Post Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 3, 2024

There are 13 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Q2 2024 Post Holdings Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's call is being recorded.

Operator

I would now like to hand the call over to your speaker today, Daniel O'Rourke, Investor Relations for Post. Please go ahead.

Speaker 1

Good morning. Thank you for joining us today for Post's Q2 fiscal 2024 earnings call. I'm joined this morning by Rob Vitale, our President and CEO Jeff Zadoks, our COO and Matt Maynor, our CFO and Treasurer. Rob, Jeff and Matt will make prepared remarks and afterwards, we'll answer your questions. The press release that supports these remarks is posted on both the Investors and the SEC Filings sections of our website and is also available on the SEC's website.

Speaker 1

As a reminder, this call is being recorded and an audio replay will be available on our website at postholdings.com. Before we continue, I would like to remind you that this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward looking statements are current as of the date of this call and management undertakes no obligation to update these statements. This call will discuss certain non GAAP measures. For a reconciliation of these non GAAP measures to the nearest GAAP measure, please see our press release issued yesterday and posted on our website.

Speaker 1

With that, I will turn the call over to Rob.

Speaker 2

Thank you, Daniel, and good morning.

Speaker 3

Our business maintained the momentum we saw in Q1 with a strong Q2. Strong manufacturing performance, disciplined pricing and solid cost management continued to drive results. With isolated exceptions, volumes generally declined. As we have previously mentioned, SNAP reductions are a meaningful component of the decline. However, there also remains a disconnect between macroeconomic statistics and consumer sentiment.

Speaker 3

Over time, we expect this to largely impact consumption location and price points rather than volume. We like the balance of our portfolio provides by virtue of the mix of products, price points and channels. Within our consumer brand segment, grocery and pet continue to perform well. While we have incremental investments to make, our confidence continues to grow regarding the sustainable contribution run rate from our pet acquisition. Cereal remains well positioned in value and is holding its own in premium with margins improving in both categories subsegments.

Speaker 3

Equally important, the integration of Pet into PCB is progressing and remains on track. Our foodservice business continues to deliver strong results demonstrating its value proposition to customers through excellent service levels and its value added product offering. While we saw a bit of a slowdown in restaurant foot traffic this quarter, we believe it is temporary and our historical algorithm and growth drivers remain intact. Refrigerated retail continues to focus on driving volumes through its vastly improved supply chain, while Weetabix remains resilient in a challenging albeit improving environment. As far as capital allocation, we remain opportunistic with our triangular focus on share buybacks, leverage reduction and M and A.

Speaker 3

The M and A pipeline has increased and we continue to look for opportunities both strategic and tactical. The debt refinancing we completed in February was exquisitely timed and created broader options for each bucket of capital allocation opportunity. Overall, I am very pleased with our performance through the first half of the fiscal year and remain very optimistic for the balance of FY twenty twenty four. With that, I will now turn the call over to Jeff.

Speaker 4

Thanks, Rob, and good morning, everyone. Starting with PCB, both our grocery and pet food products had another strong quarter, each driven by growth in our value offerings. Within grocery, cereal performed in line with the category as we help branded share in both dollars and pounds. Cereal category volume showed some signs of improvement as the rate of decline slowed to 3.6% for the quarter. We expect category volumes will continue to normalize in Q3 now that we have fully lapped the reduction in SNAP benefits.

Speaker 4

The main profit drivers within grocery continue to be carryover pricing and strong operating cost performance.

Speaker 5

For our

Speaker 4

pet food brands, category share grew in both dollars and pounds. This growth combined with strong manufacturing performance drove our results. We further ramped investments in our premium pet brands and G and A in preparation for exiting the TSA with Smucker's. Finally, from a network and supply chain perspective, we are focused on optimization for both cereal and pet. We are on track to capture the benefits of closing our Lancaster, Ohio Cereal Plant in fiscal 2025.

