Post(POST) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2022 were $1.6 billion, representing a 13% increase, benefiting from approximately $98 million from recent acquisitions and pricing actions across segments [24][25] - Adjusted EBITDA for the quarter was $263 million, with higher manufacturing input and freight costs continuing to pressure margins [24][25] - Net leverage at the end of Q1 was approximately 6.4 times, with expectations to deleverage between 3 quarters post-separation of BellRing, reducing gross debt by $1.3 billion to $1.6 billion [36][37] Business Segment Data and Key Metrics Changes - Post Consumer Brands: Net sales and volumes increased by 14% and 8% respectively; however, excluding acquisitions, net sales and volumes declined by 1% and 9% due to softness in value and private label cereal products [26][27] - Foodservice: Net sales grew by 24% and volumes by 13%, driven by higher away-from-home demand; however, total segment volumes remained below pre-pandemic levels [30][31] - Refrigerator Retail: Net sales increased by 4%, while volumes decreased by 5%; adjusted EBITDA decreased to approximately $36 million due to lower volumes and increased costs [32][33] - BellRing: Net sales increased by 8.5%, with Premier Protein and Dymatize benefiting from pricing actions, although higher raw material and freight costs pressured gross margins [34][35] Market Data and Key Metrics Changes - U.S. Cereal consumption for branded products is running nearly 2% ahead of pre-COVID levels, with market share just shy of 20% [14] - The Foodservice segment is expected to recover to pre-pandemic profit levels in 2023, despite experiencing soft demand due to the Omicron variant [16][21] Company Strategy and Development Direction - The company is actively exploring acquisition opportunities while maintaining a cautious approach to ensure execution is not jeopardized in a challenging year [20] - The separation of BellRing is expected to be completed by the end of March, with a distribution of approximately $400 million in cash to BellRing stockholders [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a challenging environment with cost inflation running ahead of pricing actions, but remains optimistic about the ability to manage controllables and adapt to changes [10][13] - The company expects significant improvement in the second half of the year due to price realization, supply chain execution improvements, and volume recovery in Foodservice [21][22] Other Important Information - The company has taken nearly $150 million in annualized pricing actions, with the majority beginning in Q2 [15] - Cash flow generated from operations in the quarter was $106 million, with working capital slightly increasing due to decreased payables and increased inventories [36] Q&A Session Summary Question: Has inflation peaked and how are labor expectations playing out? - Management indicated that the environment remains unsettled, but there is a strong ability to get pricing where needed, with marginal improvements in labor and supply chain situations [41][44] Question: What is the outlook for the value segment and private label? - Management noted a flattening of the value segment in Post Consumer Brands, with improved volumes in private label businesses, although margins remain under pressure [45][48] Question: What is driving the expected deceleration at BellRing in Q2? - Management attributed the deceleration to normal seasonality, which was already factored into prior guidance [49] Question: What actions are being taken to ease labor and transportation issues? - Management is focusing on labor retention strategies and improving recruitment, while transportation remains a more challenging area due to market conditions [84][85] Question: What is the long-term growth outlook for each business segment? - Management views the cereal market as steady with slight growth potential, expresses confidence in the Refrigerated Retail segment, and anticipates substantial growth in Foodservice and BellRing post-pandemic [88][90][91]