Mulch holds down Scotts’ financial results for 2017

Scotts Miracle-Gro’s investment in hydroponics is paying off.

The Marysville-based company reported booming growth of more than 100 percent year-over-year at its Hawthorne Gardening Co., which includes recent acquisitions involving indoor and hydroponic growing systems. Overall, company sales grew 5 percent during fiscal 2017.

“We have acquired the best hydroponic portfolio in the world,” said CEO Jim Hagedorn during a call with analysts.

The expansion at Hawthorne offset a disappointing year for Scotts’ mulch business, which weighed down U.S. retail sales that fell 7 percent in the fourth quarter ended Sept. 30, compared to the same quarter a year ago. Scotts said the drop in sales was due to soft results at large retailers.

“Consumer purchases in these channels increased by nearly 4 percent when excluding the mulch category and performed largely in line with our expectations,” Hagedorn said in a news release.

Total sales for 2017 came in at $2.64 billion, up from $2.51 billion a year ago, although net income of $218.8 million this year was down significantly from the $314.8 million reported a year ago. Earnings per share were $3.63 this year compared to $5.09 a year ago.

For the fourth quarter, Scotts’ sales totaled $376.7 million compared with $348.7 million a year ago. The company lost $33.4 million, or 57 cents per share, compared with $26.9 million, or 44 cents per share a year ago.

Scotts’ business is highly seasonal, and the company normally reports a loss in its first and fourth quarters.

Hagedorn praised the company’s push for better cash flow through its operations and the company closed the year with $120 million cash on hand, compared to $28.6 million a year ago.

Scotts Chief Financial Officer Randy Coleman believes the mulch business will somewhat recover next year, but he expected at least some retail channels to remain lukewarm. The company plans to release two new Roundup products next year and is looking at some smaller acquisitions.

Scotts stock reached a 52-week high on Tuesday, closing at $102.42 a share, up 3.3 percent on the day.