POST - Earnings call transcript Q3 2024

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Operator

Welcome to the Post Holdings Third Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions]

I would now like to turn the call over to Daniel O'Rourke, Investor Relations for Post.

Daniel O'Rourke

Good morning. Thank you for joining us today for Post's Third Quarter fiscal 2024 Earnings Call. by COO; our CFO and morning Jeff and and this our Zadoks, Matt joined Rob President Vitale, CEO; Treasurer. I'm Mainer, our afterwards, and answer Jeff Matt make remarks, Rob, will your and questions. prepared we'll that release and is investors also filings both SEC on the press is SEC's posted supports The the website our on of sections available the remarks and these website.

our call audio replay available on As An will recorded. a website is reminder, postholdings.com. being this at be

call carefully obligation this contain like and results to this investors these remind which are and forward-looking from we subject forward-looking as undertakes statements. materially Before I update are statements of that statements, call management current continue, would uncertainties to you statements. that considered actual will to these of risks as date These no differ should could be by the

measures. call certain discuss This will non-GAAP

measures reconciliation on our yesterday release of issued these a For the non-GAAP see measure, nearest press website. posted GAAP and to our

will over the I With call to that, turn Rob.

Robert Vitale

Daniel. Thank enabled full In solid year guidance. increase that another us to quite our you, we delivered QX,

quite is fully and consumer have with purchasing never environment. own in been are solid noticed recent pleased certain challenging we satisfied, including aggressive the business we This shares. our against acquisitions. I'm a While performance performance, you transitioning

labor consumer across behavior Inflation in is are channels. couple impacted has cooling but cumulative markets. change rapid last Meanwhile, years so pricing over of the

improvement outperformance eggs. foodservice retail our in the ongoing expect value-added versus over reference quarter We both both label consumption phenomenon next and significant strong underwriting of case, business private pet branded cereal channels this year. to work mix our highlights include through in the our in and Key products, of price

sustained We in be FY to expect these 'XX. highlights

lift. as our of refrigerator without side trade incremental sufficient the underperformed other the cannibalized base On volume investment segment retail ledger,

level trade addressing spending. are appropriate the We of

support lapping further and along Looking support environment, market ahead capital the 'XX, strategic trends. The markets more we with expect stable volume 'XX, which, M&A to favorable will a consumer action. more

is reactive leverage levels, low will to at we tend be and historically Our allocation. capital with

our And to diversification of and consider remain Our conditions. the enable business clear to changing adapt capital. will us your model eyed as allocation we we

provide Now context quarter. will more on Jeff the

Jeff Zadoks

than both Thanks, and profit dollars pounds. grocery Carryover pet the drivers both volumes branded Within operating contributed were grocery, to and in quarter combined products be supply food with profit grocery. Starting strong our main category everyone. PCB, another good performance. performed pricing we to with challenged, we Rob, slightly as performance morning, chain within share increased and continued of cereal better excellent the and although

down X.X%, category Cereal quarter, category expect to continue lap finished volume the to to volumes historical CAGR of this we normalize recovery immediate down the an X% approximately quarter will we X%. despite seeing snap not as

XXs. in however, rates our low remained our food across Recall, to we total brands. the flat the our the of sales share last pet fairly volumes improved XXs the in from and food For replenishment as inventories low from business, customer a fiscal year, pet benefited the revenues onetime of half customer fill category and prior

cereal year continued planned the our Smucker's the from our closure continue exit The on performance Ohio drive in to remain and half our a manufacturing with Lancaster, Strong to results. first TSA track integration fiscal plant of pet XXXX.

Moving quarter Foodservice. product good to had mix. We strong very with a

pricing egg related restaurant XXXX Overall quarter. promotions well in outbreak, from foot to benefited as customer the runout were flat November elevated as we of addition, the traffic. In despite final influenza avian volumes slowing the

volume our improve with to continued products. highest-margin precooked XX% mix our growth However, egg in

will we of than ramp-up our made Recognizing is quarter track share to adjusted anticipated, Lastly, impact we $XXX quarter-to-quarter, million. the expectation that but encounter delays has during shake we continue progress manufacturing fourth it been the our we The to is EBITDA approximately for the slower significant achieving quarter. hard RTD that in some full in Foodservice avian right. influenza

significant business profitability. retail refrigerated a Our pullback had in

with encouraged costs. respectively, and than were came X%, we expected higher to While see dinner significantly up X% breakfast volumes trade growth this side and

