Dive Brief:
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Post Holdings reported second-quarter net sales of $1.58 billion, a 26.3% boost from the year-ago period. As in the first quarter of 2018, sales in all four of the company's U.S. segments were up. Sales of ready-to-eat cereals and granola increased by 7.2% over the first quarter of 2017. Refrigerated retail — including egg and potato, side dishes, egg, cheese and sausage — jumped 32%. Protein shakes and powders rose 15.7%, and private brands — including peanut and other nut butters, dried fruit and nut products — climbed 9.8%.
- The CPG company said that second-quarter gross profit was up $111.6 million to $475.7 million, compared to $364.1 million for the year-ago period. Operating profit rose 19.5% to $164.3 million, while adjusted earnings before interest, taxes, depreciation and amortization jumped 37.5% to $314.3 million. Post reaffirmed its fiscal 2018 adjusted EBITDA range of $1.22 to $1.25 billion and updated its capital spending for the year to between $245 million and $255 million.
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The company announced May 2 that its board had approved a new $350-million share buyback program, with repurchases occurring over a two-year period beginning May 7. As of May 2, the company repurchased $488 million under previous stock repurchase authorizations.
Dive Insight:
This latest quarter was a pretty solid one for Post Holdings, which has been bulking up to show that it’s more than just a cereal company. Unlike some of its peers, such as Kellogg, which just posted soft growth numbers this week for its RTE core cereal brands, and General Mills, whose yogurt and cereal sales have both fallen lately, Post saw growth in all four U.S. segments. Refrigerated retail and protein shakes and powders led the pack, and private brands and RTE cereal and granola weren't far behind.
Cereal sales were boosted by the company's recent resurrection of its Oreo O's sugary cereal and the introduction of Chips Ahoy! and Nutter Butter cereals, which are exclusively sold online and at Walmart for a limited time. With this appeal to nostalgia, indulgence and the snacking trend, Post successfully gambled on a sales bump.
Recently acquired U.K. whole-grain cereal brand Weetabix also did well during the second quarter, reporting net sales up by 15.3% compared to the year-ago period. Pro forma volumes were down 1.8%, the company noted, but net sales saw benefits from favorable foreign exchange rates.
Post said in January that it might spin off its private brands business or perhaps take it public. The segment — including Golden Boy, a maker of nut butters, dried fruits and trail mixes; Dakota Growers, a pasta manufacturer; and Attune Foods, a manufacturer of non-GMO granolas, cereals and snacks — did even better this past quarter than the one before that, so its value is likely increasing. The company noted in this latest earnings report that "one of its subsidiaries" had submitted a statement to the Securities and Exchange Commission on March 28 in relation to a proposed initial public offering for its private brands business.
"Post continues to evaluate strategic alternatives for its private brands business, as announced on January 11, 2018, and there can be no assurance that Post's evaluation of strategic alternatives will result in any transaction or other action by Post," the earnings report stated.
Since private brands continue to do well in the marketplace, Post's private brands business shouldn't have too much trouble raising money through a potential IPO. If the company decides to go that way, the question is what it plans to do with the cash it raises — buy back more stock, invest in additional M&A, or possibly do some of each.