Pet food and food service industry growth After earnings
Saint Louis — In the third quarter that concluded on June 30, Post Holdings, Inc.’s earnings were bolstered by the pet food and restaurant sectors. The acquisition of a piece of J. M. Smucker Co.’s pet food business was finalized by Post in late April, and this was positively reflected in the company’s earnings report. A minor downturn in branded breakfast goods was also mitigated this quarter by the foodservice sector’s momentum from the first and second quarters, which is a result of consumers turning more and more to private label options to fend off inflationary pressures.
Post’s third-quarter net earnings of $89.6 million, or $1.49 per share on common stock, were 48% lower than the company’s third-quarter net earnings of $170.2 million, or $2.77 per share, the year before. The income from swaps was $17.1 million, as opposed to $131.6 million in the third quarter of the prior year. The third quarter of the prior year’s adjusted EBITDA of $250.8 million was 35% lower at $338.2 million. Net sales increased by 22% to $1.86 billion from $1.52 billion.
Net sales at Post Consumer Brands increased by 52% to $871.3 million, of which $275.3 million could be attributed to pet food. Volume decreased 5.7% in the third quarter when the gains from pet food were excluded, mostly due to decreases in branded cereal and peanut butter. The decrease in private label cereal was somewhat countered by volume increases.
In a conference call with analysts on August 4, President and CEO Robert V. Vitale stated, “So we’ve got pet, cereal, and peanut butter under the Post Consumer Brands segment.” As they prepare for 2024, you will begin to notice the changes in the segment, which is what we will be able to share with you in another quarter. Undoubtedly, pet acquisition accounts for the majority of the segment’s fluctuations. Since pet is a part of a broader segment, we won’t be providing precise updated guidance on it, but it should be quite easy to watch the development over the next few quarters.
Additionally, Mr. Vitale expressly mentioned that “a bit of a blip in volume consumption” in the branded cereal category was caused by the SNAP program’s March drop.
The adjusted EBITDA estimate for the fiscal year increased from $930 million to $945 million in the same quarter last year to $1.18 billion to $1.20 billion.
“We wouldn’t be talking about ’24 just yet if we hadn’t had the twin events of adding pet and having quite an outsized performance year-to-date in foodservice,” Mr. Vitale stated. “That cadence is abnormal. We are therefore making an effort to provide you a little bit more of our thinking as it relates to a time period that is a little bit further out than we would ordinarily do so out of respect for the difficulties you all confront with the complexity that we occasionally produce.
By 7.5%, foodservice’s net sales reached $622.7 million, higher than the third quarter of the previous year. Demand for eggs and potatoes while away from home drove a 3% increase in volume. The volumes of eggs and potatoes rose by 2.3% and 6.8%, respectively.
Mr. Vitale stated, “Let’s concentrate primarily on our side dish business, which is the foundation of the franchise.” We have all suffered significant setbacks during the past two years. In addition, during the past two years, this segment’s supply chain has improved the most compared to the segment with the most difficult supply chain two years prior.
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Therefore, 18 months before the final six, we found ourselves in a situation where our supply chains were underperforming, prices were rising, and we had no support for advertising because, given our incapacity to support new products inside our supply chain, advertising made no sense. Therefore, it’s not a good place to build a brand. Now, the supply chain is fixed. The absence of marketing support has either been addressed already or is currently being done so. Also, as some of our rivals have started to price, pricing is becoming more standard. Therefore, I have hope that the issues in that region were a result of both self-inflicted and large-scale supply chain issues that have been resolved.
Net sales at Weetabix rose 7.4% to $134.2 million. Volumes decreased 4.7% as declines in branded biscuits outweighed gains in private label biscuits.
Mr. Vitale stated, “We believe that as we engage with advertising, our refrigerated business will be stronger.” “Weetabix’s performance for the current year has suffered because of our significant investments in the company. Thus, we are in a good position for ’24. A little macro-strengthening there would be excellent. However, we are adept at regulating what we can influence. Even without considering the pricing dynamics of AI, our foodservice industry is in excellent condition. We’ve talked for a while about the significant investment we made in precook capacity, which initially seemed dubious because it was made just before COVID. It is already paying off handsomely, as evidenced by the increased mix of value-added goods.”
Net earnings for the common stock over the first nine months of the fiscal year were $235.6 million, or $4.13 per share, compared to $672.7 million, or $10.96 per share, at the same period last year. From $4.27 billion to $5.04 billion in the previous year period, net sales increased by 18%.