Successful Q3 Buoys Outlook beyond 2022

ST. LOUIS — Post strong third quarter results, Post Holding, Inc. raised its outlook for fiscal 2022. The company raised its guidance for adjusted EBITDA to $930 million to $945 million from $910 million to $940 million. The momentum from the spin-off of the company’s interest in BellRing Brands, Inc. helped provide the basis for Post’s stronger third-quarter earnings as it dealt with “persistent issues” in its supply chains along with “historic levels of inflation.”

Post’s net income in the third quarter ended June 30 was $170.2 million, or $2.77 per share of common stock, a sharp increase from a loss of $54.3 million in the same period a year ago. The most recent quarter included swaps revenue of $131.6 million and a $35.1 million gain on the BellRing investment.

Net sales increased 22.2% to $1.5 billion from $1.25 billion in the same period a year ago.

“The Post had a successful quarter,” said Robert W. Vitale, president and chief executive officer, on an Aug. 5 conference call with analysts. “We’re building momentum for the last quarter of the year and into next year.

“First, we have been able to largely offset the impact of inflation with pricing. Input costs remain volatile and we expect further inflation and further pricing. We are confident in our ability to provide the required prices. Gross margins declined year-over-year primarily as a result of the mechanics of our grain-based pricing model in foodservice, as well as a mixed change across our overall business portfolio.”

Segment profit in the company’s Post Consumer Brands business fell in the third quarter to $81.8 million, down 7% from $87.8 million. Net sales increased to $574.7 million, up 23% from $468.7 million.

“The cereal business in North America continues to benefit from the consumption strength of key brands such as Fruity Pebbles and Honey Bunches of Oats, as well as the strength of private label and value,” Mr. Vitale said. “Our branded share reached 20% and total private label reached 6.7%. Remember, we are the largest supplier of private label ready-to-eat cereals. The recent innovation, in particular the Premier Protein cereal, has also been quite well received.’

Volumes in the post-consumer brands business increased 13.9% in the quarter.

Segment profit in the Weetabix business fell to $27.8 million, down 3% from $28.6 million in the same period a year ago. Net sales increased 1% to $124.9 million from $123.4 million.

“Weetabix net sales increased 1% despite a significantly stronger U.S. dollar versus the British pound, which caused a foreign currency translation headwind of nearly 1,100 basis points,” said Jeff A. Zadox, executive vice president and chief financial officer. “Net sales benefited from significant increases in list prices and sales from the recently acquired brand (Lacka Foods Ltd.). These benefits were offset by an unfavorable mix reflecting growth in private label products.”

In April, Post acquired Lacka, a UK-based distributor of ready-to-drink high-protein shakes.

Foodservice profit was $45.9 million in the quarter, up 65% from $27.9 million a year ago. Net sales in the third quarter increased 33% to $579 million from $435.1 million. Growth in the foodservice sector was driven by gains in distribution and higher demand for out-of-home locations, Mr. Zadox said.

“Revenue growth continued to outpace volume growth as revenue reflected the impact of price actions and the effect of our commodity cost pass-through pricing model,” he said. “While we saw year-over-year growth this quarter, overall segment volumes remained below pre-pandemic levels.”

Refrigerated Retail segment profit was lower in the quarter, falling 27% to $10.4 million from $14.3 million. Net sales increased 12% to $246.4 million from $220.8 million. The retail refrigeration segment was hit by bird flu, Mr. Vitale said.

“The rising costs of avian influenza cannot be overcome quickly enough,” he said. “However, the business has made great strides year on year. Remember that last year our supply chain constraints left us unable to build inventory before the key holiday season. We have expanded our capacity with other manufacturers and are fully prepared for the upcoming season.”

In the three months ended June 30, Post bought back 1.9 million shares for $145.8 million at an average price of $76.43 per share. During the nine months ended June 30, Post repurchased 3.8 million shares for $338.9 million at an average price of $89.94 per share. The average price per share during the nine-month period was $103.79 before the BellRing distribution and $76.43 after the BellRing distribution. As of June 30, Post had $145.8 million remaining under its share repurchase authorization.

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