Speaker 4

For pet, we are implementing an optimized warehouse distribution network combined with grocery and lining up all the necessary internal and third party capacity to fully exit the Smucker's Co Pak agreement in the first half of twenty twenty five. Moving to Foodservice, we had another strong quarter as favorable mix and customer renewals were supported by excellent service levels. While we did see a pullback in overall egg volumes from declines in restaurant foot traffic and inventory reductions at certain customers, we continue to see growth strong growth within our higher margin precooked egg products, which were up approximately 5%. There remains significant runway in our business by not only moving existing customers up the product value chain, but also by converting the 40% of foodservice industry volumes still using shell eggs. Our value proposition has never been stronger or more evident as wage rates drive operators to seek more efficiencies.

Speaker 4

Rounding out the discussion of foodservice, although we continue to see cases of avian influenza, including cases found in dairy herds, we have not had any additional outbreaks within our owned or contracted farms. Lastly, we continue to ramp our RTD shape co manufacturing for Bellring with improving production performance in the quarter, albeit well behind our initial startup plan. We expect to hit our targeted profit run rate for shakes exiting fiscal Q4. Turning to Weetabix, U. K.

Speaker 4

Cereal category volumes declined 3%, but we outperformed the category given our participation in private label. From a supply chain standpoint, our overall service levels showed improvement. Outside of cereal, UFIC continues to be a volume bright spot providing an attractive source of growth. Our refrigerated retail business had a solid quarter, driven by continued manufacturing and cost management. We are focused on driving demand and pulling all levers to do that including advertising, promotion and innovation.

Speaker 4

With that, I'll turn the call over to Matt.

Speaker 6

Thanks, Jeff, and good morning, everyone. 2nd quarter consolidated net sales were $2,000,000,000 and adjusted EBITDA was $345,000,000 Net sales increased 23% driven by recent acquisitions. Excluding acquisitions, sales declined 5% driven by lower overall volumes and the impact of our foodservice pricing pass through model partially offset by higher retained pricing across our businesses. Supply chain performance at bill rates remained strong while inflation persisted in areas such as sugar and labor costs with some offsets from better freight and grain costs. Finally, SG and A increased as we continued targeted marketing investments in our retail businesses.

Speaker 6

Excluding the benefit of pet food acquisitions, Post consumer brands net sales increased 1% and volumes decreased 4%. Average net pricing, excluding pet food, increased 5%. Volumes declined primarily in non retail cereal and peanut butter. Segment adjusted EBITDA increased 74% versus prior year as we benefited from the strong contribution of pet food and improved grocery performance. Weetavix net sales increased 10% year over year.

Speaker 6

Sales benefited from the D side acquisition and a 4 40 basis point tailwind from a stronger British pound. On a currency and acquisition neutral basis, net sales were flat and volumes increased 3%, while mix shifted to private label products. Segment adjusted EBITDA decreased 1% versus prior year as increased volumes and favorable FX were offset by private label mix shift and increased marketing costs. Foodservice net sales and volumes declined 12% 2%, respectively. Revenue reflects pass through of lower grain costs and a reduction in pricing due to the removal of avian influenza price adders from last year.

Speaker 6

Volumes reflect decreases in our liquid egg products, partially offset by growth in our precooked egg and potato products. Adjusted EBITDA decreased 8% as the removal of ABN influenza price adders from last year and lower egg volumes were partially offset by favorable mix shift to higher margin precooked eggs and customer renewal pricing. Refrigerated retail net sales decreased 8% and volumes decreased 5 percent. Both were driven by distribution losses in egg and cheese products. Segment adjusted EBITDA increased 3% led by improvements in plant cost I'm sorry, plant cost performance and SG and A.

Speaker 6

Turning to cash flow. In the Q2, we generated $250,000,000 from operations driven by increased profitability and improved working capital. Our net leverage decreased 2 tenths of a turn to 4.3 times. Capital expenditures in the quarter were approximately $100,000,000 driven by continued investments in our pet food business and the expansion of our Norwalk, Iowa pre cooked egg significantly added to our debt maturity runway as we cleared out 3 years of near term maturities. In addition, we added to our overall liquidity as we increased the size of our revolver by $250,000,000 to $1,000,000,000 Finally, given the strong first half of the year, we again raised our guidance.

