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Post Holdings (POST) Q3 Earnings & Sales Beat Mark, Rise Y/Y

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Post Holdings, Inc. (POST - Free Report) reported robust third-quarter fiscal 2022 results, wherein the top and the bottom line improved year over year and came ahead of the Zacks Consensus Estimate.
 
Results reflect solid pricing actions across the business and the recovery of volume demand in the Foodservice segment, mitigated by raw material and freight inflation, and higher manufacturing expenses. Also, labor shortages and supply-chain hurdles caused manufacturing inefficiencies and capacity constraints in the third quarter of 2022. These limitations hurt sales, lowered throughput and increased per unit product costs.

Shares of Post Holdings have rallied 6.5% in the past three months against the industry’s 5.2% dip.

Quarter in Detail

Adjusted earnings from continuing operations of 69 cents per share increased from 50 cents reported in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of 58 cents.
 
POST registered sales of $1,524.9 million, up 22.2% year over year, with all segments witnessing growth. Further, the figure exceeded the consensus mark of 1,364 million. The top line included $128.1 million of net sales from acquisitions. These acquisitions include the Lacka Foods Limited, Private label ready-to-eat (PL RTE) cereal business, the Egg Beaters liquid egg brand, the Almark Foods business and related assets and the Peter Pan nut butter brand.

We note that on Mar 10, 2022, Post Holdings concluded the distribution of 80.1% of its interest in BellRing Brands, Inc. (BellRing) to its shareholders. The historical results of the BellRing business now form part of POST’s discontinued operations. Apart from this, POST divested the Willamette Egg Farms business on Dec 1, 2021.

The gross profit amounted to $364.7 million, down 0.9% from $368.1 million reported in the year-ago quarter. The gross margin contracted from 29.5% to 23.9% in the quarter under review due to higher raw material, freight and manufacturing costs.

Post Holdings’ SG&A expenses increased 18.9% year over year to $225 million. SG&A expenses as a percentage of sales came in at 14.8%, down 40 basis points from the year-ago quarter’s level.

The operating profit of $105.5 million fell 31.9% year over year. Adjusted EBITDA rose 8.1% to $250.8 million.

Segment Details

Post Consumer Brands: Sales in the segment increased 22.6% year over year to $574.7 million in the quarter under review. Segment sales included $50.5 million generated from the buyout of PL RTE Cereal Business. Volumes rose 13.9%. Excluding gains from the buyout, volumes rose 7.4% on strength in Peter Pan nut butters, Malt-O-Meal bag cereal, Honey Bunches of Oats, Pebbles and private label cereal. The segment’s adjusted EBITDA dipped 1.3% to $118.1 million.

Weetabix: Segment sales rose 1.2% year over year to $124.9 million, including the contribution of $6.2 million from the Lacka acquisition and currency headwinds of nearly 1,070 basis points. Volumes were reported to be flat. Excluding gains from the Lacka buyout, volumes dropped 6% as declines in branded products were somewhat offset by growth in private label products (buoyed by distribution gains). Segmental adjusted EBITDA of $37.2 million dipped 1.8% year over year.

Foodservice: Sales increased 33.1% to $579 million in the quarter under review. Volumes rose 6.2% owing to the increased away-from-home egg and potato demand. Egg volumes rose 7.2% and potato volumes rallied 8.5%. Segmental adjusted EBITDA was $86.4 million, up 44.5% year over year.

Refrigerated Retail: Sales in the segment were $246.4 million, up 11.6% from the year-ago quarter’s figure. Segment sales included $23.2 million generated from the Egg Beaters and the Almark acquisition. Net sales in the year-ago period included contributions from the divested Willamette business. Volumes slipped 3.1% year over year. Excluding any benefits from Egg Beaters, Almark and Willamette in all periods, volumes inched up 2.2% on a 10.4% rise in side dish volumes. Segmental adjusted EBITDA declined 11.4% year over year to $29.6 million.

Financial Details

As of Jun 30, 2022, this currently Zacks Rank #3 (Hold) player’s cash and cash equivalents came in at $263.5 million, with long-term debt of $6,032.4 million and total shareholders’ equity of $3,406.7 million.

Cash provided by operating activities was $219.7 million for the nine months ended Jun 30, 2022. During the fiscal third quarter, Post Holdings repurchased 1.9 million shares for $145.8 million. In the said period, POST bought back 3.8 million shares for $338.9 million, bringing the remaining share repurchase availability to $145.8 million as of Jun 30.

Guidance

Post Holdings anticipates fiscal 2022 adjusted EBITDA between $930 million and $945 million, up from $910-940 million projected earlier. POST anticipates capital expenditures in the range of $240-$275 million in fiscal 2022. This includes roughly $40 million for the purchase of land and construction of a facility to manufacture RTD shakes for BellRing.

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