We profit improvement commodity From the prices versus and segment in headwind recalibrating EBITDA a adjusted prior further a anticipate investments the these sequential quarter. year QX are pressuring significant were sale fourth segment. standpoint, for

strong positive continue side, the management we performance across cost On see to manufacturing network. the and

within to our volumes biscuits. a decline private and label saw flat moderated Weetabix. category to of U.K. branded cereal Turning X%, we and volumes

Continued chain pricing from with on and improvement drove some margin label combined supply improvement incremental service QX. sequential with private levels, products

X Phase X Phase successfully is the completed the fall. and on conversion the track addition, for In in of its ERP larger business second

I'll that, turn Matt. the With call to over

Matt Mainer

and Jeff, good morning. Thanks,

$X.X and billion sales acquisitions. Third million. quarter X% recent driven EBITDA were net increased was Net $XXX adjusted sales consolidated by

Excluding neutral. strong, was X% in on while foodservice of inflation pricing our driven impact commodity remained fill acquisitions, volumes overall model. lower and balance sales retail chain Supply businesses declined and performance by foodservice of rates our the pass-through pricing

as in Finally, targeted marketing our businesses. SG&A increased retail investments we continued

the Excluding from Post food the X% brands sales year decreased and prior net consumer pet and quarters, both of decreased volumes benefit acquisitions current X%.

nominal contribution increased in improved nonretail performance. Average branded a from Weetabix decreased X%, sales net XX decreased pet from we net X% Sales as points a Volumes and X% Segment declined prior pricing, food increased benefited and year tailwind British basis stronger versus and and the cereal. excluding increased products. decline basis, acquisition year-over-year. XX% a primarily from a the foreign of net driven X%. of by pet acquisition adjusted and volumes grocery currency non-biscuit Deeside strong pound. in sales neutral food, currency benefited On EBITDA

XX% pressures XX% prior ERP while improved easing our ahead costs decreased year. the were lap a egg pass-through increases and partially offset lower to we influenza net price benefit the inventory pre-cooked and year the grain prior last avian EBITDA reflect leverage net as Adjusted reduction margin Foodservice in build potato of Volumes setters pricing revenue due mix in volumes higher commodity a as both reflects from EBITDA we and of products adjusted of and influenza in price sales by the X%, elevated eggs. wind market by led year. headwinds quarter of shift versus manufacturing down go-live. of the increased the in These to Segment egg avian imbalances favorable X%, setters decreased products. increased

higher Refrigerated portfolio retail -- the prices were sales of volumes were prior losses offset sides. year. Favorable flat. for increased increased reflecting costs as compared Segment EBITDA side products. a net significantly volumes result decreased trade lower distribution in dinner egg a net declined adjusted by pricing sale decreased to and XX%, trade dish X%, result Average while a in net primarily as

in quarter Norwalk, third cash operations the expansion pre-cooked million were and Iowa egg to sequential $XXX the we of million, working $XXX continued facility. investments Capital quarter, the performance strong In by Turning profit generated capital. to capacity from flow. driven expenditures driven approximately in our by pet and improvements food

the operations million For flow flow. free cash last $XXX months, cash was XX netting and to million, $XXX $XXX from were capital of million, expenditures

share. an strong In our approximately repurchasing the of average at share. repurchased net cash per an shares additional approximately at maintained at of flow, average XXX,XXX per in $XXX while Given leverage we the price of X.Xx month $XXX an price July, shares we X the million quarter

authorization new $XXX week. approved In next addition, begins repurchase million Board share our a that

that, $X,XXX again guidance the Finally, the will Q&A. for million raised call to our million. of With turn $X,XXX given new over we range operator the to I strong performance a in quarter, to the

Operator

our will [Operator from And Lazar Andrew first Instructions] Barclays. question come with