Speaker 6

Within this new guidance range, we see the remaining 2 quarters of the year as fairly balanced to each other. Relative to Q2, we see seasonal lows for refrigerated retail in Q3 and Q4 with some additional investments around our pet integration being the biggest sequential drivers. With that, I will turn the call back over to the operator for Q and A.

Operator

Thank you. Our first question comes from Andrew Lazar with Barclays. Your line is open.

Speaker 7

Good morning, everybody.

Speaker 3

Hey, good morning, Andrew.

Speaker 7

Good morning. Rob, I wanted to start just thinking through what Pet margins might have looked like in the quarter and sort of where we go from here. If we put a low to mid-20s EBITDA margin on legacy PCB and adjust a little bit for the perfection deal, maybe we get around $50,000,000 or so in EBITDA contribution from the larger pet asset or maybe about a 12% EBITDA margin. And in the last couple of quarters, I think margins were also in that range, but you've kind of warned it might be a bit transitory due to some benefits such as the pipeline fill. And obviously, you've talked again today about the need or plan for some incremental investment moving forward.

Speaker 7

So it sounded like margins would revert back a little bit, but we haven't seen that yet. So I guess I'm just wondering if my math is reasonably accurate and then what maybe drove the strong performance because we've got a couple of quarters in a row now with this sort of low to maybe a little bit higher teens EBITDA margin in Pet. I'm trying to get a sense of what you see as the sustainability of that.

Speaker 3

Well, if anything, you're a touch on the low side in terms of contribution. So as you rightfully point out, margins have been running reasonably attractive and consistent with some of the top down talk we had at the outset that the margin structure was just inappropriately low and needed to be addressed. So that's largely been addressed with better execution through the plans, filling the unmet need, coming off allocation with the exception of some certain products where we remain with some capacity issues. So I think that the foundation that you just articulated is accurate, but so is the historical comments that we need to make some investments. But what I would tell you is those investments are not going to dramatically change the margin structure.

Speaker 3

It will be within that range of low teens where we think this business should operate on an ongoing basis.

Speaker 7

Got it. Thanks for that. And then in the prepared remarks just now, you talked about how you think the restaurant slowdown you've seen in restaurant traffic, you think will be temporary? And also that you expect the cereal category sort of to normalize in the fiscal second half as you lap some of the changes to Snap. And so I guess if I just take those 2 sort of together, it suggests a little bit of a brighter outlook potentially for sort of the industry trend as we move forward.

Speaker 7

And I don't know, maybe that's a little bit more optimistic than I've heard from some others in the space about maybe the timing of this recovery. And just trying to get a sense of if I'm reading that right or and maybe it's just that you are starting to see some of this play out, which gives you that sort of level of improved visibility or maybe a multiples?

Speaker 3

I think the question is timing. I don't think we're significantly different in our outlook than most of our peers. So maybe it was more an articulation when we said temporary. I didn't mean to imply it was an immediate turnaround. I think we've got some inflationary issues that hit foodservice that had already hit in retail and we're seeing some shift back to retail.

Speaker 3

Volumes in retail are a bit more difficult to parse through because in addition to having some shift from away from home to in home, we have the snap lapping to contend with. So parsing out causation is a bit more challenging. The comment about temporary away from home was more if you look at historical context, these things occur. We've had some significant customers with some foot traffic issues. I'm very confident with the strong channel partners we have that those will be corrected and that we will go back to growth in foot traffic.

Speaker 3

Whether that's been 1 quarter, 2 quarters, I couldn't tell you.

