ST. LOUIS — More M.&.A. may be on the way for Post Holdings, Inc., said Rob Vitale, president and chief executive officer. Over the past two years, the St. Louis-based holdings company has built a diversified portfolio that includes ready-to-eat cereal, egg ingredients, protein bars and nut butters. Most recently, in September, the company agreed to acquire Willamette Egg Farms, L.L.C. to expand its egg business.
|Rob Vitale, president and c.e.o. of Post|
“From a strategic perspective, Post is well-positioned,” Mr. Vitale said during a Nov. 24 earnings call with financial analysts. “We do not lack for opportunities to deploy capital. Our opportunities include tactical purchases, like our Willamette Egg transaction, as well as more transformative opportunities. We will continue to pursue both while being discriminating in our selection among these opportunities.”
For Post, such an opportunity may include a small acquisition to expand a business unit or a single “blockbuster acquisition,” Mr. Vitale said. Recent transformative transactions have included the January acquisition of MOM Brands for $1.15 billion and last year’s purchase of Michael Foods for $2.45 billion.
“Where two years ago to really move the meter, we needed to make more of the blockbuster acquisition, now we have the luxury of having opportunities to build within the portfolio on a tactical basis,” Mr. Vitale said. “That being said, we continue to look for transformational opportunities and would pursue them if the right one came along. We are not shying off of either.”
For the fiscal year ended Sept. 30, Post narrowed its loss to $167.3 million, which compared with a year-ago loss of $343.2 million. Adjusted EBITDA increased 91% to $657.3 million from $344.5 million. Net sales for the year totaled $4,648.2 million, up 93% from prior-year sales of $2,411.1 million.
“We enter 2016 having spent two years building a portfolio that provides a balance of diversification, organic growth and M.&A. optionality,” Mr. Vitale said. “Each of our business units, including ready-to-eat cereal, has the strategy to deliver organic growth, and each business unit has opportunities for more dramatic growth via M.&A. Together, the business units complement each other in a manner that enables aggressive balance sheet management to fuel the growth and leverage the return potential.”
Segment profit for the Post Consumer Brands unit, which includes the company’s Post Foods and MOM Brands ready-to-eat cereal businesses, increased 19% to $205.5 million for the year, which included the negative impact of an inventory adjustment and integration expenses. Net sales for the segment advanced 31% to $1,260.8 million.
“The cereal category has continued to show improvements in its rate of decline,” Mr. Vitale said. “While we would certainly like to be discussing category growth, the first step in getting there is slower decline. We attribute this improvement to an overall increase in cereal advertising, a modestly improving consumer profile, and simply the lapping of weaker comparisons.”
For the Michael Foods Group, which includes food service, egg, potato and pasta businesses and the retail cheese business, segment profit for the year was $188.2 million, up 771% from $21.6 million the year before. Net sales grew 164% to $2,305.7 million.
“We continue to navigate the reverberations of avian influenza,” Mr. Vitale said. “That event echoes through our business practices around biosecurity, our relationships with customers, and our overall approach to risk management. It would be foolish to conclude this risk is contained; rather, we have a better understanding of it and have developed a thorough approach to mitigate the effects of any future outbreaks.”
Post’s Active Nutrition segment, which includes the PowerBar, Premier Protein and Dymatize brands, reported a loss of $13.8 million, which compared with a loss of $1.8 million in the prior year, reflecting the negative impacts of an inventory adjustment from acquisition accounting and integration expenses. Segment sales increased 89% to $555 million for the year.
“Within our Active Nutrition brands, Premier Protein continues to perform exceptionally well,” Mr. Vitale said. “PowerBar is on track with respect to its needed renovation. Our challenge remains Dymatize.”
To reactivate the Dymatize brand, Post has ceased internal manufacturing of the products. Post also plans to exit the Dymatize private label business and shrink the branded business to its core products. Three products within the portfolio amount to approximately 76% of sales but only 22% of stock-keeping units, Mr. Vitale said.
Operating profit for the Private Brands segment, which includes nut butters and nut and dried fruit snacks, increased 84% to $41.5 million, including the negative impact of an inventory adjustment resulting from acquisition accounting. Segment sales advanced 113% to $529.7 million for the year.
For the fourth quarter, Post had a loss of $72.5 million, which compared with a loss of $287.4 million for the comparable quarter. Adjusted EBITDA was $193.1 million for the quarter, up 41% from $137.3 million in the year-ago quarter. The company recorded non-cash goodwill and intangible asset impairment charges of $60.8 million in the quarter within the Active Nutrition and Post Consumer Brands segments.
Net sales increased 26% to $1,309.8 million from sales of $1,043.1 million the year before. The increase in sales was driven primarily by three acquisitions completed during the year. Excluding acquisitions, net sales were flat compared with the same period of the previous year.
“We finished 2015 with a strong fourth quarter, and we are encouraged by our prospects for 2016,” Mr. Vitale said. “We expect 2016 to build upon the momentum we have gained and enable us to attractively grow adjusted EBITDA despite incremental investments in brand building and modestly higher net commodity costs.”For the year ahead, Post management expects adjusted EBITDA to be between $780 million and $820 million.