Acquisition helps drive strong earnings at Ralcorp

by Eric Schroeder
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ST. LOUIS — Gains from the recently acquired Harvest Manor Farms helped drive stronger sales and earnings at Ralcorp Holdings, Inc. in the first quarter. Net income in the quarter ended Dec. 31 totaled $67,200,000, equal to $1.20 per share on the common stock, up 3% from $65,500,000, or $1.17 per share, in the same period a year ago.

Net sales for the quarter were $991,900,000, up 2% from $968,200,000 last year. Ralcorp said sales received a $53,800,000 boost from Harvest Manor Farms, which was acquired in March 2009. Excluding sales from the acquisition, total base business sales fell 3% year over year.

For the first quarter, Cereals had profit contribution of $73,300,000 on sales of $440,800,000, down from $74,100,000 and $449,300,000, respectively, in the same period a year earlier. Ralcorp attributed the decrease to volume declines and lower net selling prices, partially offset by the effects of product mix.

“Although branded R.-T.-E. volume declined as a result of continued competitive promotional activity in the category, the amount of the decline was less than experienced in the second half of fiscal 2009,” Ralcorp said in a Feb. 5 filing with the Securities and Exchange Commission. “In co-manufacturing (volume produced for branded companies), the prior year’s first quarter included significant hot cereal volume that was not recurring, driving most of the noted volume decline. In addition, other co-manufacturing volume decreased as a result of the end or decline of several production contracts. The total co-manufacturing volume change resulted in a sales dollar decline of $8.5 million for the quarter. The decrease in hot cereal volume was primarily due to the loss of lower margin business a year ago in a competitive bid.”

Within the Snacks, Sauces & Spreads segment, profit contribution totaled $47,500,000, up 60% from $29,700,000. Sales rose 13% to $369,300,000 behind gains from the Harvest Manor acquisition. According to Ralcorp, crackers and cookies volume declined 5% and 9%, respectively, during the first quarter. Nuts sales volume fell 2%. Peanut butter sales rose 8% in the quarter, due largely to new business with an existing major customer, Ralcorp said.

Profit contribution in the Frozen Bakery Products segment was $26,400,000, up sharply from $15,000,000 in the same period a year ago. Total net sales of the Frozen Bakery Products segment were $181,800,000, down from $191,100,000.

“While volume in the in-store bakery channel was down only slightly, I.S.B. net sales declined 8% from the prior year due to a shift in product mix to more frozen dough products from value-added products such as breads, as well as lower pricing,” Ralcorp said. “The retail channel reported strong volume gains in addition to slight pricing increases, partially offset by a shift in sales mix. The increase in retail volume is attributable to a new customer, increased distribution with other customers, and waffle supply difficulties at a major competitor.”

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