St. Louis / MO. (pfh) Post Holdings Inc., a consumer packaged goods holding company in the United States, reported results for the fiscal quarter ended March 31, 2016. Highlights:
- Net sales of 1.3 billion USD and Adjusted Ebitda of 247.8 million USD
- Announced Adjusted Ebitda guidance for the second half of fiscal 2016 to be between 410 million USD and 430 million USD
- Announced an additional 25 million USD in synergies within the Post Consumer Brands segment
Second Quarter Consolidated Operating Results
Second quarter net sales were 1’271.1 million USD, an increase of 218.4 million USD, or 20.7 percent, compared to the prior year. The sales increase was driven by the fiscal 2015 acquisition of MOM Brands and the fiscal 2016 acquisition of Willamette Egg Farms, as well as organic sales growth. On a comparable basis, net sales increased 0.9 percent when compared to the same period in fiscal 2015 resulting from organic sales growth within the Post Consumer Brands, Active Nutrition and Private Brands segments, which was partially offset by an anticipated decline in sales within the Michael Foods Group segment.
Gross profit for the second quarter was 409.3 million USD or 32.2 percent of net sales, an increase of 133.8 million USD compared to the prior year gross profit of 275.5 million USD or 26.2 percent of net sales. Selling, general and administrative (SG+A) expenses for the second quarter were 205.6 million USD or 16.2 percent of net sales, an increase of 29.2 million USD compared to the prior year SG+A of 176.4 million USD or 16.8 percent of net sales.
Adjusted Ebitda was 247.8 million USD for the second quarter, up 98.6 million USD compared to the prior year. The increase was driven primarily by the acquisition of MOM Brands, synergy savings within the Post Consumer Brands segment and organic Adjusted Ebitda growth in the Michael Foods Group and Active Nutrition segments.
Net earnings available to common shareholders were 1.5 million USD, or 0.02 USD per diluted common share, for the second quarter. Adjusted net earnings available to common shareholders were 69.0 million USD, or 0.87 USD per diluted common share.
Six Month Consolidated Operating Results
Net sales for the six months ended March 31, 2016 were 2’519.9 million USD, an increase of 393.3 million USD, or 18.5 percent, compared to the prior year. Gross profit increased 247.2 million USD to 771.8 million USD or 30.6 percent of net sales. SG+A expenses for the six month period were 392.6 million USD or 15.6 percent of net sales, an increase of 49.0 million USD compared to the prior year SG+A of 343.6 million USD or 16.2 percent of net sales. Adjusted Ebitda was 483.4 million USD for the six month period, up 206.6 million USD compared to the prior year period. For the six months ended March 31, 2016, net earnings available to common shareholders were 12.0 million USD, or 0.17 USD per diluted common share. Adjusted net earnings available to common shareholders were 110.3 million USD, or 1.40 USD per diluted common share.
Post Consumer Brands
Post Consumer Brands includes the ready-to-eat (RTE) cereal businesses.
Net sales were 440.1 million USD for the second quarter, up 196.2 million USD over the reported prior year second quarter. On a comparable basis, net sales increased 0.8 percent, or 3.6 million USD, over the same period in fiscal 2015 with volumes declining 1.9 percent. Net sales benefitted from growth in net sales and volume forMalt-O-Meal branded bags, Pebbles and co-manufacturing as well as higher average net selling prices, which was partially offset by anticipated reduced distribution for MOM branded boxes and declines in net sales and volume for Great Grains, Shredded Wheat and Grape-Nuts. Segment profit was 74.7 million USD and 50.8 million USD for second quarter 2016 and 2015, respectively. Second quarter 2016 segment profit was negatively impacted by integration expenses of 5.8 million USD. Segment Adjusted Ebitda was 106.3 million USD and 62.8 million USD for second quarter 2016 and 2015, respectively. For the six months ended March 31, 2016, net sales were 851.7 million USD, up 390.3 million USD over the reported prior year period. Segment profit was 137.6 million USD, compared to 88.4 million USD in the prior year period. Segment profit for the six months ended March 31, 2016 was negatively impacted by integration expenses of 13.7 million USD. Segment Adjusted Ebitda was 203.5 million USD, compared to 112.6 million USD in the prior year period.
Michael Foods Group
Michael Foods Group includes the egg, potato, cheese and pasta businesses.