Speaker 7

Got it. And then very quick last one. Just you mentioned the aseptic plant being up to full capacity really towards the end of the fiscal year. It sounded new to me and a little bit pushed back and maybe I have that wrong because I also haven't heard that on the flip side at least yet from the folks over at Bellring being an issue. So I guess where do I where's the disconnect there or has something changed?

Speaker 3

Yes, I don't think there's a disconnect. I think you're reading it right. From a post perspective, we've had some startup challenges that we're working through very methodically, not unusual for a startup. One of the reasons this is such an attractive category to be in is it's not easy. So we're overcoming some of those startup issues that everyone contends with and maybe we should have planned more of them.

Speaker 3

And in my dual hat role, Bellring anticipated more of the problems than Post did because they've had more start up experiences. So their numbers are already factored into the run rate that we are now achieving. So there's no disconnect from the perspective you just outlined.

Speaker 7

Great. Thanks so much.

Speaker 3

Thank you.

Operator

Thank you. Our next question comes from Michael Lavery with Piper Sandler. Your line is open.

Speaker 8

Thank you. Good morning.

Speaker 9

Good morning.

Speaker 8

You mentioned that despite the pretty sizable recent avian flu outbreak, you've protected your volumes. Just can you help us maybe handicap the pricing outlook, just having been through having seen some of this before? Is there any early signs of how that might be evolving? And just have some visibility on supply and demand for the more broadly that you can share in terms of what we might anticipate as far as how that evolves?

Speaker 3

A little bit like trying to predict the direction of a tornado. What we focus on is making sure we have effective biosecurity over our facilities. And obviously, we can't control what other participants in the market do. And then price becomes the independent variable. So we would simply be hazarding a guess as to what direction something like HPII will take and I wouldn't want to try to guess.

Speaker 3

What we would tell you is that we are prepared for multiple contingencies around no breakouts, breakouts that disproportionately affect us and breakouts that disproportionately affect our competitors. So it's multi option tree scenarios that we game rather than trying to plan one scenario.

Speaker 8

Okay. Thanks for that. And just on pet as far as the sort of the pet parent consumer, it seems to be a bit more trade down and maybe value conscious like in so many other categories. Can you just give a sense of how beneficial that could be or what you're seeing in terms of brand positioning for your side and how it all fits together?

Speaker 3

Well, it's something we've been speaking to fairly consistently that we baked it into our assumptions that there would be a trade down and it has been occurring and we expect it to continue. So nothing different than we previously talked about. And that when I mentioned the meeting on fill demand, that was primarily in the segment that benefits from the trade down.

Speaker 8

Okay, great. Thanks so much.

Speaker 7

Thank you.

Operator

Thank you. Our next question comes from David Palmer with Evercore ISI. Your line is open.

Speaker 10

Thanks. Good morning.

Speaker 7

Good morning. Good morning.

Speaker 10

Question on Pet and particularly things that would drive the top line, your growth plans there. You have Perfection Foods. In the past, you talked about repositioning some of the brands like Rachael Ray. So any thoughts about what your plans are and how it's going so far?

Speaker 3

Sure. When we bought the business, I think we articulated we viewed it as 2 segments. We had a premium segment with Nutrition Nature's Recipe and then we had a value segment with the balance of the brands and that the key to the value segment was stabilizing capacity and making sure we were meeting on unmet demand as the demand migrated from more premium to less premium. Within Rachael Ray and Nutrish, we see that as more of a marketing issue and positioning the brand to make sure the consumers are clear on the value proposition. That's being done, but that's a longer process than is fixing the plans and making sure we're meeting the unmet demand.

Speaker 3

We are focused on it, of course. We are being patient to make sure we have the right creative and the right brand positioning. But this investment opportunity was not predicated upon being able to grow those brands. It was predicated upon maintaining. So growth specifically in those brands is the additional upside to our investment case.

Speaker 10

And then with Perfection, is that is there a distribution opportunity in the near term? And what are your thoughts there?

