Successful Q3 buoys post 2022 view

ST. LOUIS – Post Holdings Inc. raised its outlook for fiscal 2022 following strong results in the third quarter. The company’s declining interest in Bellring Brands Inc. helped underpin strong third-quarter earnings for the Post, which explored “emerging challenges” in its supply chain alongside “historic inflation.”

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

Net sales rose 22.2 percent to $1.5 billion, up from $1.25 billion in the same period a year ago.

“Post had a successful quarter,” President and CEO Robert Vitale said during an Aug. 5 conference call with analysts. “We are building momentum for the last quarter of the year and next year.

First, we were able to offset inflation. Input costs remain volatile, and we expect more inflation and higher prices. We are confident in our ability to deliver the required value. Gross margins decreased year-over-year primarily due to changes in the mix of our grain-based pricing model in our foodservice and overall business portfolio.

Profit in the company’s mail-order consumer brands business fell to $81.8 million in the third quarter, down 7 percent from $87.8 million. Net sales increased to $574.7 million, an increase of 23 percent from $468.7 million.

“The North American cereal business continues to benefit from the strength of consumption in 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 brand share has reached 20%, and the total private label has reached 6.7%. Remember, we are by far the largest ready-to-eat cereal label supplier. The latest innovation, especially Premier Protein Cereal, has been well received.”

Volumes in the Postal Consumer Brands business increased 13.9% in the quarter.

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

“Weetabix net sales increased 1% in US dollar versus British pound terms, resulting in foreign currency translation headwinds of approximately 1,100 basis points,” said Jeff A. “Net sales benefited from higher price increases and brand sales from the recently acquired (Lacka Foods Ltd.). These benefits were offset by an unfavorable mix reflecting growth in private label products.”

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

Foodservice profit was $45.9 million in the quarter, up 65 percent from $27.9 million a year ago. Net sales in the third quarter increased 33 percent from $435.1 million to $579 million. Growth in the food service business was boosted by distribution gains and demand away from home, Mr Sadock said.

“Revenue growth continues to outpace volume growth as revenue reflects the impact of pricing actions and the impact of our commodity costs on our pricing model,” he said. “While we saw year-over-year growth this quarter, overall unit volume remained below pre-pandemic levels.”

Refrigerated Retail’s profit was lower in the quarter, falling 27% to $10.4 million from $14.3 million. Net sales increased 12 percent to $246.4 million from $220.8 million. The refrigerated retail segment has been affected by avian flu, Mr. Vitale said.

“The increase in the cost of avian influenza could not pass quickly,” he said. “However, the business has grown significantly year on year. Last year, supply chain constraints prevented us from building inventory before the key holiday season. We have expanded our capabilities with third-party manufacturers, and are fully prepared for the upcoming season.

During the three months ended June 30, Post bought back 1.9 million shares worth $145.8 million at an average price of $76.43 per share. In the nine months ended June 30, the Post bought back 3.8 million shares worth $338.9 million at an average price of $89.94 per share. The average price per share over the nine-month period was $103.79 before the Belling distribution and $76.43 after the Belling distribution. In the year As of June 30, Post had $145.8 million left in stock buybacks.