Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Post Holdings Inc (POST, Financial) reported a strong fourth quarter, with adjusted EBITDA growing by 45% over the last two years, driven by both organic growth and pet acquisitions.
- The company generated approximately $1 billion in free cash flow over the past two years, highlighting strong cash flow conversion.
- Post Holdings Inc (POST) successfully reduced net leverage by more than a full turn over the last two years, improving its financial position.
- The pet business has performed exceptionally well, exceeding expectations by more than doubling the acquisition case.
- Foodservice segment showed strong performance with a 3.6% volume increase, led by distribution gains in eggs and potatoes, and a favorable mix shift to higher value-added products.
Negative Points
- Cereal category volumes declined by 2.6%, reflecting ongoing challenges in the segment.
- Pet consumption volumes were down roughly 2%, driven by reduced distribution points for Nutrish and price elasticity in Gravy Train.
- The Refrigerated Retail segment faced distribution losses in egg and cheese products, impacting net sales.
- Weetabix experienced a 2% decline in UK cereal category volumes, with branded biscuits down 3% due to lapping heavier promotions from the previous year.
- The company faces ongoing challenges in its shake manufacturing start-up, with lower-than-expected output and delays in reaching the desired run rate.
Q & A Highlights
Q: Rob, given the top line decline in most segments except food service, at what point do these declines become a concern for EBITDA growth?
A: Robert Vitale, President and CEO, explained that while they can't shrink their business to prosperity, they aggressively manage out lower-margin business without worrying about volume reduction. The focus is on optimizing the network, especially in cereal, and they believe trends will eventually stabilize.
Q: Have you seen any decline in private label volumes in your categories, similar to other large private label players?
A: Robert Vitale stated that they have not seen any erosion in private label penetration in their categories. They have observed growth in private label cereal and Eighth Avenue, suggesting it varies by category.
Q: What are your thoughts on the volatility in egg market prices and your ability to take pricing?
A: Robert Vitale noted that while they are less susceptible to volatility due to their value-added offerings, they do face cost pressures. They are generally in a position to take pricing or allocate to customers when necessary.
Q: Can you discuss the key factors that might influence your fiscal 2025 EBITDA guidance range?
A: Robert Vitale mentioned ERP conversions and pressure on Bob Evans side dishes as potential uncertainties. They ended the year strong, which influences the guidance range, with the high end being comfortable and the low end softer.
Q: What are the levers for growth in Foodservice EBITDA for fiscal 2025?
A: Robert Vitale highlighted foot traffic volume in QSRs and mix migration to value-added products as key drivers. They feel comfortable meeting growth targets despite uncertainties like avian influenza.
Q: How is the aseptic shake manufacturing footprint performing, and is there room for improvement?
A: Robert Vitale acknowledged significant room for improvement, with current output below expected run rates. They anticipate reaching desired run rates by the second half of FY25, despite challenges with equipment and labor.
Q: Can you elaborate on the efficiencies and savings from the Perfection acquisition in the pet segment?
A: Robert Vitale explained that the acquisition provided access to Western manufacturing and distribution, offering network optimization opportunities. Additional benefits are expected in FY26 after completing optimization work.
Q: What is the outlook for Weetabix margins, and how long might it take to recover?
A: Matt Mainer, CFO, described it as a multiyear journey, with cost-out opportunities and portfolio simplification identified. They expect margin recovery over a couple of years, with some pressure from ERP conversion in the short term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
