Ralcorp sales up despite drop in branded cereal
BakingBusiness.com, May 7, 2010
by Jeff Gelski
ST. LOUIS — Net earnings at Ralcorp Holdings, Inc. fell 43% to $46.7 million, equal or 85c per share, in the second quarter ended March 31, which compared with $70.2 million, or $1.25 per share, in the previous year’s second quarter. Net sales, meanwhile, rose 2% to $965 million from $946.5 million, despite a 7% decline in net sales in the Branded Cereal Products segment.

The increase in net sales largely was due to the timing of the Harvest Manor Farms acquisition in March of 2009. Harvest Manor had net sales of $42.3 million in the second quarter.

Lower raw materials costs and the Harvest Manor Farms acquisition had a positive impact on second-quarter earnings, but lower net pricing and a goodwill impairment loss impacted earnings negatively.

The Branded Cereal Products segment had second-quarter sales of $260.6 million, down from $279.4 million in the previous year’s second quarter. The decrease was driven by lower net selling prices due to increased product promotions. Net product offerings, including Honey Bunches of Oats Pecan Bunches, Cupcake Pebbles, Shredded Wheat Vanilla Almond, Cherry Almond Crunch, Toasties and Just Bunches Cinnamon accounted for about $23 million of second-quarter net sales. Profit contribution in the segment eased to $55 million from $56.5 million in the same period a year ago.

A decrease of 1% in second-quarter net sales of the Other Cereals Products segment was driven by the effects of unfavorable selling price variances and volume declines, offset by a favorable product mix. Second-quarter sales of $193.3 million compared to $194.4 million in the previous year’s second quarter.

Within the Other Cereal Products segment, sales of private label, ready-to-eat (R.T.E.) cereal fell 4% in the second quarter. Hot cereal sales dropped 10%. Second-quarter sales of nutritional bars rose 24%, largely driven by the resumed production and sale of peanut items after an industry-wide recall of peanut and peanut-related products in the second quarter of fiscal year 2009.

Profit contribution within the Other Cereal Product segment rose narrowly to $22 million from $21.6 million.
Second-quarter net sales in the Frozen Bakery Products segment dropped to $172.9 million from $176.8 million as a result of lower pricing, largely in accordance with certain contract treatment of commodity costs in the in-store bakery and food service channels. Profit contribution in the segment totaled $40.5 million, up 67% from $24.3 million.

Second-quarter net sales in the Snacks, Sauces & Spreads segment increased 14% to $338.2 million from $295.9 million due to about $42.3 million of sales from Harvest Manor Farms. Within the segment, cracker sales declined 11%, as did cookie sales. The declines primarily were attributable to some discontinued business and reduced consumer price gaps relative to branded products at a major customer. Profit contribution in the segment rose 18% to $18.2 million from $15.4 million.

Companywide for the six months ended March 31, Ralcorp had net earnings of $113.9 million, or $2.06 per share, down from $135.7 million, or $2.41 per share. Six-month net sales were $1,957 million, up from $1,915 million.

Ralcorp stock on the New York Stock Exchange closed at $65.17 per share on May 6 after opening the day at $66.86 per share.