Post(US:POST)2022-08-05 19:18Financial Data and Key Metrics Changes - Consolidated net sales for Q3 2022 were $1.5 billion, representing a 22% increase year-over-year, benefiting from approximately $63 million in incremental sales from recent acquisitions, pricing actions, and volume demand recovery [18][19] - Adjusted EBITDA for the quarter was $251 million, with a year-over-year increase in net sales driven by pricing actions and volume recovery [18][19] - Percentage margins declined year-over-year primarily due to the mechanics of the grain-based pricing model in foodservice and a mix shift in the overall business portfolio [6][16] Business Line Data and Key Metrics Changes - Post Consumer Brands: Net sales and volumes increased by 23% and 14% respectively, with adjusted EBITDA decreasing by 1.3% due to ongoing supply chain challenges and increased employee incentive costs [20] - Weetabix: Net sales increased by 1% despite a significant foreign currency translation headwind, with volumes declining by 6% excluding the benefit from the UFIT acquisition [21] - Foodservice: Net sales grew by 33% and volumes by 6%, with adjusted EBITDA increasing by 45% due to volume recovery and improved average net pricing [22] - Refrigerated Retail: Net sales increased by 12%, while volumes decreased by 3%. Adjusted EBITDA decreased to $30 million, pressured by dairy costs and avian influenza impacts [23] Market Data and Key Metrics Changes - North American cereal business saw branded share reach 20% and total private label reach 6.7%, with strong consumption in key brands [9] - The foodservice segment is expected to exceed pre-pandemic profit levels, with ongoing improvements in supply chain fulfillment [10] Company Strategy and Development Direction - The company is focused on M&A opportunities, having completed six tuck-in acquisitions in the last two years, and is exploring combinations for a SPAC despite a weak IPO market [14][15] - The company aims to improve supply chain reliability and productivity, expecting gradual improvements rather than a binary resolution [8][50] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about entering 2023 with momentum, citing improvements in supply chains and the potential for better margins as controllable cost management improves [16][50] - The company anticipates continued inflation and pricing actions, with a focus on maintaining effective throughput in supply chains [6][32] Other Important Information - The company repurchased approximately 1.9 million shares at an average price of $76.43 per share in Q3 2022, with a total of 3.8 million shares repurchased year-to-date [24] - Net leverage at the end of Q3 was approximately 6.2x, with expectations to reduce leverage by approximately half a turn through the intended debt-for-equity exchange of retained ownership in BellRing Brands [25] Q&A Session Summary Question: Sustainability of organic growth in Post Consumer Brands - Management noted that pricing is a significant component, with good volume growth across the value portfolio and additional distribution gains [32] Question: Guidance for fiscal year 2023 - Management indicated no reason to believe differently from previous expectations but emphasized the need for planning regarding inventory and productive capacity [34] Question: Profitability in Foodservice division - Management stated that avian influenza contributed approximately $10 million in the quarter, with expectations for continued growth in profitability [43] Question: Challenges in Refrigerated Retail division - Management acknowledged that avian influenza costs impacted margins, but emphasized the importance of third-party manufacturers in the supply chain [45] Question: Pricing net of commodities and supply chain friction costs - Management expects to have priced for inflation by the beginning of 2023, with a gradual improvement in supply chain execution anticipated [50] Question: Impact of workforce changes on supply chain - Management highlighted the need for diligent training and development due to a less experienced workforce, with a focus on asset reliability and maintenance in capital expenditures [58]