US cereal-to-pasta group Ralcorp Holdings is aiming to “accelerate” the rate at which it pushes through price increases to offset soaring commodity costs.
Ralcorp said yesterday (9 February) that it expects its ingredients, packaging and freight bill to increase by US$200m, net of its moves to hedge costs, in its current fiscal year, which ends in September.
The Post cereals owner said the “primary risks” to that estimate were costs for durum wheat, cashews, tree nuts and peanuts.
It added: “We undertook pricing actions in the vast majority of our categories in recent months as a result of these significant cost increases. Pricing actions will accelerate throughout the rest of the year but we project the price increases to lag input cost increases in the second quarter. We expect pricing actions and other cost reduction initiatives to largely offset cost inflation in the second half of the year.”
The company, which was reporting its first-quarter financial results, said its ingredients, packaging and freight costs rose by $14m year-on-year during the quarter, hitting gross margins.
However, operating profit was up 11.4% to $142.1m. Net earnings increased 6.1% to $71.3m.
Ralcorp said its first-quarter net sales rose 18% to $1.17bn, a result “primarily” driven by acquisitions made last year – including American Italian Pasta Co., Sepp’s Gourmet Foods and North American Baking.
The company said its “base-business” net sales inched up from $991.9m to $994.2m, with volumes down 2%.
Notably, Ralcorp’s sales of branded cereals fell 10% on the back of a 14% fall in volumes. The company said it had spent less on trade promotions in what remained a “competitive” ready-to-eat cereal category.
Ralcorp said it would “substantially boost advertising and support” for its branded cereals business during the year.
Shares in Ralcorp closed up 0.5% at $59.67 yesterday.
Click here for the complete statement from Ralcorp.