Hain is not providing numeric guidance for fiscal 2026 operating results, citing uncertainty around the outcome and timing of its strategic review. However, Boyce said the company continues to expect positive free cash flow for the full year.
For fiscal 2027, Boyce said priorities include stabilizing sales through Hain’s “five actions to win,” improving gross and EBITDA margins versus fiscal 2026, generating cash and eliminating stranded costs. He said guidance for fiscal 2027 is expected after the strategic review is complete.
During the question-and-answer session, Lewis said the company plans to support innovation with marketing, including a greater emphasis on digital and social channels. She said North American promotional activity has remained relatively stable, while international markets continue to see major brands leaning heavily on promotions and some increase in media investment.
Lewis closed the call by saying the quarter represented “strong cash generation” and “total debt reduction,” while acknowledging that revenue was below expectations. She said Hain is seeing growth in many core categories and is focused on addressing isolated challenges as it moves into the fourth quarter and beyond.
The Hain Celestial Group, Inc (NASDAQ: HAIN) is a leading global producer and marketer of natural and organic branded products. The company operates through two principal segments—Grocery and Personal Care—offering a diversified portfolio that spans shelf-stable foods, snacks, beverages, condiments and natural personal care items. Its product lineup addresses growing consumer demand for clean-label, plant-based and ethically sourced offerings in everyday categories.
Within its Grocery segment, Hain Celestial markets well-known brands such as Celestial Seasonings teas, Earth's Best organic baby foods, Rudi's organic bakery items, Terra vegetable chips and Sensible Portions snacks.
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The article "The Hain Celestial Group Q3 Earnings Call Highlights" was originally published by MarketBeat.
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