ST. LOUIS – Post Holdings’ portfolio of retail and foodservice businesses had the expected effect on earnings during the third quarter of fiscal 2020. Retail sales and volumes jumped while foodservice-related business performance suffered during the quarter.
“The business executed well this quarter in a challenging environment,” said Robert V. Vitale, president and chief executive officer, during a conference call with analysts on Aug. 7. “Our center store and Refrigerated Retail businesses had terrific results. Our foodservice business suffered rapid demand destruction with gradual rebuild.”
Net income for the quarter ended June 30 was $36 million, equal to 53¢ per share on the common stock, and an improvement compared to the same period of fiscal 2019 when the company earned $16 million, equal to 16¢ per share.
Quarterly sales dipped to $1.3 billion from $1.4 billion the year prior.
Post Consumer Brands, the company’s largest business unit that includes its North American ready-to-eat cereal business, saw sales rise 11% to $528 million. Volumes increased 7.5% benefiting from increased at-home consumption due to the coronavirus (COVID-19) pandemic.
“We’ve limited assortment, enabling higher manufacturing line productivity and increased output,” Mr. Vitale said. “This was most pronounced in Post Consumer Brands, which, because of its value portfolio, manages a relatively larger number of SKUs (stock-keeping units). We are now close to essentially a normal level of manufacturing and are reestablishing our merchandising programs.
“As you all know, the ready-to-eat cereal category has struggled in recent years. We anticipate that the experience in the last several months will have a positive intermediate to long-term benefit on the trajectory of the category.”
Refrigerated Retail business unit sales surged 21% during the quarter to $250 million. Volumes increased 5%, benefiting from increased at-home consumption with growth in cheese, sausage and side dishes partially offset by declines in egg products, according to the company.
At the opposite end of the spectrum, Foodservice sales plummeted 41% to $242 million when compared to the same period of the previous year. Business unit volumes declined 42%, with egg volumes falling 39% and potato volumes declining 53%.
“Our near-term challenge remains in foodservice,” Mr. Vitale said. “We saw volume recovery in line with expectations, and the business was profitable in June. We expect the fourth quarter to continue the June performance, but we certainly have the potential for pandemic-related headline risk or benefit.”
Jeff A. Zadoks, chief financial officer, added, “We expect our foodservice volume recovery to highly correlate to the degree restrictions are imposed on mobility and gathering and coincide with the progress achieved in containing the spread of the virus, improved therapeutics and ultimately, an effective vaccine. We continue to anticipate a full recovery will likely take through fiscal 2021.”
Weetabix sales rose 3% to $112 million. Volumes benefited from an increase in biscuit cereal products and the benefit of participation in a government-backed food initiative were partially offset by declines in drink and bar products resulting from reduced on-the-go consumption.
Like many other companies, Post Holdings withdrew its earnings guidance earlier in the year. Management expects fourth-quarter adjusted EBITDA to be like the third quarter.
“It’s hard to neatly wrap this quarter up into a singular description, but the best I come up with is resilience,” Mr. Vitale said. “In some ways, this quarter revealed the strength of the construction of our portfolio.”