Andrew Lazar

that around been a is year? quarter see that we've EBITDA we kind fiscal Foodservice, rate of that ongoing ask that now? ahead that Or EBITDA 'XX, I a year of that trying headwind, but in year-over-year somewhat Foodservice to this in more formally next with could the curious, lapping in strong think it what you above of the because higher get On rate segment, you or run think And run consistent the running point. right, to partly, I'm for spoke sort But Foodservice be didn't ongoing $XX if has of you last where change curious of sort acknowledge seen with I rate run year? sense whether million. at I'm think it ongoing to as

Matt Mainer

Sure. is going to kicking and avian see ahead the run of we're influenza is to related the $XXX to costs we're million pricing Andrew, million. in. pressure between $XXX difference the again, QX around that in And incur rate we think going

Andrew Lazar

yet the in changed sort come? Yes. if Got whole PET, planned the it. data for seeing. of guess quarter. channel it a maybe sort story, terms trade pet of decelerated And as in much to in in then pretty in the something as of down And consumption not not has seeing still does that's a reinvestment measured of sense to I I'm to get And basis you which sequential started had kick been mainstream tell like meaningfully on looked if to whether trying certainly or

Matt Mainer

X drivers One, really in pet the actually food Andrew, there. seasonality category. there's

you a between QX and QX do So over-year. pullback see

for The us, had piece new in though, was QX. distribution specifically gains other we

particular fill was in a from pipeline lives. there new So

Other the are to of with that, in those this be. So we're X components than of line decline. where sequential expect kind we'd

Andrew Lazar

meaningful think, Got having mentioned seen pipeline. Rob, sort quarter, of last you lastly, increase it. just M&A a the I And in

share been been repo. such. obviously, and get private sort in is that last taking now and one seen of your other equity-owned you've sense, have quarter? that to assets leverage mentioned But any trying of while it's change that sort a the M&A than advantage or aged way You you've landscape around of And lower since to a

Robert Vitale

it's now. our opportunities considering to the in the a long right take anything, accelerated Obviously, those market very pipeline feels but If time been active deal, in mature of to amount time of take considering. may a No. we terms we've and

Operator

Palmer with come ISI. question Next David will from Evercore

David Palmer

synergies, to to you'll imagine Anything going kind for about spending to be volume I'm brand promotion feeling stabilize where just point volume want would feeling you're pets. how you gives a I dry X%. visibility? to you're powder to dial fiscal you're down consumer in Post of seems that. of line address starting into I'm up only that about on questioning is want productivity, heading wondering pet to 'XX. that what going how continue that

So be things the takes how that for would about any help. incremental, the thinking I'm sunsetting and gives the could mentioned about thoughts Smucker, just you be 'XX TSA

Matt Mainer

Yes.

a be to on to got that's overcapacity on the So rightsizing capacity Obviously, cereal brands, couple quarter we've Post beyond the that's a And positive. really obviously, say, would some then, in with category. the now. just volumes. we contribution have We in closing Lancaster down were line X%. the I track There or about the your consumer were of in cereal factors comment that, side, around

really bid SKU just KCCO business across discontinuation also pullback then and board, our talked saw Canada in are seen or potential but would a volume category Beyond those outliers of that, what in in pressures. our the in Lancaster performance the we government to own. offset But we've I some positive volumes and on general say to rationalization with the side terms you relative X some is of a about

David Palmer

what and the Any EBITDA -- an us could timing do fiscal of you to to 'XX? estimate that want give in mean of that

Matt Mainer

talked a the contribution Lancaster to million on we're $XX We track as year, for about be being there. full and

if -- again, pretty persist our pressures So volume outlook. of although to promotional we're promotional, could in volume there rational be your point, terms there's they

Operator

will come JPMorgan. with question next from Goldman Our Ken

Kenneth Goldman

the if the me may. timing that. of Two update had Michael then XXXX not for on correct quarter sure you that I exit now? year. TSA start, the fourth plant. shifting it I also this into I wasn't the heard for right. One, we hear Please of on I the I an hoping quick that's was if quite think Is ones previously if timing. to scheduled was didn't And

Robert Vitale

to back-office TSA was 'XX. about the the there's of lingers the on There's So TSA the year. question target co-pack could you arrangement we're a of part part the change Smucker, But of end at the again? no that foodservice, our timing. fiscal first that the then in into And fiscal exit say