Speaker 3

I would say that perfection provides more of a rebalancing of our manufacturing as we now have a Western plant than it does a distribution opportunity. There may be some distribution opportunities, but that was more about capacity than growth.

Speaker 10

And then just last one on Foodservice. Are you still comfortable generally speaking, you mentioned the multiple option tree with regard to avian influenza, but are you still generally comfortable with that $95,000,000 run rate per quarter on EBITDA?

Speaker 3

We certainly are.

Speaker 10

Got it. Thank you very much.

Speaker 3

Thank you.

Operator

Thank you. Our next question comes from Ken Goldman with JPMorgan. Your line is open.

Speaker 2

Hi, thanks. Can you remind us maybe what some of the key risks are that are embedded into the lower end of guidance? And I'm asking because I think maybe some of the lower end included some risk of headwind from HPAI, maybe it still does. Just want to get a sense of kind of what's baked in there, just in case avian flu does not end up being a headwind for you? I'm making sure I'm right in the first case there.

Speaker 3

Well, I think the 2 key risks are volume trajectory and HPAI. HPAI is just very difficult to predict, as I mentioned earlier. And then volume trajectory is uncertainty. We've seen some improvements. We've seen some degradation in other channels.

Speaker 3

As I mentioned, it's a bit of a confusing consumer environment right now. So I would put those as the 2 big risks.

Speaker 2

And you said 2Q, I think you meant 2H just to be clear?

Speaker 3

I did.

Speaker 2

Okay. And then quickly just on the M and A environment, hoping to get a little bit of a better sense for what you're seeing there just in light of your maybe calling out a little bit more flexibility that you have. But also just digging in a little bit, has your experience with the pet business changed at all the type of business that you're looking for, maybe opened you or your eyes to a little bit broader of a variety of opportunities. Just given how successful you've been in terms of turning the margins around here, I know there's not every opportunity won't be quite that juicy in terms of your ability to improve margins. But has it really just expanded the, like I said, the opportunity set in your eyes longer term?

Speaker 3

Well, I would say not because we have always had a very broad outlook with respect to where we could take our M and A opportunities. As we have grown and our portfolio has become more focused on areas where we were able to deliver synergies, that has somewhat narrowed our focus to where we could deliver those synergies. At the same time, we continue to look more broadly at things that would be new platforms. So I would say from an internal perspective, because we've always looked at things that with a very broad lens, no, from an execution perspective, do we feel confident in doing something a bit further afield? I would say yes, and we previously have.

Speaker 3

So I mean previously have felt that confidence. So I think the M and A environment is interesting right now because the pure volume of opportunities has increased. Whether those convert to anything or not is a remains an uncertainty. I think the volatility in the high yield market continues to create some choppiness in the M and A market. So we'll have to navigate that.

Operator

Thank you. Our next question comes from Robert Dickerson with Jefferies. Your line is open.

Speaker 5

Great. Thanks so much. Maybe just kind of a easy question around Q2. I think you said the next two quarters on EBITDA side should be fairly balanced, but I think that's what you said coming out of Q1 regarding the next three quarters and clearly you had a great Q2. I just got on the call a little bit late, so excuse me if you already stated this, but I was just curious kind of what changed obviously through the quarter relative to the original perspective?

Speaker 6

Yes. I think a little better performance on PCB for sure than expected. Just strong serial performance given the backdrop of the environment there. It was probably the biggest outlier relative to our expectations and continued really strong performance in Pet. But that will be the biggest mix.

Speaker 6

And then obviously we've got some puts and takes in the second half of the year. Biggest driver like I mentioned is really refrigerated retail. Has significant seasonality in the second half to the downside versus they have their benefit of seasonality in the first half, especially with Easter all being in Q2. And then we've got some additional investments we're going to make around PCB for pet integration, G and A and also some of those distribution investments will be sequenced through.

Speaker 1

All right. Super.

Speaker 5

And then I guess, just going back quickly, the refrigerator retail, I realize a little pressure there on the distribution side. So as we think forward, maybe not even just back half, but longer than the back half of this year, kind of what's the overall net strategy to kind of resuscitate performance?