Net sales were 557.7 million USD for the second quarter, an increase of 1.3 percent, or 7.4 million USD, over the reported prior year second quarter. On a comparable basis, net sales declined 2.2 percent, or 12.2 million USD, over the same period in fiscal 2015. Egg sales declined 2.8 percent, on a comparable basis, with volume declining 15.9 percent, as a result of the impact of avian influenza which reduced Post’s egg supply available for sale. Refrigerated potato products sales declined 1.9 percent, with volume declining 6.2 percent. Cheese and other dairy case products sales declined 3.3 percent, with volume declining 5.2 percent. Pasta products sales increased 2.7 percent, with volume up 11.8 percent. Sales for cheese and other dairy case products and pasta were impacted by reduced pricing related to lower input costs. Segment profit was 89.6 million USD and 39.8 million USD for second quarter 2016 and 2015, respectively. Segment profit for the second quarter of 2016 included 4.2 million USD from the acquisition of Willamette Egg Farms. Segment Adjusted Ebitda was 121.9 million USD and 77.7 million USD for second quarter 2016 and 2015, respectively, with egg, pasta and cheese products all achieving organic Adjusted Ebitda growth. For the six months ended March 31, 2016, net sales were 1’144.1 million USD, a decline of 0.5 percent, or 5.5 million USD, over the reported prior year period. Segment profit was 170.4 million USD, compared to 81.9 million USD in the prior year period. Segment profit for the six months ended March 31, 2016 included 12.6 million USD from the acquisition of Willamette Egg Farms. Segment Adjusted Ebitda was 239.9 million USD, compared to 150.1 million USD in the prior year period.
Active Nutrition
Active Nutrition includes the protein shakes, bars and powders and nutritional supplement products of the PowerBar, Premier Protein and Dymatize brands.
Net sales were 143.8 million USD for the second quarter, an increase of 6.8 percent, or 9.2 million USD, over the reported prior year second quarter. On a comparable basis, net sales increased 11.6 percent, or 14.9 million USD, over the same period in fiscal 2015, with strong growth for Premier Protein shakes partially offset by anticipated declines at Dymatize. Segment profit (loss) was 13.8 million USD and (4.5) million USD for second quarter 2016 and 2015, respectively. Segment Adjusted Ebitda was 20.0 million USD and 4.1 million USD for second quarter 2016 and 2015, respectively. For the six months ended March 31, 2016, net sales were 259.6 million USD, a decline of 2.0 percent, or 5.4 million USD, over the reported prior year period. Segment profit (loss) was 24.3 million USD, compared to (10.8) million USD in the prior year period. Segment Adjusted Ebitda was 36.7 million USD, compared to 8.8 million USD in the prior year period.
Private Brands
Private Brands primarily includes nut butters, dried fruit and nuts, and granola.
Net sales were 129.7 million USD for the second quarter, an increase of 3.8 percent, or 4.8 million USD, over the reported prior year second quarter. Nut butters and dried fruit and nut sales increased 4.5 percent, with volume up 9.7 percent. Granola and cereal sales increased 1.6 percent, with volume declining 5.3 percent. Segment profit was 7.7 million USD and 10.4 million USD for second quarter 2016 and 2015, respectively. Segment Adjusted Ebitda was 13.9 million USD and 16.9 million USD for second quarter 2016 and 2015, respectively. For the six months ended March 31, 2016, net sales were 265.3 million USD, an increase of 5.0 percent, or 12.6 million USD, over the reported prior year period. Segment profit was 20.6 million USD, compared to 17.3 million USD in the prior year period. Segment Adjusted Ebitda was 33.0 million USD, compared to 31.2 million USD in the prior year period.
Interest, Other Expense and Income Tax
Interest expense, net was 77.2 million USD for the second quarter compared to 59.8 million USD for the prior year quarter. For the six months ended March 31, 2016, interest expense, net was 155.0 million USD, compared to 119.9 million USD for the six months ended March 31, 2015. The increase for both the quarter and the six month period was driven by a rise in Post’s debt principal balance outstanding primarily resulting from theMay 2015 term loan issuance in connection with financing the MOM Brands acquisition.
Other expense relates to non-cash mark-to-market adjustments on interest rate swaps and was 90.9 million USD for the second quarter of fiscal 2016, compared to 28.8 million USD for the second quarter of fiscal 2015, and 106.8 million USD for the six month period in fiscal 2016, compared to 83.4 million USD for the six month period in fiscal 2015.
Income tax benefit was 10.5 million USD, or an effective income tax rate of 187.5 percent, in the second quarter of fiscal 2016. For the six months ended March 31, 2016, income tax expense was 3.2 million USD, or an effective income tax rate of 9.5 percent. The effective income tax rate for both periods in fiscal 2016 was favorably impacted by discrete items that occurred in the second quarter of fiscal 2016 which primarily related to Post’s decision to divest its Michael Foods Group Canadian business.
Outlook
Post management has raised its fiscal 2016 Adjusted Ebitda guidance range to be between 893 million USD and 913 million USD, from between 810 million USD and 840 million USD. Post management expects Adjusted Ebitda for the second half of fiscal 2016 to be between 410 million USD and 430 million USD.
Post management continues to expect capital expenditures for fiscal 2016 to be between 145 million USD and 155 million USD, including approximately 20 million USD related to growth activities and approximately 20 million USD related to integration activities. Maintenance capital expenditures for fiscal 2016 are expected to be between 105 million USD and 115 million USD.
Post management continues to expect to achieve 50 million USD in run-rate annualized cost synergies within the Post Consumer Brands segment by the end of fiscal year 2016 and also announced an additional 25 million USD in run-rate annualized cost synergies, which are expected to be achieved by the end of fiscal year 2018.
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