Kenneth Goldman

the there opening? just on timing the the change was in understand any Michael guidance I if plant of didn't

Robert Vitale

timing what the Norwalk, you're No, of of didn't that? we about talking remarks prepared about, expansion our if comment but didn't the -- that's that,

Kenneth Goldman

clearly, it you. saying yes but not I'm thank

Robert Vitale

the ramp-up has No, is just than Yes. been we open. expected. slower plant It's our

yes, previously we the that So that I guess or what communicated. is, from the expected profitability been beyond put way it has profitability had delayed from to

Kenneth Goldman

was kind know for if just more, can, your than you've many last your a to the think Are around grown of ahead, couple it fair much on range than Broadly, I rapidly sales. dollars to marketing. last SG&A the continue of as over months, that percentage it last never XX that one about your to then it the good pace rise increasing has brings number of more it understanding years months up about is until kind But to sales is I'm of dipped SG&A reasons a of over XX And now at SG&A. back And this talked will there kind faster percentage curious, years. revenue? mid-XX% stay will there? the SG&A of a it just exactly think to kind meaningfully I model

Matt Mainer

Yes.

of a couple think things. I

within A&C. You elevated that we next definitely some definitely Also, some additional as in our given of would step have We targeted some that segments the the investments there or there's may overperformance year. mentioned bonus recalibrate. some well portfolio, reset

Operator

Smith come with from will question next Matt Our Stifel.

Matthew Smith

to I wanted go Foodservice to the back business.

capacity your that visibility at and online it Could the you coming distribution when could opportunities? capacity remind of for and mean comes what pipeline that us Norwalk. capacity filling online further in expanded the have You

Matt Mainer

another Yes. on We so still or Norwalk. construction have year of

really there'll could be when as as would that then period ramp plant. months filling be fiscal and would XX terms long come that of that be that's a 'XX online So typically in

Matthew Smith

could as consumers Can to improve lift to -- consumers from bring to back you Refrigerated Retail the trajectory? into back trial strong about volume up brands. anticipated? if go promotional get to invested in move And to as where some had the your or trade And business, induce into activity and you why the wasn't here you -- your you talk we

Matt Mainer

Sure.

on we that we as kind bit overshot. well. again, tail. mentioned, as a a of back that. we're X-month of It's So look we -- a Honestly, There's recalibrating just

was essentially QX in is well. some as But quarter of spend we'll support the amount the get Again, and But So this that. to didn't tally of We increase just spent is QX the the see happened related X% this in an we're terms a recalibrating full we of sides. there. what lifts example, in promo. is QX

would XX. I something subsidized think were support to some that which have of profitability. expected spend, that sales level deteriorated base we we instead, north promotion, of on And

Matthew Smith

period And couple that you quickly? promotions to those mentioned recalibrate pull does look fairly events. that take the out for back market? Are longer a a promotional of of planned to able quarters you Or

Matt Mainer

the is lot a Yes, behind good category knowledge we as Again, I are. mean with very just cereal, think mature is a comparison analogy I of a as think, that. reminder, a think to promotions. cereal a as history I with I of

in reminder, As category refrigerated have we haven't than much been to just retail a cereal. different promote a able don't We that history.

the level So recalibrated activity we that of definitely underestimated promotional expectations the happened. But in and our accrual quarter. the have

like So forward. we feel ring-fenced we adjusting that going and have a

like So it. got on feel a good we've we handle

Operator

Sandler. Our come Michael next Lavery will with Piper question from

Michael Lavery

a cereal mentioned from the cereal also in consumer branded think fiscal keep How You how at expect And -- you stretched. how I how is but bit of bit be hearing about little a read-through little stable. much reconcile we private to cereal stable better think we said so do maybe the is little do or label, you is consumer in the just you 'XX you also or least about outperforming there? bit where The maybe more consumer is placed dynamics?

Robert Vitale

Let Private with quarter. label in branded the me start comment. initial outperformed the

So...

Michael Lavery

Sorry.

Okay. I misheard that.

