Post Holdings Inc Margins Up in Latest Results

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Post Holdings Inc (NYSE: POST) has struggled to grow its business in recent years as new competitors entered the grocery business and consumers switched to organic and natural foods. That's impacted Post Holdings' strategy, forcing management to focus on growing the bottom line, even if sales aren't growing.

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Fiscal third-quarter results showed some significant progress in improving the company's earnings performance. These are the numbers investors should know for the quarter.

Post Holdings Inc: The raw numbers

Metric Q3 2017 Q3 2016 Year-Over-Year Change
Sales $1.27 billion  $1.25 billion  2.1% 
Net income ($62.9 million)  breakeven  n/a 
Diluted EPS ($0.93)  $0.00  n/a 

What happened with Post Holdings Inc this quarter?

The numbers above look pretty bleak, but they're not really representative of Post Holdings' true performance in the quarter. Here are some important highlights.

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  • Sales for consumer brands fell 1.7% to $427.3 million and segment profit was up 29% to $96.9 million.
  • Michael Foods Group sales were up 1.2% to $524.2 million, although pro forma sales fell 4.2% on a 20.3% decline in branded cheese sales. Egg volumes were up 6%, but sales were down 2% on falling prices. Segment profit was down from $65.6 million a year ago to $46.4 million last quarter.
  • Active nutrition continued to thrive, showing a 20.9% increase in sales to $188.7 million and a 58% jump in profit to $28 million.
  • Private brand sales fell 4.3% to $132 million and segment profit fell $1 million to $8 million.
  • There was a $33.5 million currency gain on foreign currency in relation to the Weetabix acquisition, which was completed on July 3, 2017.
  • Post took a $160.4 million loss in the early retirement of debt plus a $45.2 million loss on non-cash mark-to-market adjustments on hedges.
  • Without one-time costs, adjusted earnings were $49 million, or $0.63 per share.

What management sees for the future

Management sees a better 2017 than they anticipated, particularly after the Weetabix acquisition. They increased full-year adjusted EBITDA guidance from $920 million to $950 million, which was before Weetabix, to a new range of $875 million to $990 million, including Weetabix.

Capital expenditures are expected to be up about $20 million from previous guidance to $200 million to $220 million, inclusive of Weetabix and the cage free conversion of a Bloomfield, Nebraska facility.

Looking forward

Post Holdings isn't going to be a big growth company, but the improvement on the bottom line is key for investors looking into this food supplier. And as the active nutrition business grows, the company may one day be back to growth. 

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Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Post Holdings. The Motley Fool has a disclosure policy.