The Hain Celestial Group Inc

The Hain Celestial Group, Inc. (NASDAQ: HAIN) is an organic and natural products company. The Company manufactures, markets, distributes, and sells organic and natural products. The Company has two geographic based reportable segments: North America and International.

Recent Financial and Business Updates:

• In the third quarter, HAIN reported a 9% decrease in net sales, amounting to USD 455.2 million compared to the same period in the prior year. After adjusting for factors such as foreign exchange, acquisitions, divestitures, and discontinued brands, the net sales decline was 6% in comparison.
• The gross profit margin experienced a 160-basis point decrease, settling at 21.4% from the prior year period. When considering the adjusted gross profit margin, the decline was even greater at 200 basis points.
• HAIN incurred a net loss of USD 115.7 million in the third quarter of 2023, contrasting with a net income of USD 24.5 million in the prior year period. Consequently, the net loss margin stood at 25.4%, in contrast to the net income margin of 4.9% observed in the prior year period. The net loss for this quarter included non-cash impairment charges amounting to USD 156.6 million (after taxes), primarily associated with the ParmCrisps® and Thinsters® intangible assets.
• Adjusted net income for the period was USD 7.4 million, a decline from USD 29.7 million in the prior year period. Adjusted EBITDA, on a constant currency basis, amounted to USD 39.3 million in the current quarter, compared to USD 58.7 million in the prior year period, resulting in an adjusted EBITDA margin decline of 340 basis points to 8.3%.
• Loss per diluted share was reported as USD 1.29, contrasting with earnings per diluted share of USD 0.27 in the prior year period. Adjusted earnings per diluted share came in at USD 0.08, down from USD 0.33 in the prior year period.
• HAIN has revised its financial guidance for the full year fiscal 2023. It now anticipates a decline of 4% to 3% in adjusted net sales and a decrease of 15% to 13% in adjusted EBITDA on a constant currency basis compared to the prior year. Looking specifically at the fourth quarter of fiscal 2023, HAIN expects adjusted net sales to decrease by a low single-digit percentage compared to the same period in the prior year. Adjusted gross margins are projected to improve both year-over-year and sequentially, while adjusted EBITDA in constant currency is expected to range between approximately USD 40 million and USD 44 million.

Pending Litigations

The Company is currently involved in seven legal cases across state and federal courts where individuals claim to have suffered personal injuries as a result of consuming the Company's products, alleging that the products contained undisclosed and unsafe levels of naturally occurring heavy metals. The lawsuits primarily focus on injuries associated with neurological development disorders, including autism and attention deficit hyperactivity disorder.

• The Hain Celestial Group, Inc. prevailed in the Palmquist et al. v. The Hain Celestial Group, Inc. case after the U.S. District Court ruled in favor of the company, but the plaintiffs filed an appeal in the Fifth Circuit.
• The case NC v. The Hain Celestial Group, et al. is scheduled for trial on October 4, 2023, in the Superior Court for the State of California, County of Los Angeles.
• Two Nevada state court cases, Benitez v. Beech-Nut Nutrition Company, Inc., et al. and Buenaventura v. Beech-Nut Nutrition Company, Inc., et al., have been consolidated for discovery purposes, with a trial date set for July 29, 2024, in the Benitez case.
• The Watkins v. Plum, PBC, et al. case in the United States District Court for the Eastern District of Louisiana is currently scheduled for trial on August 28, 2023, but the parties intend to request a trial date no earlier than March 2024.
• In P.A. et al. v. Hain Celestial Group, Inc., et al., the trial is set to begin on January 23, 2025, in the Circuit Court of the First Circuit, State of Hawai'i, following the filing of a First Amended Complaint and the company's response.
• In the Pourdanesh v. Hain Celestial Group, Inc. et al. case, the plaintiff has filed a Complaint in the Superior Court for the State of California and plans to submit an Amended Complaint specifying the products involved after a stay was imposed until the Initial Status Conference on May 17, 2023.

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HAIN denies any responsibility for the alleged injuries caused by its products and is committed to vigorously defending against these lawsuits. However, it acknowledges the possibility of future lawsuits with similar or different legal claims and potential damages. The outcomes of such lawsuits may be unfavorable, resulting in significant costs or damages that may not be covered by insurance, potentially impacting HAIN's financial condition and business in a material adverse manner. 

As per the above-mentioned fundamentals, as well as outstanding litigations against the company, an ‘Avoid’ rating has been given The Hain Celestial Group, Inc. (NASDAQ: HAIN) at the current price of USD 11.97 as of June 12, 2023, at 09:30 am PDT.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

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Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

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Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is June 12, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

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