Foodservice drives Post’s expansion
As the company began the fiscal year 2023, Post Holdings, Inc. saw improved results as a consequence of foodservice performance exceeding expectations.
For the first quarter of 2022, which ended on December 31, 2022, Post Holdings’ net income was $91.9 million, or $1.66 per share of common stock. This is in contrast to a $208 million loss at the same time last year.
In contrast, adjusted earnings from continuing operations came in at $71.2 million during the same time last year, down from a $6 million deficit. The company’s investment in BellRing generated a $5.1 million gain, swap income brought in $12.3 million, and debt discounts of $10.4 million were reported in the latest quarterly results.
First-quarter net sales rose 17% to $1.57 billion from $1.34 billion.
Post increased its full-year fiscal 2023 adjusted EBITDA estimate from an earlier estimate of $900 million to $1.04 billion to $1.025 billion to $1.065 billion as a result of the strong first-quarter performance.
The president and CEO of Post, Robert V. Vitale, stated on a conference call with analysts on February 3 that the company “had quite a solid quarter.” “All segments demonstrated strong growth, but the foodservice segment outperformed forecasts, which led to a modification in our outlook for the remaining portion of the 2023 fiscal year. Most reassuringly, we are certain that the sustainable EBITDA threshold for foodservice has reset to roughly $350 million before accounting for the contribution from our late-year ready-to-drink shake factory.
The Post Consumer Brands division’s segment profit increased by 11% to $79.3 million from $71.3 million in the previous year. From $507.3 million to $554.7 million, net sales increased by 9%.
“Private label and Peter Pan cereal saw a strong growth,” stated Chief Financial Officer Matthew Mainer. “Declines in government bid business, MOM bags, and Honey Bunches of Oats offset these gains.” Because of our pricing strategies, which offset severe cost inflation and increasing production expenses, Adjusted EBITDA improved by 5% over the previous year.
Mr. Vitale provided more context for the cereal industry by pointing out that the corporation has observed some price differences between MOM and private label goods that needed to be closed.
He stated, “Those have since been fixed, and moving forward, you should expect to see some correction of that dynamic.” “The other factor is that the MOM bag has a higher entrance price even if it is extremely appealing on an ounce basis. Thus, there seems to be a slight shift in favor of opening price point levels. However, I would anticipate that some of that dynamic with MOM brands would start to revert as the rest of the year goes on.
The Foodservice division of Post showed significant success, with segment profit rising 423% to $79.1 million from $15.1 million during the same time last year. The segment’s net sales increased to $600.5 million from $438.6 million in the previous year, a 37% increase.
“As revenue reflects the impact of inflation-driven pricing actions, our commodity pass-through pricing model, and avian influenza-driven pricing actions to offset higher cost to procure eggs on the spot market, revenue growth continued to outpace volume growth,” Mr. Mainer stated. “By leveraging increased volume and better average net pricing, segment adjusted EBITDA increased to $109 million, offsetting the impact of higher production costs.”
The Weetabix segment’s earnings was $21.5 million, a 21% decrease from $27.2 million in the previous year. Sales decreased from $118.6 million to $118.1 million, almost staying the same.
According to Mr. Mainer, the acquisition of the UNFIT brand in April 2022 and large list price hikes helped boost sales in the Weetabix segment.
Sales in the Refrigerated Retail segment increased 7% to $293 million, but profit increased 54% to $21 million from $13.6 million.
According to Mr. Vitale, Post is starting to observe a growth in the distribution of private labels inside the chilled retail sector. Post stated that in order to support both increased distribution and velocities, it will need to rely more heavily on brand investment because it does not produce private label products for the market.
“Our primary tools would be more conventional ongoing innovation, ongoing pack size adjustments, and increased marketing, all of which we believe the brand would merit regardless of the existence of private label,” he stated. “In the category, private label has been attempted several times but has not proven successful. We’ve done a pretty good job of handling that.
We’re bringing it up because, with inflation so pervasive as it is, the situation we find ourselves in is a little different than it has ever been in this category. We therefore anticipate success in controlling that incremental competition, but as it is relatively new, we wanted to draw attention to it.
Post stated that it anticipates capital expenditures for the upcoming fiscal year 2023 to be between $275 million and $300 million, of which $75 million to $85 million will go toward manufacturing ready-to-drink shakes and precooked, cage-free eggs.