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Post Holdings Inc. Posts Jump in Profit in Fiscal Second Quarter

By Travis Hoium - May 4, 2018 at 9:06PM

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Acquisitions are starting to pay off for Post Holdings.

Post Holdings Inc. (POST 1.45%) reported earnings before the market opened on Friday, May 4, and showed a solid turnaround from some recent operational challenges. There wasn't a drop in egg sales to complain about, or a drop in organic sales overall. In fact, volume is picking up, and acquisitions are adding to Post Holdings' growth.

Here's a look at the highlights for Post Holdings from the fiscal second quarter.

Food spilling out of a grocery bag

Image source: Getty Images.

Post Holdings Inc: The raw numbers

Metric Q2 2018 Q2 2017 Year-Over-Year Change
Sales $1.59 billion $1.26 billion 26.3%
Net income $88.9 million ($5.5 million) N/A
Diluted EPS $1.20 ($0.08) N/A

Data source: Post Holdings Q2 2018 earnings release. EPS = earnings per share.

What happened with Post Holdings Inc. this quarter?

The headline numbers were impressive. But gains were spread across Post Holdings' operating segments, which is great for the business:

  • On January 12, 2018, Post Holdings completed the acquisition of Bob Evans, a provider of products like refrigerated potato, pasta, and vegetable-based dishes. This caused a reorganization of the business; it included moving granola and pasta to the consumer brands business, along with some of the Michael Foods group into refrigerated foods and some into private brands. The new reporting structure started this quarter, which makes growth in revenue a bit uneven, given that it's not really comparable to a year ago. That's something to keep in mind in the segment results below.
  • Post consumer brands revenue was up 7.2% versus a year ago to $462.3 million, and segment profit rose $1.0 million to $91.1 million. Volume for the quarter was up 1.8% versus a year ago.
  • Weetabix revenue was up 15.3% on a pro forma basis to $109 million, despite a 1.8% drop in volume. Segment profit was $15.7 million.
  • Refrigerated food revenue was up 32% to $600.0 million, driven by the addition of Bob Evans to the results. Segment profit increased from $37.1 million a year ago to $62.7 million.
  • Active nutrition, which includes Post's best growth products like protein shakes, bars, and nutritional supplements, saw a 15.7% increase in revenue, to $205.2 million, on a 34% increase in shake sales. Segment profit increased from $21.2 million to $26.1 million in the quarter.
  • Private brands revenue rose 9.8% to $212.6 million, on a 9.2% increase in volume. However, segment profit did fall $0.9 million to $14.2 million.
  • In March, Post also announced a draft registration to take its private-brands business public. We don't know yet if an offering will take place, but it's one of the options management is exploring.

What management had to say

Management said that 2018 capital expenditures would come to $245 million to $255 million, $10 million higher than previously estimated, after accounting for the closure of the Clinton cereal facility and a cage-free housing conversion in a Nebraska facility.

In addition to added capital costs, management expects $30 million to $37 million in added costs for severance, retention, and consulting expenses related to closing the Clinton plant.

Looking forward

Guidance for adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was reiterated at $1.22 billion to $1.25 billion. The new operating structure will make it more difficult to gauge operating metrics for the next few quarters, given their uneven year-over-year comparisons. But it looks like most business segments are experiencing a higher volume of sales, which is positive for the business long term, and could push shares higher as the pickup in sales continues.

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool owns shares of Post Holdings. The Motley Fool has a disclosure policy.

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