Post (NYSE:POST) Holdings executives said the company’s diversified portfolio delivered second-quarter adjusted EBITDA above expectations, but management maintained its prior full-year adjusted EBITDA guidance because of new cost pressures tied to the conflict in the Middle East.
Daniel O’Rourke, Post’s director of investor relations, said in opening remarks that the company continued “aggressive share repurchases,” reducing its share count by 15% fiscal year to date. He also said Post’s cash flow, liquidity and credit metrics provide “significant flexibility for opportunistic capital allocations.”
Cost pressures keep guidance unchanged
Asked why Post did not raise guidance after a stronger-than-expected quarter, Mainer said the primary issue is higher fuel-related costs, including fuel charges and surcharges. He said Post has some coverage and hedges in place, but the recent increase in diesel prices is flowing through the company, particularly in North America.
Catoggio said the company is currently assuming it will absorb the added fuel and packaging-related costs through the profit and loss statement for the balance of the fiscal year. If inflation persists into the next fiscal year or worsens, he said Post would consider pricing actions, though he characterized it as too early to determine.
More broadly, Catoggio said if inflation across consumer packaged goods remains in the low-single-digit range, companies may attempt to absorb it through their P&Ls, possibly by reducing promotional intensity. If inflation rises above that level, he said the industry would likely see more targeted pricing.
Pet business focused on restage and price architecture
Catoggio said Pet performance is being affected by three factors. First, the dry dog food category has been weaker than expected, and dry dog food represents about 60% of Post’s pet portfolio. He said the category was down 4% in pounds and accounted for about 20% of the company’s gap to the category.
Second, Post saw higher-than-expected elasticities after raising prices on about one-third of the 9Lives brand, particularly more functional products. The company also lost exclusivity with a couple of retailers. Catoggio compared the situation to Gravy Train, where Post previously used rollbacks in the short term and later addressed the issue with price-pack architecture. He said Gravy Train is now growing 40% in pounds at one of Post’s largest retailers.
Third, Catoggio said the Nutrish relaunch is still in early stages and likely will take the entire third quarter to fully appear in the market. The relaunch includes new positioning, packaging and price points. Where it has been fully implemented, he said the brand is showing sequential weekly improvement, including flat year-over-year performance in the last week of April in a declining category. Management expects the category to be at least flat to slightly growing versus the prior year by the fourth quarter.
Foodservice profitability expected to normalize at prior run rate
In foodservice, Catoggio said supply and demand remain balanced and that Post continues to view the business as returning to its previously discussed run rate. An analyst referenced roughly $125 million in quarterly profitability, and Catoggio said management still sees that as the run-rate level, while noting the quarter included multiple moving pieces related to avian influenza comparisons, supply constraints, pricing and costs.
On whether customers could shift back to whole eggs as egg prices fall, Catoggio said that is a risk Post evaluates. However, he said the value proposition of value-added egg products remains “quite sticky,” particularly among larger operators that remove labor from their systems and benefit from consistency and food safety. He said smaller independent operators may have more flexibility to switch, but they represent a much smaller portion of the business.
Cereal, Weetabix and refrigerated retail updates
Catoggio said the cereal category has improved from a year ago but remains below pre-pandemic levels. He said the category was down 3% in pounds for the quarter and down 2.5% in April. Despite lower promotional spending and assortment transitions in the food channel, he said Post was the only large player to hold dollar market share flat year over year.
For Weetabix, Catoggio said reported sales were affected by the loss of an Oreo O’s licensing agreement, with one more quarter before Post fully laps that impact. He said the broader U.K. cereal category has returned closer to flat, and the core Weetabix “yellow box” product has strong momentum and continues to outperform.
Mainer said Weetabix margins are also being influenced by UFit, a co-managed business that continues to grow but carries lower margins. He said Post executed network optimization at the end of March, including closing a private-label facility tied to the Deeside acquisition, which should support better profitability in the second half. He expects noticeable sequential EBITDA margin improvement in the third and fourth quarters compared with the first half.
In refrigerated retail, Mainer said the business saw a significant lift in dinner sides, with 12% growth. He said Easter timing was the largest driver, as the holiday fell in the second quarter this year versus the third quarter last year. New private-label products introduced at the start of the fiscal year also contributed. Catoggio added that underlying volume growth, private label and Easter each contributed to the gains.
Capital allocation, M&A and private label
Mainer said the M&A environment remains mixed. Some private assets have not come to market, in part because of public market multiples and potential clearing prices. He said Post continues to evaluate opportunities, including smaller synergistic tuck-ins and larger portfolio separations by competitors, but the company’s own share price and implied multiple remain the benchmark and create a high bar for acquisitions.
Catoggio said Post’s integration of 8th Avenue is progressing well, with underlying business performance in line with the deal model and synergies running slightly ahead of plan. He said the company expects to reach the synergy run rate toward the end of the fiscal year.
On private label, Catoggio said Post Consumer Brands has the company’s largest private-label exposure, at about 20% of that business, with strong positions in cereal, granola and peanut butter. He said Post is smaller in private-label pet, where it operates more as a premium private-label player. In Weetabix, Mainer said private label is north of 40% of the business, in line with the U.K. market, and provides alternative price points that help with retailers.
Mainer also said Post generally needs about $150 million in cash on the balance sheet for working capital and daily operations, including needs related to Weetabix and international operations.
About Post (NYSE:POST)
Post Holdings, Inc is a consumer packaged goods company that operates as a holding company for a diverse portfolio of food and beverage brands. The company’s principal activities include the production, marketing and distribution of ready-to-eat cereal, refrigerated and frozen foods, and nutritional beverages. Through its operating segments—Post Consumer Brands, Foodservice, Refrigerated Side Dishes & Bakery, and Active Nutrition—Post Holdings delivers a broad array of products to retail grocers, convenience stores, foodservice operators and e-commerce channels.
The Post Consumer Brands segment features a variety of hot and cold cereals under names such as Honey Bunches of Oats, Shredded Wheat and Pebbles.
