Higher sales, operational loss for Hawthorne following Sunlight Supply acquisition

The Scotts Miracle-Gro Company announced fiscal year 2018 financial results in line with the company’s guidance and highlighted by strong operating cash flow.

“There is little doubt that fiscal 2018 was one of our most challenging years in recent memory,” said Jim Hagedorn, chairman and chief executive officer. “Our U.S. Consumer business, however, had a strong second half following unfavorable early season weather. The Hawthorne team also made substantial progress in recent months, integrating the Sunlight acquisition to enable strong benefits for 2019.”

“Across the entire organization we have been building toward a solid recovery in 2019. Our goal for 2019 is to deliver sales growth in a range of 10 to 11 percent resulting in non-GAAP adjusted earnings in the range of $4.10 to $4.30. We expect that growth to be driven by the full-year impact of the Sunlight Supply acquisition as well as pricing in our U.S. Consumer segment of roughly 3 percent. We will remain focused on continued working capital improvement as operating cash flow remains a critical performance metric for our team.”

Hawthorne sales increased 20 percent, to $344.9 million, driven by acquisitions. Excluding acquisitions, the business declined 27 percent on the year. Hawthorne reported an operating loss of $6.1 million, which included the dilution associated with the acquisition of Sunlight Supply.

“The integration of Sunlight Supply remains on track and we continue to expect at least $35 million in synergies from this transaction,” said Randy Coleman, chief financial officer. “While we are obviously disappointed by the performance of Hawthorne in 2018, we expect to return to growth in 2019 and remain bullish on the long-term prospects for this business.”

“While we expect to see solid gross margin rate improvement in the U.S. Consumer segment, the full-year impact of the lower-margin Sunlight transaction will offset most of those gains,” Coleman said. “Throughout the organization we have also taken strong steps to overcome other expense headwinds while increasing our investment in our people and brands.”

Click here for the full results.


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