Post Consumer Brands
Post returned to profitability in fiscal 2017, generating net income of $48.3 million.

ST. LOUIS — After a challenging fiscal 2016 in which the company sustained a loss of $3.3 million, Post Holdings, Inc. returned to profitability in fiscal 2017, generating net income of $48.3 million, equal to 51c per share on the common stock, in the year ended Sept. 30. Net earnings in fiscal 2017 included a $222.9 million loss related to early extinguishment of debt and a $91.8 million net gain primarily related to non-cash mark-to-market adjustments on interest rate and cross-currency swaps.

Net sales in fiscal 2017 increased 4% to $5,225.8 million, up from $5,026.8 million a year ago.

Adjusted EBITDA was $989.1 million in fiscal 2017, up nearly 6% from fiscal 2016.

In a Nov. 17 conference call with analysts, Robert V. Vitale, president and chief executive officer of Post, said ready-to-eat cereal in North America and the United Kingdom remains the largest contributor to total adjusted EBITDA.

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

“In U.S. measured channels, the (R.-T.-E.) category continues to experience low single-digit declines, and our expectations for 2018 are consistent with recent performance,” Mr. Vitale said. “We do believe the rate of decline is overstated as non-measured channels are growing. We estimate this reverses 1 percentage point of decline. As we have discussed, the adult subsegment remains the weakest in North American cereal. Older consumers are seeking breakfast alternatives with more protein. Other segments of our business benefit from this trend. We have clear and reasonable expectations for Post Consumer Brands in 2018.

“First, we will complete the final stage of the merger that created this segment; bringing Post Foods and MOM Brands together has resulted in cost reduction well ahead of our initial expectations.

“Second, we must apply that same rigor to the Weetabix North America integration. It is well under way.

Post Consumer Brands and MOM Cereal
Bringing Post Foods and MOM Brands together has resulted in cost reduction for the company.

“Finally, and most critically, we must continue to deliver taste and value propositions that enable us to defend our share. We expect modest growth in EBITDA to result from flat volumes and ongoing cost reductions, which are partially offset by increases in advertising and commodity costs.”

Operating profit in the company’s Post Consumer Brands unit totaled $359 million in fiscal 2017, up 19% from $302.9 million in the same period a year ago. Net sales in the unit increased to $1,851.5 million from $1,838.5 million.

Digging deeper into the company’s cereal business, Mr. Vitale said Post sees “a more intense competitive environment” heading into 2018 than it experienced in 2017. He said the additional competition in the bagged cereal segment brings both positives and negatives to the table.

Weetabix USA, Post
The Weetabix North America integration is under way at Post.

“We tend to see some velocity reduction,” he explained. “However, the entry of additional competitors into the segment also validates the perceived product quality of the packaging and, generally, has led to expansion of the bag segment, which we tend to be, in that, a winner in. So as the competitive environment changing has some puts and takes, and we think we have done enough scenario planning to factor it into our expectations for 2018.”

Mr. Vitale said Post does not expect to see significant distribution gains from Weetabix in 2018. Instead, Post plans to spend the next year integrating the business, dealing with cost management and lifting the unit's operating profit margins.

“That’s a 12- to 24-month process, including some supply chain reconfiguration,” he said.