Cornucopia’s Take: One of the biggest owners of organic branded products is in hot water over its accounting practices. The company has used acquisitions of smaller companies to greatly expand its organic footprint over the years. How these accounting issues will play out on grocery store shelves is unclear.
SEC investigating organic food giant
Sustainable Food News
Hain Celestial investors in for rough ride, says Probes Reporter
The Lake Success, N.Y.-based company (NASDAQ: HAIN), which owns the Earth’s Best organic baby food and BluePrint cold-pressed juice brands, delayed the release of its fourth quarter and FY2016 results on August 15, and launched an independent audit of accounting irregularities.
More than 41 million shares traded that day, with the stock price closing at $39.35, down 26.3 percent. Hain’s tumbling share price shaved about $2 billion from its market cap and is now at $3.8 billion.
At the center of its accounting troubles is whether revenue associated with concessions that were granted during the fourth quarter to certain unnamed U.S. distributors was accounted for in the correct period.
Probes Reporter said it filed a Freedom of Information Act (FOIA) request with the SEC, which confirmed Hain’s “involvement in on-going enforcement proceedings” but declined to disclose any details.
“We forecast the road ahead for Hain Celestial travelers will be worse than many expect,” Probes Reporter said. “When a company of Hain’s size experiences accounting issues of the scale sufficient to delay an otherwise routine SEC filing by two months (and still counting), the underlying cause is usually much worse than investors recognize and/or management lets on.”
Hain’s stock was trading Wednesday morning at $35.69, down 13 cents. The shares have a 52-week low of $33.12 and a 52-week high of $56.99.
Hain also said on August 15 that it did not expect to reach its previously announced FY2016 guidance, which was EPS between $2.00 and $2.04, a 6-9 percent increase; and revenue between $2.95 billion and $2.97 billion, up 9-10 percent. Analysts polled by Thomson Reuters reportedly expect FY2016 EPS of $2.02 on revenues of $2.94 billion.
Later that month, CNBC’s Jim Cramer said on his ‘Mad Money’ show that Hain shareholders should sell their stock over its recent admission of accounting irregularities.
On September 1, Hain said it received a notice from the Nasdaq Stock Market stating that it no longer complied with listing requirements. Under Nasdaq rules, the company has until the end of October to submit a plan to regain compliance. If the plan is accepted, Hain could be granted up to 180 days from the Form 10-K’s original due date of Aug. 16 to regain compliance.
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