ST. LOUIS — Pebbles led a strong first quarter for Post Holdings, Inc.’s branded cereals, which carried the Post Consumer Brands segment to a 2% sales increase.
Pebbles had pound consumption growth of 13.1% in the quarter ended Dec. 31, 2016, while Malt-O-Meal bags and Honey Bunches of Oats had pound consumption growth of 11.4% and 3.7%, respectively. Consumption of Great Grains fell because of stock-keeping unit (s.k.u.) rationalization.
“We think we’ve done good things around innovation, packaging (of Pebbles),” said Rob Vitale, president and chief executive officer of St. Louis-based Post Holdings, in a Feb. 3 earnings call. “We think we’ve made some taste improvement. So I would hesitate to try to attribute anything to one silver bullet. It’s basic blocking and tackling across all aspects of the product, the marketing mix, the sales execution that has driven a really quite impressive performance.”
Post is returning Pebbles to its box-only format, he added.
“The brand’s strong performance and pricing strategy makes this a good move for Post and its retail partners,” he said. “We expect Pebbles to continue to grow through better advertising, better taste and better innovation.”
The Post Consumer Brands segment recorded first-quarter profit of $81.6 million, up 30% from $62.9 million. Net sales of $420.6 million were up 2% from $411.6 million. Volumes declined 0.5%. Net sales and volume grew for Malt-O-Meal branded bags, Pebbles and Honey Bunches of Oats. The growth was offset partially by reduced volumes for lower margin co-manufacturing and government bid business.
Post Consumer Brands posted adjusted EBITDA of $108.9 million due to manufacturing cost savings, improved product mix and modestly reduced consumer advertising and promotion, said Jeff Zadoks, chief financial officer for Post Holdings, in the earnings call. A higher trade promotion rate partially offset those factors.
“Recent cereal category trends have continued,” Mr. Vitale said. “The category declined this quarter 1.9% in dollars and 0.5% in pounds. However, unlike recent periods, this quarter base volumes declined and incremental volumes grew. Our consumption was strong, with dollars increasing 3.4% and pounds increasing 4.7%. As with the prior quarter, we grew in both base and incremental sales. For the quarter, our dollar and pound share increased 19% and 21.8%, respectively.”
Post Holdings overall recorded net earnings of $97.6 million, or $1.36 per share on the common stock, which was an increase of 283% from $25.5 million, or 16c per share, in the previous year’s first quarter. Net earnings included a gain of $144.5 million primarily related to non-cash, mark-to-market adjustments on interest rate swaps. First-quarter net sales of $1,249.8 million were up 0.1% from $1,248.8 million.
The Michael Foods segment sustained a $17 million loss compared with a profit of $80.8 million in the previous year’s first quarter. Net sales in Michael Foods dropped 8% for $539.8 million from $586.4 million. First-quarter expenses included a provision for $74.5 million in legal settlements related to agreements to settle egg anti-trust class-action claims.
The Active Nutrition segment, behind strong growth for Premier Protein branded products, recorded operating profit of $24.9 million, up from $10.5 million in the previous year’s first quarter. Sales jumped 33% to $153.9 million from $115.8 million in the first quarter for Active Nutrition.The Private Brands segment had operating profit of $7 million, down from $12.9 million. Sales were $135.6 million, the same as the previous year’s first quarter.