Bagged cereals benefit Post Consumer Brands

by Eric Schroeder
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Pebbles cereal and Malt-O-Meal bagged cereal, Post
Malt-O-Meal bagged cereals and Pebbles turned in a strong third quarter at Post Holdings.
 

ST. LOUIS — Malt-O-Meal bagged cereals and Pebbles turned in a strong third quarter at Post Holdings, Inc., pushing operating profit in the company’s Consumer Brands segment up 29% year-over-year to more than $96 million.

The Post Consumer Brands segment recorded third-quarter profit of $96.9 million in the third quarter ended June 30, up from $75.2 million in the same period a year ago. Net sales of $427.3 million were down nearly 2% from $434.5 million. Volumes declined 1.1%.

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

“Cereal category trends weakened this quarter with a decline of 4.8% in dollars and 3.9% in pounds,” Robert V. Vitale, president and chief executive officer, said during an Aug. 4 conference call with analysts. “We continue to see declines most pronounced in adult brands, all family brands performing with the category and kid’s brands performing ahead of the category.

“Specific to Post, our consumption was down 1.9% on a dollar basis and 1.7% on a pound basis. However, our dollar and pound share increased to 19.2% and 22%, respectively. Malt-O-Meal bags and Pebbles each had a good quarter, growing pound consumption 4.2% and 1.6%, respectively. Honey Bunches of Oats consumption continues to be pressured by distribution losses of ancillary s.k.u.s (stock-keeping units) and general weakness in the all family segment. Great Grains consumption comparison remains negatively impacted by products discontinued in 2016.

HoneyMaid S'mores cereal, Oreo O's cereal, Post
Post's cereal performance benefited from the introduction of two new license products: Oreo O’s and Honey Maid S’mores.
 

“Our fourth quarter will be the first fully comparable period. Core Great Grains consumption performance was flat this quarter. Overall, our consumption performance was pressured by softer base turns and reduced merchandising activity. However, performance benefited from the introduction of two new license products: Oreo O’s and Honey Maid S’mores. While early, both products are off to a strong start.”

Post Holdings closed on its acquisition of Weetabix on July 3, but Mr. Vitale said the company had little color to add on the business other than to note that Post remains confident in its synergy estimates and early integration activities are proceeding well.

“Most significantly, we have been quite pleased by the considerable enthusiasm from our new Weetabix colleagues regarding the potential benefits of this combination,” he said.

 

The Michael Foods segment posted a profit of $46.4 million in the third quarter, down 29% from $65.6 million in the same period a year ago. Net sales in Michael Foods increased to $524.2 million from $518 million.

“Michael Foods performed as expected this quarter,” Mr. Vitale said. “While certain customers have yet to return to value-added egg products, momentum for new opportunities is growing. Additionally, we are once again serving international markets, which present growth opportunities. Recall throughout the year, we have discussed a reduction in Michael EBITDA, resulting from an imbalance of oversupplied grain-based eggs versus grain-based demand. We continue to estimate the full-year decline in this segment’s EBITDA to be near $100 million, and that decline has been factored into our guidance. We expect sequential improvement in Michael fourth-quarter results with the performance gap to last year nearly eliminated.”

The Active Nutrition segment recorded operating profit of $28 million, up from $17.7 million in the previous year’s third quarter. Sales increased 21% to $188.7 million from $156.1 million in the third quarter of fiscal 2016. 

Post Active Nutrition, PowerBar and Premier Protein
Post's Active Nutrition segment recorded operating profit of $28 million.
 

The Private Brands segment had operating profit of $8 million, down from $9 million. Sales were $132 million, down 4% from the previous year’s third quarter. 

“Results were impacted by constrained capacity at our granola business,” Mr. Vitale said. “New capacity was delayed by a small oven fire, and we now anticipate the new capacity to come on-line in September. Our nut butter business had a solid quarter and has overcome some earlier execution issues that weighed on first-half results.”

Post Holdings overall sustained a loss attributable to common shareholders of $62.9 million in the third quarter on sales of $1,272.1 million. Net loss attributable to shareholders included losses of $160.4 million related to early extinguishment of debt and $45.2 million primarily related to non-cash mark-to-market adjustments on interest rate and cross-currency swaps.  
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