Robert Vitale

taken the grow some the going has it's moved of and forward consumer And about time pricing acceptance the I so behavior rapidly comment is accustomed think around environment to. that the more to

market, the in cooling So a mode like word going a super-hot we that we that market are is to it in transitional a labor use from feels cooling intentionally the inflation. now labor consumer

adjustment, as volumes see reference we think that more labor past for a be a markets. of price constructive the get to should in cooling products for generally it and should value bit be the it So I constructive

we will takes. So think consumer but and that to tend on environment year more there's balance, the certainly be constructive puts next some

Michael Lavery

And some extended to across call pressure? all you would have out Or you that see characterize you your do likely likely as where categories? more maybe would

Robert Vitale

create its within didn't and skills given cereal, overall food, continue better. the home. of as Evans Certainly There away are period Matt to broadly try we a continues to in outperform trends do a we through mentioned, which Value-added both trade in been Again, across having eggs let bit considerably opportunities brand. home the really get maturity, rusty volume to to Bob our believe demand. from we

think with be I applicable So cereal to varying would most the the comments of application to degrees categories. other

Michael Lavery

directed think That's the that's helpful. of And in pet, terms about how and give where on on can just update playing and how timing an to you brands of trajectory and kind that's out? spending of which kind just

Robert Vitale

things trajectory, advertising? say you mean in of like incremental when spending And you investment

Michael Lavery

Exactly, yes.

Robert Vitale

brands premium It's our more mostly are that around larger.

get want But can So and it I at the mean, particular I invest. would to where we don't choose into spend. details around look and cadence to into you portfolio

Operator

with question Our John comes Securities. Mizuho next Baumgartner from

John Baumgartner

mentioned but first just Maybe you of remember that, in and approach the changes And funded think correctly outlet, on response. seem QX, the that promo, terms of there to consumer of were promising in still back of type terms here coming last retail even to dust type I off, program customer customer-funded in refrigerated or material trade to there is on the QX? clarify geography settling think the quarter, some relative any were promotions if I I

Matt Mainer

season. mean that No. around was on was during customer really QX, the comment the I and holiday

and is and benefit I we're bit would different be a little is in then seasonality is very quarter. maybe very, But seasonality QX. there that So that's of a seeing difference, which strong that's the QX, really is peak the dynamic the really QX good no say volumes season then where in would

John Baumgartner

seeing foodservice and your segments down exposure your distribution to of daypart existing or skewing there. shift sort And the more there for you any away trading from less to where the are is eggs then certain are to we -- why particular. growth within okay. And don't where Rob, expensive in particularly resilient volume And items. Are breakfast, within pre-cooked back business, Home that come growth there's then then,

You offerings but to any that are effect more not at mentioned due outperforming, eggs base have broadly out Maybe if a are curious smaller on sell-through observations it's you sure but other that's just retail. just if relative to granular, there. I'm too

Robert Vitale

is business, quarter. the in very highest-margin add precooked volumetrically well, business to over XX% fact, perform The and the which Yes. highest value is continuing grew

traffic the of patterns of been which reported some We are last seeing have larger that ones you've changes of and within QSRs, the foot by in restaurants the across I'm seen some weeks. sure couple

is where of long-term in there the So But to a value some great the product terms offset proposition will take of of it's foot think that going. back-of-house operations, of irrespective such is the of some a business short-term labor out issues. of that be it we continue way and vagaries that could traffic particular trend

Operator

Our with Dickerson comes Rob next question from Jefferies.

Robert Dickerson

you kind there of maybe you think year, let's of, kind more to -- pressure benefits help around just through correct support of any on capacity? play some from offsetting next top in of commodity could as of this potential the immediately categories that despite the Rob, some say, profitability kind of in complex volume want you rightsizing grain are grain-based which the the of

Robert Vitale

mentioned, fairly we some from there's it inflationary As couple such right of examples. at as sugar look then a balanced grains, as a items and offsetting there's packaging now, as you benefits,

either. the benefit. currently it see not think we're huge a same don't huge we as be So At expecting detriment a I it time, to

head the balanced next year. into as So we fiscal fairly

Robert Dickerson

right, cool. just And on Weetabix. All then quickly

pricing. as basis. that was even You of I release a is of guess, Or just that up somewhat bring of through, and let's QX, be there but called we of sounds sustained? some, like then on new part of And of I'm base a curious, right, more like that margin of back year, on the uptick comments a Like that kind just again, out kind would sequential, say, kind business? uptick next portfolio, other the some impressive, think is that that down? flow-through step for impacts margin a could year-over-year also margin maybe a It in kind

