Gains from Post Foods purchase drive profit at Ralcorp

by Eric Schroeder
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ST. LOUIS — Higher prices coupled with gains associated from the acquisition of the Post Foods business from Kraft Foods Inc. helped drive a 55% gain in first-quarter earnings at Ralcorp Holdings, Inc. Net income in the first quarter ended Dec. 31 totaled $65,500,000, equal to $1.17 per share on the common stock, up from $42,400,000, or $1.66 per share, in the same period a year ago. Earnings per share were adversely affected due to 30.5 million shares issued in the Post Foods acquisition, and as a result of one-time items related to Ralcorp’s investment in ski resort owner Vail Resorts, Inc.

Net sales for the quarter were $449,300,000, up sharply from $180,700,000 last year. Ralcorp said approximately 81% of the sales growth came from Post Foods (included in the Cereals segment). Excluding Post Foods, sales volume changes were mixed, with increases in Cereals (8%) and Sauces and Spreads (3%), offset by declines in Frozen Bakery Products (8%) and Snacks (6%).

Effective with the start of fiscal 2009, Ralcorp changed its reportable segments as follows:

• The cracker, cookie and chip business has been aggregated with the nuts and candy business in a segment renamed "Snacks."

• The branded ready-to-eat cereal business and the store brand ready-to-eat and hot cereal and nutritional bar business continue to be aggregated in a segment renamed "Cereals."

• The name of the Dressings, Syrups, Jellies & Sauces segment was changed to "Sauces and Spreads."

• There was no change to "Frozen Bakery Products."

For the first quarter, Cereals had profit contribution of $74,100,000 on sales of $449,300,000, up from $20,600,000 and $180,700,000, respectively, in the same period a year earlier. Excluding sales from the Post Foods business, net sales increased 7%.

"The base business net sales growth in the Cereals segment is attributable to both higher volumes and higher prices," Ralcorp said in a Feb. 5 filing with the Securities and Exchange Commission. "We continue to increase distribution with most of our largest retail cereal customers and have also benefited from a favorable sales mix, excluding co-manufacturing. Though co-manufacturing volume is up overall, a shift from R.-T.-E. to hot cereal resulted in a $3.8 million decline in co-manufacturing dollar sales."

Within the Snacks segment, profit contribution totaled $20,500,000, up from $13,200,000. Sales rose 9% to $194,500,000 behind selling price improvements and product mix, partially offset by the effects of volume declines in all categories. According to Ralcorp, crackers and cookies volume declined 3% and 2%, respectively, during the first quarter.

Profit contribution in the Frozen Bakery Products segment was $15,000,000, down 15% from the same period a year ago. Ralcorp said the decline reflected volume declines, higher raw material costs, an unfavorable product mix and higher warehousing and freight costs. Total net sales of the Frozen Bakery Products segment were $191,100,000, up 5%.

Profit contribution in the Sauces and Spreads segment was $9,200,000, up sharply from $1,700,000 in the same period a year ago. Sales climbed 21% to $133,300,000.

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