Speaker 6

Sure. I mean it continues to be investment around the business and particularly around the dinner sides. We've got some new innovation that Jeff mentioned that's hitting the market just recently. So too soon to tell there, but certainly the strategy continues to be innovation or combined with additional marketing investment and we're leaning into promotion a bit more given some of the benefits we saw in Q1.

Speaker 5

All right, great. I'll pass it on. Thanks so much.

Operator

Thank you. Our next question comes from Mark Torrent with Wells Fargo Securities. Your line is open.

Speaker 11

Hey, good morning. Thank you for taking the questions. Just touch on promos a little bit with regards to Refrigerated Retail. We've seen promo activity more broadly across food and beverage pickup in recent periods. Is that sort of consistent with your view on the market?

Speaker 11

How rational is the activity in your categories? And how do you expect that to progress through the year?

Speaker 6

Yes. I think it is consistent with our view and what we think needs to happen. Obviously, from a refrigerated retail is a little bit different segment for us because we don't have a value alternative for a private label like we do in cereal for sure. So we don't get that change in mix benefit. So we're continuing to see investment in promo.

Speaker 6

And like I said, we had a case in Q1 where we got the benefit of some promotion, a little more sponsored by one of our customers and saw some significant benefits. So I think we'll continue to take targeted bets there, but remain rational.

Speaker 11

Okay. And then on M and A, you called out increased activity or opportunity on that front, maybe some perspective on what is driving that? Have valuations moved at all? And is the environment allowing you guys to be more aggressive there?

Speaker 3

Well, we don't know if valuations have moved yet because what we are first seeing is an increase in opportunity flow. So we need some more transactions to occur in order to gain the sense of a market. I think what's driving it is there has been a relatively low period of M and A, specifically private equity exits that have aged some of these opportunities such that I think they will come to market in more of a group. And that combined with some of the movement in the debt markets, both positive and negative, is all impacting the way the market forms. So we need a little bit more time before we can really answer where the equilibrium is on multiples.

Speaker 3

But what we can say with a fairly degree fairly high degree of confidence is that the number of opportunities is really significantly ticking up.

Speaker 11

Okay. Thanks. I'll pass it on.

Operator

Thank you. Our next question comes from John Baumgartner with Mizuho Securities. Your line is open.

Speaker 12

Good morning. Thanks for the question.

Speaker 3

Hey, John.

Speaker 12

Maybe first off, in Foodservice and Eggs, the coffee chain segment has been a big driver of growth in precooked these last few years. But as you highlighted, about 40% of foodservice volume is still shell eggs. So in light of these comments about the demand weakness now, how do you think about diversifying the customer base further with new capacity, opening more outlets in areas such as leisure, hospitality? And then I guess how does the bulk of the outlets with this 40% of Shell eggs volume still fits? How does that overlap with your current channel exposure right now?

Speaker 3

Well, the in reverse order, the Shell egg tend to be the smaller operators. So they are less represented in our customer base. So we would be adding distribution as we convert from shell eggs to value added eggs. And for the first part of that question, we have an ongoing effort, multi year, if not multi decade, to move customers up that value added pyramid. So we continue to see growth in the higher value added products, including the products that heavily skew towards coffee outlets, and we would expect that trend to continue with the additional support of we now have some tailwind created by increase in wage rates.

Speaker 3

So the single biggest variable in driving demand is that we are essentially taking labor and cost out of back of house operations by providing a product that's closer to immediately servable. So as costs grow, that provides additional impetus for customers to move up the pyramid both from value add both from shell to value added and up to value added pyramid.

Speaker 12

So I mean of that 40% of Shell ladies volume out there, if it's small operators, are those folks do you think more inclined to trade into precooked or if they're kind of mom and pops and there's less reason to take labor out of the system? Is there maybe less likelihood of chipping like that 40% over time?