Robert Vitale

couple A of things. Yes.

benefit As Matt build. prepared remarks, in of because a this his quarter there said inventory is

conversion beginning that at expect through to an an third going we're for on year. manage that, any building fiscal of in ongoing wouldn't have we bumps because in next the an quarter So ERP hit might to road in had that inventory the that, occur. is that the basis. of And absorption we you And benefit preparation

our that towards was With on that more migrating QX and the a we'll the would that QX year more expectation step to more step we business. that trajectory said, expect certainly historical That's QX were that we this eventually get be margin But up. to. of of that trough fair, of profile expect the we is and than begin

but better maybe So still expect step it bit at line a of the was say to clear fiscal way than of beginning little year. a a will the where trend down, this be

Operator

with Our Fargo next Torrente Wells Securities. question comes from Marc

Marc Torrente

First pet, talked of you from QX. on slowdown sales through the in some the drivers of sequential

some brands. further advertising implies simple premium math the even around some doing expansion Just stepping as you're margins on up

So color maybe there. little progress margin on just a the more

Matt Mainer

Yes.

the mean, A&C, lot dollars we've but bigger more some costs flow-through the So are keys reinvested of brands and and margin our progress the driver. been I'd the manufacturing say those for really is the taken and stabilization behind had that of I and We've just has there the efficiencies performance margin ramped think around manufacturing improvement. a of the I

Marc Torrente

year projects Okay. year? carry egg timing. to up How And into ramp. these investments manufacturing facility spoke pet of well shake stepped as with You much then CapEx this the as next the

there context cash think for about through conversion levels flow 'XX, guess ahead. any Just thinking should I we free and CapEx how

Matt Mainer

expect to very we have spend. terms think we we've are multiyear about the in it of projects, 'XX be Norwalk Bloomfield. CapEx to range 'XX way These similar And and definitely certainly talked I the in is

Operator

question Carla final JPMorgan. will Casella take we from with And our

Carla Casella

of follow-ups. couple A

and more back question versus you pick have is go environment in you need half your trade M&A. across the it for trade is are year, spending retail, foodservice I and see both another? one this spend as about but one Just on And up then seeing in the that expectation categories, into consistent should of talked we we

Robert Vitale

trade will I an bit spend, we targeted reactive. knee-jerk of it be in but will think likely uptick and see not little a

think Bob And we make intended is our being question? way the the sure the get need the Evans with sorry, I best in spend. I'm what was we that trade to your example brand, we spent lift other

Carla Casella

is it one one other? Well category more category targeted more is versus in exposed? Or

Robert Vitale

are No, we'll trade we think as focus to there -- execute spend portfolio where opportunities from the will we on across is pricing potatoes, there benefit go dishes. in. The primary side

Carla Casella

then was M&A Okay. question on other the And environment. the

deal the the If if you for are coming into could opportunities flow sellers. to getting I -- you type about or more any just in -- levels interesting talk talked levels irrational fair, and the the there just more past, of are think if

Robert Vitale

sorry, I'm my sure I Yes. got not but a I'm bit the you're question, Carla, all best. so of echoing, I'll do

exits. been I average than time PE think period have we've in which seen there of lower a

that owners consumer from we're We more of do opportunities the portfolio corporate owners So opinion PE always seeing should assets. of are pruning.

there that some in So area. opportunities are

So say my of thing same I significantly would opportunities even sequentially. year-over-year quantum increased the prior has that comments in and

our That we on just respect And shares. capital. the as to the doesn't as be how capital the want beneath basis, into mean happen and with at acquire disciplined can we're will we we average stay which very allocate will to multiples we a post-synergy long trading of anything course allocate because

well, from say. anything not to perspective, to converts environment plentiful an too whether or that good -- early environment opportunity So a

Operator

Webcast. This have XXXX have a and Quarter will today's Post now the reached line disconnect Third at and wonderful of we question-and-answer And conclusion the Please Call session. Earnings time, day. Conference this Holdings conclude your

Post (POST) 2 Aug 242024 Q3 Earnings call transcript