Post records 22% jump in net sales on strong performance in its pet food segment

USA – Post Holdings, a consumer-packaged goods holding company has reported net sales of US$1.9bn, an increase of 21.9% on the prior year on the back of a strong performance in its pet food and foodservice categories.

Rob Vitale, president, and chief executive officer at Post Holdings, while announcing the company’s third-quarter earnings for the three-month period ended June 30, said that the raised earnings guidance reflects its acquisition of several pet food brands formerly owned by The J.M. Smucker Company.

Vitale added that the company expects the pet-food business to continue into its next fiscal year.

“We expect to be well positioned for FY-2025 as we realize synergies from the pet acquisition, continue to improve supply chains and make incremental investments in marketing.”

In addition to the surge in sales, gross profit came to US$501.6 million, up 37.5% year-over-year, and accounted for 27% of net sales over the three-month period.

Early this year, Post entered the US pet industry by acquiring brands from J.M.Smucker in a deal estimated to be worth about US$1.2 billion.

According to Post, Pet Food contributed US$275.3m towards that net sales total.  Vitale added that the company’s expectation for the sector’s contribution has increased in the short term and meaningfully more so once they move past full integration and synergy realization.

According to Rob Vitale, margin realization for its pet food division is “exceeding expectations.” He noted three reasons for this: changes in factory leadership and behaviors, which have resulted in improved service levels and inventories.

Vitale also highlighted conservative general and administrative assumptions, and putting a hold on investing in the segment’s “brand rehabilitation.

Foodservice, on the other hand, which saw net sales and volume growth of 8% and 3%, respectively, was also picked out as a key contributor to its quarterly performance.

According to Post, supply chain disruptions have calmed compared to the same period in 2022, but the company continues to incur cost inflation, higher manufacturing costs, and “below optimal” fulfillment rates. It has continued to take pricing actions throughout the business to offset impacts from cost inflation.

In an upbeat assessment of the company’s prospects for the rest of the year, analyst Matthew Smith of Stifel said:

“We now estimate the pet business will generate $50m of EBITDA during the five months of Post’s ownership in FY-23, up from US$40m previously, including a stronger-than-anticipated margin performance, partially offset by stepped-up investments.”

He added that the company is also optimistic that the food service business will contribute US$100m or so in extraordinary EBITDA in FY-23.

The company also shared its nine-month performance, in which Post reported net sales of US$5.05 billion, up 18.1% year-over-year. Gross profit grew 23.8% to $1.33 billion and accounted for 26.4% of net sales over the first three quarters of fiscal 2023.

Given these results, Post Holdings has updated its full-year outlook to reflect an adjusted EBITDA between US$1.18 billion and US$1.20 billion and capital expenditures for fiscal 2023 are expected between US$275 million and US$300 million.

“We do feel good about pet, but we feel very good about most of our business,” Vitale said.

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