Food & Drinks

Foodservice delivers strong Q4 for Post Holdings

ST. LOUIS — As Post Holdings, Inc. closed out its 2022 fiscal year, Robert Vitale, president and chief executive officer, said he saw the core franchise gaining strength even as the company worked to fend off the effects of inflation, supply chain obstacles and unfavorable foreign exchange rates. Fourth-quarter results were helped by “exceptional performance” in the Foodservice segment, he said.

“Over the last three years, enterprise-wide EBITDA margins have decreased approximately 440 basis points,” Mr. Vitale said in a Nov. 17 conference call with analysts to discuss fourth-quarter and full-year financial performance. “Roughly half of this decrease is attributable to growth in foodservice and attractive acquisitions that yield lower EBITDA margins. So, mix related. The remaining half is our addressable opportunity.

“Attacking this opportunity will be a multiyear effort focused on several areas, including maintaining pricing discipline vis-a-vis input cost inflation, stabilization of supply chain costs and performance, better leverage on fixed assets within Refrigerated Retail, and improvements in manufacturing asset reliability aimed at minimizing plant downtime.”

Net earnings of Post in the fourth quarter ended Sept. 30 were $83.9 million, equal to $1.32 per share on the common stock, which compared with $29.9 million, or 39¢ per share, in the fourth quarter of 2021. The year-ago quarter included net earnings from discontinued operations and tax and noncontrolling interest of $21.6 million.

Adjusted EBITDA was $279.7 million, an increase of 32%, from $212 million in the fourth quarter of 2021.

Net sales in the fourth quarter rose 16.5% to $1.58 billion, up from $1.36 billion in the year-ago quarter.

“Net sales increased 16.5% and benefited from pricing actions in each segment and continued volume recovery in our foodservice business,” Jeff Zadoks, chief financial officer, said during the conference call. “Supply chain disruptions eased slightly, but our per unit product costs remained elevated and our customer order fulfillment rates remain below optimal levels.”

In fiscal 2022, net earnings of Post Holdings were $756.6 million, or $12.09 per share, up sharply from $166.7 million, or $2.38 per share, in 2021.

Sales for the year were $5.85 billion, up 17.5% from $4.98 billion in fiscal 2021.

“I would characterize 2022 as having been dominated by inflation management and ongoing supply chain challenges,” Mr. Vitale said. “We expect 2023 to be focused on margin restoration.”

Segment profit for Post Consumer Brands in the fourth quarter was $82 million, an increase of 23% from the prior-year period. For the fourth quarter, net sales were $587.6 million, up 12.6% from the fourth quarter of 2021.

Volumes increased 2.1% primarily driven by growth in Peter Pan nut butters, Pebbles, private label cereal and Malt-O-Meal bag cereal, partially offset by declines in Honey Bunches of Oats, the company said.

Post Consumer Brands experienced some category trade-down to value in private label while branded consumption dollars grew to 19.4%. The company is still working its way back to pre-pandemic levels of supply chain execution, Mr. Vitale said.

For the full fiscal year 2022, segment profit was essentially flat at $314.6 million. Net sales for the year were $2.24 billion, an increase of 17% from fiscal 2021.

Foodservice segment profit surged 393% to $70 million in the fourth quarter. Foodservice net sales in the quarter rose 37% to $625.5 million. Volumes increased 3.6%, with egg volumes up 5.2% and potato volumes up 2.1%.

Quarterly segment profit increased 144.7% to $151 million. Post said segment profit for fiscal year 2022 was negatively impacted by a provision for legal settlements of $13.8 million, which was treated as an adjustment for non-GAAP measures.

“So foodservice margins, as I suggested in my remarks, tend to normalize at higher levels than prior to an experience like the — whether it’s COVID or AI, whatever the emergency may be because I think that the business is so competitively advantaged, and the biosecurity is so good, and the cost structure is so impressive that it really does allow for a demonstration of the value of the relatively unique proposition that we offer,” Mr. Vitale said. “So, in crisis, character is revealed, and I think that’s what happens. We expect this with our foodservice business. By no means do we expect the margin to remain as elevated as it has been in the last couple of months, but we would expect it to remain or to become institutionalized at a higher level than it had been historically.”

In fiscal 2022, Foodservice net sales rose 29.7% to $2.1 billion.

Weetabix segment profit slipped 15.5% to $27.7 million from the year-ago quarter. Fourth-quarter net sales dropped 8.2% to $116.8 million, which included $6.7 million from the Lacka acquisition. Volumes declined 2.9%. Excluding the benefit from the Lacka acquisition, volumes were down 9.4% as growth in private label products was offset by declines in branded products.

Sales also reflected the negative impact of foreign currency exchange rates and dramatic inflation in the UK, specifically tied to home energy.

Fiscal 2022 net sales in the Weetabix segment held flat at $477.3 million. Segment profit in the year was $109.5 million, down 5.1% from 2021.

Refrigerated Retail segment profit in the fourth quarter leapt 335.1% to $16.1 million while net sales dipped 0.8% to $249.2 million.

Sales in year-ago quarter included $10.1 million related to the divested Willamette business, according to Post. Volumes declined 15%. Excluding the effect of the Willamette business, volumes dropped 7.1%, driven by declines in egg, resulting from the HPAI, and cheese, due to the company’s exit from certain low-margin business.

“Recall that last year, supply chain inhibited our ability to build inventory for the all-critical holiday season,” Mr. Vitale said. “This year, inventories are at a solid level and customer fill rates dramatically improved. High egg prices inhibited volume and profit in this segment, but on balance, it has made great progress.”

Segment profit for fiscal year 2022 slipped 25% to $57.1 million. Full-year net sales edged up 6.4% to $1.04 billion.

Post also announced it is promoting two executive employees to new roles. Matt Mainer, current senior vice president and treasurer, was promoted to include CFO in his title. Jeff Zadoks, current executive vice president and CFO, was promoted to executive vice president and chief operating officer. Both employees will assume their new roles Dec. 1.

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