Larger bags increase MOM Brands sales for Post

by Jeff Gelski
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MOM brands' bigger-sized boxes and bags of cereal increased sales for Post

ST. LOUIS – Sales increased for MOM Brands in the third quarter ended June 30 even though overall sales of ready-to-eat cereal declined for Post Holdings, Inc. Larger bags of cereal and new product introductions drove MOM Brands to growth of 6% in lbs and 6.8% in dollars, said Rob Vitale, president and chief executive officer.

“At a category level, ready-to-eat cereal declined 1% in dollars and 2% in lbs during our fiscal third quarter,” Mr. Vitale said during an earnings call on Aug. 7.  “This is the fourth consecutive quarter in which rates of decline have slowed, but we are lapping the worst quarter in recent history. We continue to see a migration of larger package sizes, which bodes well for our combined business. During the quarter, extra-large boxes grew 18.4% in lbs, and large bags grew 3.3%.”

Post Foods’ consumption performance fell 4% in dollars and 3.2% in lbs, Mr. Vitale said. Distribution declines weighed on otherwise healthy consumption results. The declines primarily were related to the discontinuation of several weaker Honey Bunches of Oats stock-keeping units (S.K.U.s), which reduced base volumes, he said.

Recently acquired businesses such as Michael Foods and MOM Brands boosted third-quarter results overall for Post Holdings, Inc. Results were even better than the company expected, leading Post Holdings to increase its adjusted EBITDA guidance for the fiscal year.

The biggest over-performance was in R.T.E. cereal, Mr. Vitale said.

Rob Vitale, president and c.e.o. of Post.

“As we moved into the integration with MOM, one of the things we decided to do was highly focus the organization around cereal,” he said. “As a result, a lot of extraneous activities fell away. I think that focus is essential to the go-forward plan. That has resulted in better performance across the cereal business, both in terms of volumes and cost management.”

Mr. Vitale said the combined cereal business for Post Holdings had an 18.4% market share in dollars in the quarter, up 0.2 share points, and a 21.4% market share in volume, up 0.6 share points.

Post Holdings had net earnings of $24 million, or 34c per share, which compared to a loss of $35.1 million in the previous year’s third quarter. Adjusted EBITDA rose to $187.5 million, which compared to $87.8 million in the previous year’s third quarter. Third-quarter net sales rose 91% to $1,211.8 million from $633 million. Driving the sales increase were businesses acquired after June 30, 2014, and the lapping of partial period results in the third quarter of the previous fiscal year from Michael Foods. On a comparable basis, net sales increased 3%.

Post Holdings changed its fiscal-year adjusted EBITDA guidance range to between $635 million and $650 million. Previously the range was between $585 million and $610 million. Post now has four reportable segments: Post Consumer Brands, Michael Foods Group, Active Nutrition and Private Brands.

Post Consumer Brands, which includes R.T.E cereal, in the third quarter had profit of $51.6 million, up from $44.8 million, and net sales of $356.9 million, up from $238.2 million. Adjusted EBITDA was $90.1 million, up from $57.8 million.

Michael Foods Group in the third quarter had profit of $48.4 million, which compared to a loss of $9.6 million in the previous year’s third quarter, and net sales of $564.7 million, up from $212.7 million. Adjusted EBITDA was $81.2 million, up from $22.6 million. On a comparable basis, net sales were up 0.9%.

Recently acquired businesses in the Michael Foods Group include Michael Foods and Dakota Growers Pasta Co. Jeff Zadoks, chief financial officer of Post Holdings, said pasta volumes were up 2.3% in the third quarter, primarily related to quarterly bid business and increased volumes in the retail channel.

PowerBar sales declined as the strong dollar and soft sales in North America offset sales growth in Europe.

The PowerBar brand belongs to Post’s Active Nutrition segment. PowerBar sales declined as the strong dollar and soft sales in North America offset sales growth in Europe, Mr. Zadoks said.

“Good progress is being made on PowerBar,” Mr. Vitale said. “Production at the Boise (Idaho) manufacturing facility ceased in June, and production was transferred to co-manufacturers. This will enable us to begin to benefit from annualized manufacturing cost savings of approximately $4 million. We have revamped both the product and its packaging.”

Overall, net sales in Post’s Active Nutrition segment increased $67.1 million to $153.8 million in the third quarter. On a comparable basis, net sales were up 17.0%, or $22.3 million, from the previous year’s third quarter. Segment profit was $7.9 million, which compared to a loss of $2.5 million in the previous year’s third quarter. Adjusted EBITDA of $15.5 million was up from $5 million.
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