Post adjusted EBITDA strong across segments

by Eric Schroeder
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Post cereals - Great Grains, Honey Bunches of Oats, Pebbles, Malt-O-Meal
Post is focused on the support of its four cereal brands: Honey Bunches of Oats, Great Grains, Pebbles and Malt-O-Meal branded bags.

ST. LOUIS — For Post Holdings, Inc., the second quarter of fiscal 2016 had a little bit of everything across the company’s portfolio. The company’s cereal business was unchanged, while Michael Foods had a good quarter and Active Nutrition performed “exceptionally well.”

Overall, net income at Post in the second quarter ended March 31 was $1.5 million, equal to 2c per share on the common stock, down from $26.3 million, or 48c per share, in the same period a year ago. Adjusted EBITDA, though, was $247.8 million, up 66% from $149.2 million a year ago. Net sales increased 21% to $1,271.1 million from $1,052.7 million.

Operating profit in the company’s Post Consumer Brands business, which includes ready-to-eat cereal, totaled $74.7 million in the second quarter, up from $50.8 million a year ago, and sales increased to $440.1 million from $243.9 million.

In a May 6 conference call with analysts, Rob Vitale, president and chief executive officer, said the company’s outlook on the ready-to-eat cereal category remains unchanged. Specific to Post, the company’s consumption dollars during the quarter declined 1.9% while volume declined 3.1%.

Rob Vitale, Post Holdings
Rob Vitale, president and c.e.o. of Post

“We are particularly focused on the support of our four brands: Honey Bunches of Oats, Pebbles, Great Grains and the Malt-O-Meal branded bags,” Mr. Vitale said. “We saw consumption dollar and pound growth for three of our core four. The exception was Honey Bunches of Oats, where base volume growth of 2.5% did not fully offset incremental volume declines of 15%, compared against a heavy merchandise period last year.

“Pebbles and our main Great Grains products continued to see solid consumption growth, with pounds growing 5.8% for Pebbles and 2.8% for these Great Grains products. We are focusing the Great Grains brand on our four core s.k.u.s (stock-keeping units) and reducing support from ancillary s.k.u.s. Malt-O-Meal branded bags had good dollar consumption growth of 2.8% and volume consumption growth of 0.2%. This result was achieved despite lapping a prior year that had heavier consumption of smaller trial size bags. In general, consumption base sales for Post Consumer Brands were flat, while higher promoted prices reduced incremental consumption.”

Mr. Vitale said Michael Foods had a “very good” second quarter, as segment profit increased 125% to $89.6 million from $39.8 million. Sales rose to $557.7 million from $550.3 million.

Michael Foods cheese and eggs - Post Holdings
Michael Foods' sales rose to $557.7 million from $550.3 million during the quarter.

“Our repopulation efforts continue following last year’s outbreak of avian influenza,” he said. “Our own farms have resumed operations. We expect them to reach full output levels during our fiscal third quarter. Third-party contracted farms continue to repopulate. We expect them to reach full production capacity by the end of calendar 2016. Recall that as egg supply returns, we are in the process of reversing the temporary portion of incremental A.I. pricing. Our business has shifted toward higher margin channels and products benefiting margins. We expect mix to remain favorable in comparison to our pre-A.I. mix.”

In Post’s Active Nutrition segment, operating profit was $13.8 million, which compared with a loss of $4.5 million a year ago. Net sales increased to $143.8 million from $134.6 million. Mr. Vitale said Premier Protein performed “exceptionally well” during the quarter with shake sales up more than 50%.

“Premier continues to have strong growth in the club channel and is showing great growth in food, drug and mass through expanded distribution,” he said. “The PowerBar renovation is under way with new ingredients, new products and new packaging. We continue to ramp up production with our co-manufacturers for Dymatize.”

Post Active Nutrition - Dymatize, PowerBar, Premier Protein
In Post’s Active Nutrition segment — which include Dymatize, PowerBar and Premier Protein — operating profit was $13.8 million.

In the Private Brands unit, segment profit was $7.7 million, down 26% from $10.4 million a year ago. Net sales were $129.7 million, up from $124.7 million. Jeff Zadoks, chief financial officer, said the sales increase was driven by higher volumes for organic peanut butter, regular peanut butter and dried fruit and nut products, which partially was offset by reduced volumes for tree nut butters.

For the six months ended March 31, net income was $12 million, or 18c per share, which compared with a loss of $75.3 million in the same period a year ago. Adjusted EBITDA was $483.4 million, up from $276.8 million a year ago. Net sales for the six months were $2,519.9 million, up from $2,126.6 million.
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