Ralcorp fiscal '09 profit climbs 73% behind Post

by Eric Schroeder
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ST. LOUIS — A full year of benefits from the Post Foods business acquired in August 2008 helped drive sharp earnings growth at Ralcorp Holdings, Inc. in fiscal 2009. Net income in the year ended Sept. 30 was $290.4 million, equal to $5.16 per share on the common stock, up 73% from $167.8 million, or $5.51 per share, in fiscal 2008.

Net sales for the year were $3,891.9 million, up 38% from $2,824.4 million last year. Of the $1,067.5 million sales increase, $890.1 million was attributed to Post Foods and $90.5 million to Harvest Manor Farms.

For the fourth quarter ended Sept. 30, net income was $79.9 million, or $1.41 per share, up 94% from $41.1 million, or 91c per share, in the same period a year ago. Net sales were $983.2 million, up from $873.5 million.

"Post delivered over $300 million in EBITDA during our first year of ownership, which met our expectations," said David Skarie, co-chief executive officer. "We are pleased that the business met our objectives despite a difficult transition and increased competitive pressure, particularly in the last six months of our fiscal year. We have met with all of our major customers to reinforce our commitment to growing this business on both a short- and long-term basis. The customers are excited about our plans for the coming year as we improve our competitive position. In addition, now that Post is firmly on the Ralcorp platform, we will begin driving costs out of the business."

Net sales for Ralcorp’s Cereals, Crackers and Cookies segment were $1,873.9 million, up 100% from $936.5 million in fiscal 2008. Profit contribution for the segment during fiscal 2009 totaled $342.6 million, up from $118.1 million in fiscal 2008. Ralcorp said Post Foods contributed about $250.6 million to the segment’s profit contribution during the year.

Net sales in Snacks rose 15% to $793.7 million, up from $687 million in fiscal 2008, behind the acquisition of Harvest Manor. Profit contribution was $79.5 million, up 69% from $47.1 million. The increase in profit contribution reflected incremental profit from Harvest Manor, improved mix, and higher pricing driven by higher input costs.

Profit contribution in the Frozen Bakery Products segment was $69.1 million, up from $63.7 million in fiscal 2008. Total net sales of the Frozen Bakery Products segment were $694.8 million, down 2% from $711.8 million. The sales decline was due in part to an 11% drop in volume partially offset by selling price improvements.

"Sales volume in the food service channel, particularly in the higher margin bread category, has been negatively impacted by the loss of a major customer due to pricing actions and lower restaurant traffic at our casual-themed national customers," Ralcorp said. "In the in-store bakery channel, volume losses were primarily attributable to lower sales of breads (particularly higher-priced organic breads) and cookies, partially offset by an increase in frozen dough sales volumes."

Net sales of Sauces and Spreads rose 8% to $529.5 million, while profit contribution climbed 143% to $38.1 million. Ralcorp said sales were boosted by the timing of price increases in response to rising costs, partially offset by the effect of a change in product mix.

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