Hain Celestial Group Inc. (NASDAQ:HAIN) shares fell more than 3% in premarket trading on Monday after the health and wellness group reported fiscal second-quarter results that missed expectations on both earnings and revenue.
The company posted an adjusted loss of $0.03 per share, underperforming the consensus forecast of breakeven results. Revenue totaled $384 million, slightly below analyst expectations of $385.78 million and down 7% from the same quarter last year. Organic net sales also declined 7% year over year, driven by a nine-point drop in volume and mix that was only partly offset by a two-point benefit from pricing.
Cash generation provided a rare positive. Net cash from operating activities rose 20% year over year to $37 million, while free cash flow increased to $30 million from $25 million in the prior-year period.
“We demonstrated meaningful strategic and operational progress in the second quarter and are advancing our turnaround strategy with urgency,” said Alison Lewis, President and CEO. “We took bold steps to sharpen our portfolio and strengthen our balance sheet through the divestiture of our North American snack business, giving us greater financial flexibility alongside an improved margin and cash flow profile.”
Profitability metrics weakened during the quarter. Gross margin declined to 19.4%, a drop of 330 basis points from a year earlier, while adjusted EBITDA fell to $24 million from $38 million in the prior-year period.
Performance was particularly soft in North America, where organic net sales fell 10% year over year, largely due to declines in snacks and baby formula. International organic net sales decreased 3%, an improvement from the 4% decline reported in the first quarter.
By product category, snacks recorded the sharpest contraction with a 20% drop in organic net sales. Beverages stood out as the only growth area, posting a 3% year-over-year increase.
At quarter-end, Hain Celestial reported a net secured leverage ratio of 4.9x under the terms of its credit agreement.