Post Holdings observes a reduction in supply chain pressures and workforce shortages.
In fiscal 2021, Post Holdings Inc. was constrained by limitations in manufacturing capacity and rising prices. Although the company’s annual results were positive, executives felt the performance should have been higher.
With an optimistic prognosis for the upcoming fiscal year 2022, management expressed hope that supply chain problems and inflation, which hampered the company in the previous fiscal year, would abate.
The company’s net income for the nine months ending September 30, 2022, was $167 million, or $2.42 per share on common stock. This represents an increase over the $800,000, or 1¢ per share, gained during the previous fiscal year.
Sales increased to $6.2 billion in the year from $5.7 billion in the fiscal year 2020.
President and CEO Robert V. Vitale stated, “Sales were largely in line with our expectations,” during a conference call with securities analysts on November 19. Cost growth was the sole cause of the miss. The two largest deviations from forecasts were transportation costs, which were $12 million higher than anticipated, and negative production costs of about $18 million, which were caused by plant inefficiencies and poor fixed cost absorption.
Furthermore, our ability to meet demand was hampered by capacity limitations, which were mostly brought on by a lack of manpower and materials as well as contract production that occurred under shipments. Customer allocation among Foodservice, Refrigerated Retail, and BellRing (Brands) was the outcome of the capacity constraint.
Removing the focus from the supply chain problems, Mr. Vitale stated that there was reason for hope because there was a high demand for Bob Evans items, Post and Weetabix cereals, and most foodservice categories.
“Due to the success of the Pebbles brand, our Post-branded cereals did well this year, gaining 0.5 share point,” he stated. “Weakness in our value portfolio offset this.” As consumer liquidity returns to normal, we anticipate that customers will revert to value pricing points.
This year, Weetabix saw a slight increase in market share thanks to innovation. However, the company has increased its market share by 1.5 percentage points since two years ago. Our Bob Evans brand penetration is up 3% from the previous year as it continues to attract more households. Notwithstanding capacity limitations and stock outs that would have limited its expansion, this gain was made.
The company’s largest business area, Post Consumer Brands, saw $1.9 billion in sales, a 2% increase over the previous year. Segment revenue decreased by 20% to $317 million. The corporation claims that a $15 million litigation settlement had a detrimental effect on it.
Throughout the year, foodservice sales saw a significant upturn, increasing 19% to reach $1.6 billion. Profit for the segment increased 141% to $62 million. Foodservice outcomes ought to have been better, according to Mr. Vitale.
He declared, “We ought to have sold more than we did.” “Demand is extremely strong, and the specific customers who order our highest value products are doing quite well.”
Due to a lack of workers, the company could only run 18 of its 22 available lines for producing foodservice goods.
He stated, “We anticipate that changing throughout the year.” By the third quarter, we hope to reach 19, and by the end of the year, we want all of the lines to be used. However, labor availability is the only factor limiting our capacity, which accounts for the discrepancy between what you would predict based on our customers and what we were able to supply.
Retail sales of refrigerated goods increased 1.4% to $975 million. Profit for the business segment dropped 40% to $76 million. The outcomes were impacted by the hog market’s volatility.
Sales of $478 million for Post’s Weetabix division were up 8% over the previous fiscal year. The segment’s $115 million earnings increased by 3%.
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According to Mr. Vitale, he anticipates adjusted EBITDA to expand at a rate of 3% to 7% in fiscal 2022, or between $1.2 billion and $1.6 billion.
He stated, “Two key assumptions supporting this range are that labor markets will normalize and that ingredient, packaging, and freight inflation will have peaked by the end of our second fiscal quarter.” There may be pressure on our outlook if such assumptions turn out to be optimistic. In terms of inflation specifically, the timing is the main source of concern since we anticipate continuing to price inflation, but perhaps a little later than expected.
The adjusted EBITDA level for 2022, he continued, does not correspond to management’s projections of Post’s base profits potential.
“Three distinct drivers,” he mentioned. First, as supply chains normalize and pricing falls, we do anticipate that some of these cost pressures and capacity bottlenecks will persist for the first half of the fiscal year before gradually decreasing. Second, we still believe that foodservice will not see a full profit recovery until the 2023 fiscal year. Lastly, fiscal ’22 will see the majority of the synergy realization from previous year acquisitions, with 2023 serving as the first full year on the P&L.