Ralcorp earnings rise behind Post business

by Eric Schroeder
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ST. LOUIS — Net income at Ralcorp Holdings, Inc. in fiscal 2008 soared more than five times its 2007 profit, driven by gains from the August acquisition of the Post cereals business and higher prices. Net earnings in the year ended Sept. 30 totaled $167.8 million, equal to $5.51 per share on the common stock, up from $31.9 million, or $1.20 per share, in fiscal 2007. According to Ralcorp, the acquisition of Post Foods increased e.p.s. by approximately 16c for the year.

Net sales for the year were $2,824.4 million, up 26% from $2,233.4 million last year. Of the $591 million sales increase, $180.5 million was attributed to Post Foods, $119.7 million to Bloomfield Bakers, and $15.8 million to Cottage Bakery.

Despite the strong results, Ralcorp sustained a number of significant costs during the year. Overall ingredient and packaging costs were unfavorable by a total of $153.9 million for the year, while higher freight rates raised costs by about $9.9 million. In regards to the Post acquisition, Ralcorp said the expense portion of the move totaled $7.9 million for the year, and the company expects the transaction and integration costs to continue through 2009.

Net sales for Ralcorp’s Cereals, Crackers and Cookies segment were $1,349.8 million, up 44% from $935 million in fiscal 2007. Profit contribution for the segment during fiscal 2008 totaled $151.9 million, up from $87.3 million in fiscal 2007. Ralcorp said Post Foods contributed about $43.3 million to the segment’s profit contribution during the year, while Bloomfield Bakers added about $9.2 million.

Net sales in Ralston Foods (including the Bloomfield acquisition) grew 34% to $819.9 million, up from $609.9 million in the same period a year ago. Ready-to-eat cereal volume was up 13% during the fourth quarter and up 9% for the year, while hot cereal rose 12% during the quarter and 3% for the year. Snacks volume rose 2% for the quarter and 6% for the year.

Sales in the Bremner cracker and cookie division were $349.4 million, up 7% from $325.1 million in fiscal 2007.

For the fourth quarter, overall cracker and cookie volume each declined 2%, but for the year, cracker volume fell 5% while cookies rose 1%.

Profit contribution in the Frozen Bakery Products segment was $63.7 million, down 10% from $70.4 million in fiscal 2007. Total net sales of the Frozen Bakery Products segment were $711.8 million, up 15. Ralcorp said growth in its base retail business was driven by incremental sales of private label waffles.

Net sales of Dressing, Syrups, Jellies & Sauces, also known as Carriage House, rose 15% to $489.1 million, while profit contribution also climbed 15% to $15.7 million. Ralcorp said sales were boosted by peanut butter, syrup and jelly volumes.

Profit contribution in the Snack Nuts & Candy segment, also known as Nutcracker Brands, fell 39% to $13.3 million despite an 8% gain in sales during the year. Ralcorp said it sustained $19.7 million in raw material costs and $700,000 in freight rates during the year.

Ralcorp said price increases for raw materials, packaging and freight were double the original projection of $75 million and would remain a concern in fiscal 2009. Despite those challenges, the company said it is confident in its growth prospects and projected earnings from the Post business would be better than the 44c to 68c per share target originally announced.

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