US: Spin-off costs hit Post profits but sales up
Costs linked to the spin off of US cereal firm Post Holdings have hit its quarterly profits but the Grape Nuts maker saw sales increase 8%.
Post reported net earnings of US$7.6m for the three months to 31 December, the first quarter of its financial year. A year earlier, net earnings were $12.8m.
Adjusted EBITDA, however, was up 15.1% at $52.5m, with gross profit increasing 7.9% to $105.7m.
A 6% rise in volumes boosted sales. Post pointed to improved sales of Honey Bunches of Oats, Grape Nuts and Pebbles.
|Post Holdings, Inc. Reports Results for the First Quarter of Fiscal Year 2013|
ST. LOUIS, Feb. 7, 2013 /PRNewswire/ -- Post Holdings, Inc. (NYSE:POST), a leading manufacturer, marketer and distributor of branded ready to eat cereals, today reported results for the fiscal quarter ended December 31, 2012.
First Quarter 2013 Highlights:
Post net sales increased 8% for the quarter ended December 31, 2012 as compared to the prior year, primarily driven by a 6% improvement in overall volumes and a 2% increase in average net selling prices. For the quarter ended December 31, 2012, the improved volumes were driven by increases in the Honey Bunches of Oats, Grape Nuts and Pebbles brands which increased 3%, 15% and 5%, respectively, as well as increases from the recently introduced Good Morenings value brand and co-manufacturing agreements. Average net selling prices increased primarily due to lower overall trade and promotional spending despite incrementally higher slotting fees for new product introductions.
Gross profit increased by 7.9% for the first quarter versus prior year on improved net sales, gross profit margin percentage decreased by 0.1% primarily due to higher raw materials costs (primarily grains, fruit and packaging), partially offset by improved fixed cost absorption. Production volume increased with sales volumes, but also reflected inventory build-up as a contingency plan in anticipation of work stoppage at one of our manufacturing facilities. We were successful in reaching an agreement with the labor union without a work stoppage. We anticipate lower production volumes aimed at reducing inventory may unfavorably impact fixed cost absorption in future periods.
Excluding the effect of $2.8 million and $2.7 million of costs related to the transition and separation from Ralcorp incurred during the first quarter of fiscal 2013 and 2012, respectively, selling, general and administrative expenses as a percentage of net sales increased from 27.7% in the first quarter of fiscal 2012 to 29.3% in the first quarter of fiscal 2013. This increase was primarily driven by incremental holding company costs, non-cash mark to market adjustments on deferred compensation liabilities and higher operating company overhead for the new direct sales force.
Adjusted EBITDA for the quarter was $52.5 million versus $45.6 million for the same time period a year ago.
Income tax expense was $3.5 million, which represents an effective income tax rate of 31.5%, for the first quarter, compared to an effective income tax rate of 32.3% for the same period a year ago.
Net earnings were $7.6 million, or $0.23 per diluted share, for the first quarter. Adjusted net earnings and Adjusted diluted earnings per share for the quarter were $10.0 million and $0.31, respectively.
Operating cash flow was $23.6 million and $26.2 million in the first quarters of 2013 and 2012, respectively. The current year amount was favorably impacted by a $15.0 million premium on our $250 million high yield bond offering completed in October 2012. Increases in inventory and accounts receivable unfavorably impacted operating cash flow for the 2013 quarter in the aggregate amount of approximately $28.8 million. Inventory increased for the aforementioned work stoppage contingency plan, and the increase in accounts receivable resulted from large pipeline shipments of new products during the last two weeks of the 2013 first quarter.
According to Nielsen, ready to eat cereal category revenues were down slightly, -0.8%, for the thirteen weeks ended December 29, 2012 as compared to the prior year, and category volumes, measured in pounds, declined -1.9%. Category dollars for the quarter were not down as significantly as consumption volume due to slight increases in every day and promoted average selling prices. The current year Nielsen data referenced in this press release is as of December 29, 2012.
Post's U.S. xAOC dollar market share was 10.2% for the thirteen weeks ended December 29, 2012, down 0.5 share points versus the same prior year time period. Post's xAOC pounds share was steady at 10.4% for the thirteen week period ended December 29, 2012.
Post and Ralcorp entered into a Transition Services Agreement in connection with the spin-off of Post from Ralcorp, covering over 20 different services areas. The most critical service area, information technology, is on track to go live and on an independent basis this summer. Management does not expect the recent merger of Ralcorp with ConAgra Foods Inc. to materially impact Post's information technology transition plans.
Post management confirms its previously provided guidance for fiscal 2013 Adjusted EBITDA to be between$210 million and $225 million, after considering the estimated year-over-year unfavorable commodity cost effect of between $10 million and $15 million. Post management continues to expect that capital expenditures will be in the range of $30 to $35 million, inclusive of between $11 and $13 million of capital costs associated with establishing stand-alone information systems separate from Ralcorp. Finally, management expects net interest expense to be between $80 and $83 million in fiscal 2013.
Original source: Post Holdings
US breakfast cereal group Post Holdings kicks off a relatively quieter week of results with its half-year numbers on Monday. On Tuesday, meat giants Marfig and JBS will report on how it fared in the f...
- just-food's pick: Innovation on show at ISM 2016
- Mondelez results and outlook - 7 things to learn
- Can dairy-free Flora lift Unilever spreads sales?
- Foodservice focus: McDonald's/Five Guys/Starbucks
- Talking shop: Wal-Mart overhaul, Lidl's US charge
- Mars to cut artificial colours from global foods
- Chobani targets growth after rejecting offers
- Arla eyes job cuts as part of 2020 growth push
- Private-equity firm HKW acquires Panos Brands
- WWF launches food security platform