Speaker 3

I think you need to think about it like a pyramid with the 40% at the base, and we don't necessarily take the base immediately to the top. What we do is we take the components along the pyramid as it thins from lower to higher in the pyramid. So the first step will be to move an operator from Shell to the lowest level of value add. Meanwhile, we will be working on trying to move a higher value add to an even higher value add. So it's not a leapfrog, it's a continuum.

Speaker 3

Okay.

Speaker 12

And then my follow-up on Refrigerated Retail and the side dishes business there. Just given the theme this season from companies calling out consumer weakness, are you seeing any incremental erosion or larger elasticity or risk to that business for the back half of the year? I mean, I know you have the innovation in marketing, but to what extent do you see that category becoming more of a discretionary product in this economy?

Speaker 6

Yes. I mean certainly I've seen that like I mentioned John the pressure on the category. We don't have the private label alternatives. So I mean that's baked into our guidance. And as we talked about, we had the benefit of seasonality in the first half.

Speaker 6

And I think our challenge is how do we drive higher volume levels outside of the seasonal tailwind that we get. So I think definitely there's elasticity within the category and that's why we're trying to invest behind the brands with both additional marketing and promo to try and drive people either the trial or back into the category. Okay.

Speaker 12

Thanks, Matt. Thanks, Rob.

Speaker 3

Thank you.

Operator

Thank you. And our next question comes from Carla Casella with JPMorgan. Your line is open.

Speaker 9

Hi. You talked about some share losses and I'm wondering was that you specifically walking away or was it a shelf space that went to a more value competitor?

Speaker 6

I'm sorry, which segment, Carla?

Speaker 9

I think you talked about it in foodservice and or refrigerated. I thought I mentioned it earlier.

Speaker 6

Refrigerated. So that's again in cheese and eggs. Really the situation there is we lost with a couple of key customers. And again, cheese continues more of the same. Obviously, we've had some challenges with our cheese business and we've continued to lose some distribution there, small piece of the overall portfolio.

Speaker 6

And then on the egg side of things, had some challenges given HPAI impacts and we're trying to get those from a year ago and we are trying to get back in some of that distribution and regain that distribution, but that's really the situation there.

Operator

Okay. And then can I

Speaker 9

just ask a follow-up on Pet? Once you get the distribution where you want to, will you be fully in house or be using 3rd party for any part of that business?

Speaker 6

Yes. We'll continue to have some 3rd party for sure in terms of Macroman given the growth we've seen especially in our more value products. So we will right size that and have to use some co manufacturing.

Speaker 9

Have you disclosed who you use there?

Speaker 4

We haven't. But we're moving from Smucker to independent third party co packers.

Speaker 9

Okay, great. Thank you.

Operator

Thank you. We have reached the end of our Q and A session. Thank you for joining us. You may now disconnect. Everyone have a great day.

Powered by Quartr

Key Takeaways

  • Post delivered a strong Q2 with net sales up 23% to $2.0 billion and adjusted EBITDA of $345 million, although organic volumes declined ~5% due to SNAP reductions and mix shifts.
  • In the Consumer Brands segment, grocery cereal held its own in both value and premium tiers with improving margins, while the pet food acquisition integration remains on track and is delivering sustainable mid‐teens EBITDA margins.
  • The Foodservice business saw continued growth in higher‐margin precooked egg products (up ~5%), offsetting a temporary slowdown in restaurant traffic, and reported no new avian influenza outbreaks on owned or contracted farms.
  • Refrigerated retail net sales fell 8% amid egg and cheese distribution losses, prompting increased investment in innovation, advertising and promotions to drive demand and leverage improved supply chain performance.
  • Management is opportunistic on capital allocation, using a February debt refinancing to expand share buybacks, reduce leverage and build a larger M&A pipeline, and has raised full‐year FY24 guidance.
AI Generated. May Contain Errors.
Earnings Conference Call
Post Q2 2024
00:00 / 00:00