Post Holdings: Volumes Normalizing After FY2023 Declines
Despite strong quarterly sales amid reduced volumes for its cereal and peanut butter business, Post Holdings reported a double-digit decline in net earnings during Q4 caused in part by volume declines in foodservice and refrigerated retail.
Releasing its quarterly earnings yesterday after markets closed, Post reported overall Q4 net sales of $1.9 billion, up 23% compared to the same period last year. Factoring higher expenses and operating costs, net earnings were $65.7 million, a 21.7% decrease compared to $83.9 million in Q4 2022.
The company is also making a change at the top: Rob Vitale, president and CEO, joined the call early on to announce he will step away from day-to-day operations as he undergoes cancer treatment. EVP and COO Jeff Zadoks will lead the company in his absence as interim CEO.
Taking over the call, Zadoks said the company had “a very strong start to our entry in the pet food category and recaptured some profit margin in our domestic retail businesses for pricing, significant improvement in labor availability, and supply chain performance.”
In February, the cereal maker acquired various pet food brands from J.M. Smuckers, then added more following its purchase of Perfection Pet Foods last month (which was not included in the results as the deal is still closing). When the pet food business is excluded from the earnings, net sales increased 3% and volumes decreased 6% with average net pricing increasing 10%.
Post’s full year sales were $6.9 billion. Net earnings were down 59% at $303 million. The company’s 2024 outlook put adjusted EBITDA between $1.2 billion and $1.26 billion.
Despite consumers pulling back on shopping trips due to a combination of “inflation, higher interest rates, reduced SNAP benefits, restarted student loan payments and lower savings,” Post Holdings is positioned for growth in 2024, Zadoks said.
“We are seeing consumers prioritize convenience and on-the-go, especially in breakfast,” he said. “We believe our diversification serves us well as we have meaningful exposure to value products and domestic and international cereal.”
Post Consumer Brands sales (which includes its cereal, peanut butter, cracker and cookie brands) during the quarter were $1 billion, versus $587 million in Q4 2022. In contrast, the company’s refrigerated retail segment posted $233 million in sales, compared to $249 million with a 8.2% decline in volume.
The company is also planning targeted investments in its Pebbles, Weetabix and Bob Evans brands in the coming year. Overall U.S. cereal volumes fell 6% during the quarter.
Zadoks noted that even as consumers trade down in CPG food categories like cereal, Post is “well-positioned to capture this move given its strong share” in private label brands. Post Consumer Brands is expected to report low- to mid-20% margin growth in its CPG food categories.
Despite supply chain challenges stemming from avian flu’s impact on eggs and softer demand, foodservice volumes declined only 1.1%, less than company leadership expectations. Net sales in foodservice were $569.5 million, a 9% decrease YoY. For the full year, foodservice sales were $2.4 billion, an increase of 15.8% compared to 2022.
Post’s executive team remained optimistic that there was only improvement ahead.
“I don’t want to be too rosy about it, there’s obviously competition but thus far we’ve had a tremendous amount of success in maintaining our business and growing it not only recently but over time,” Zadoks said.
