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Edited Transcript of POST earnings conference call or presentation 7-Feb-20 2:00pm GMT

Q1 2020 Post Holdings Inc Earnings Call

St. Louis Feb 11, 2020 (Thomson StreetEvents) -- Edited Transcript of Post Holdings Inc earnings conference call or presentation Friday, February 7, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeff A. Zadoks

Post Holdings, Inc. - Executive VP & CFO

* Matt Mainer

Post Holdings, Inc. - IR Executive

* Robert V. Vitale

Post Holdings, Inc. - President, CEO & Director

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Conference Call Participants

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* Andrew Lazar

Barclays Bank PLC, Research Division - MD & Senior Research Analyst

* Brian Patrick Holland

D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst

* Christopher Robert Growe

Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Analyst

* David Sterling Palmer

Evercore ISI Institutional Equities, Research Division - Senior MD & Fundamental Research Analyst

* John Joseph Baumgartner

Wells Fargo Securities, LLC, Research Division - VP and Senior Analyst

* Kenneth Bryan Zaslow

BMO Capital Markets Equity Research - MD of Food & Agribusiness Research and Food & Beverage Analyst

* Michael Scott Lavery

Piper Sandler & Co., Research Division - Director & Senior Research Analyst

* Robert Frederick Dickerson

Jefferies LLC, Research Division - MD & Senior Research Analyst

* William Bates Chappell

SunTrust Robinson Humphrey, Inc., Research Division - MD

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Presentation

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Operator [1]

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Welcome to the Post Holdings First Quarter 2020 Earnings Conference Call and Webcast. Hosting the call today from Post are Rob Vitale, President and Chief Executive Officer; and Jeff Zadoks, Chief Financial Officer.

Today's call is being recorded and will be available for replay beginning at 12:00 p.m. Eastern Time. The dial-in number is 800-585-8367 and the passcode is 1371013. (Operator Instructions) It is now my pleasure to turn the floor over to Matt Mainer of Post Holdings for introductions. You may now begin.

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Matt Mainer, Post Holdings, Inc. - IR Executive [2]

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Thank you. Good morning, and thank you for joining us today. With me are Rob Vitale, our President and CEO; and Jeff Zadoks, our CFO. Rob and Jeff will begin with prepared remarks, and afterwards, we'll have a brief question-and-answer session. The press release that supports these remarks is posted on our website in both the Investor Relations and SEC filings sections at postholdings.com. In addition, the release is available on the SEC's website.

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. As a reminder, this call is being recorded, and an audio replay will be available on our website.

And finally, this call will discuss certain non-GAAP measures. For reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Rob.

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [3]

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Thanks, Matt. Thank you all for joining us. I wasn't sure I was going to do this, but I think before I go into my prepared remarks, I'm going to share with you that I am about 90% of the way back from a domestic virus I've been fighting this week. So bear with me through hacks and other things as we share with you our results for the quarter.

So with that, the first quarter came in largely in line with expectations. We communicated a 2020 plan with modest second half favorability. And in total, our quarter is consistent with our cadence expectations. As always, there are some puts and takes across the business. This morning in my prepared remarks, I will provide some additional clarity around 2020 outlook, a brief business update and comment on capital allocation.

To start, I want to give some additional detail around the quarterly cadence. While revenue is closer to evenly split between halves, our plan called for and continues to call for first half adjusted EBITDA to represent approximately 46% to 47% of the year. This compares to a first-second half split in 2019 of 49-51. We expect the acceleration into the second half for the following reasons: A cereal promotional calendar that is weighted to the second half, navigating potato side dish production constraints that have resulted in customer allocations, the timing of pricing moves, cycling start-up costs for our Norwalk plant, back half cost reductions versus first half investment in cost reductions and the timing of key promotional events for BellRing customers, coupled with heavy Premier Protein advertising spend in Q2.

Turning to the business. BellRing is off to a great start. Their call is coming up shortly, so I won't steal any of their thunder. From a Post perspective, the focus remains on how to best strategically manage the asset and allocate its capital. This will be a story in the making and one that looks quite promising. Our domestic cereal had an expected decline in consumption as we lapped aggressive promotional events in grocery and club. As I mentioned, our promotional calendar this year favors the second half. More structurally, we were early in license sweets, and we are seeing the impact of competitive reactions. We have a promising innovation pipeline and continue to be confident in the near and longer-term trajectory of the business. The category itself was a relatively bright spot this quarter. Inclusive of nonmeasured channels, it grew approximately 0.5%.

Weetabix continues to perform well, and we would like to find a way to build around this team. Foodservice eggs and potatoes and Bob Evans side dishes had solid growth. However, we had weakness in retail eggs and cheese. Across the integrated supply chain, we incurred costs tied to supporting potato demand, and we are struggling with a labor shortage in some key rural markets. Both factors pressured profit growth in an otherwise solid quarter. Both issues will linger to a degree throughout the year.

8th Avenue made solid progress to recover from a weak 2019. It also executed a strategic purchase in acquiring peanut butter manufacturing assets from Conagra. We continue to expect adjusted EBITDA of $100 million to $105 million before consideration of the Conagra purchase.

Turning to capital allocation. Our attempt to acquire the TreeHouse private label cereal assets met with opposition from the FTC. We believe it was through our own conclusion, but we ultimately agreed with TreeHouse that protracted litigation was in neither party's best interest. We continue to search for M&A prospects, but we always do so against an array of capital allocation choices, including buying our own shares. This quarter, we acquired 2.2 million shares of Post. Despite the commitment to share repurchases, we ended the quarter at leverage levels that for Post are historically low.

With that, I will now turn the call over to Jeff.

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Jeff A. Zadoks, Post Holdings, Inc. - Executive VP & CFO [4]

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Thanks, Rob, and good morning, everyone. Adjusted EBITDA for the first quarter was $303.1 million, with consolidated net sales for the quarter growing 3.2% year-over-year. Post Consumer Brands net sales and volumes declined by 3.1% and 3.4%, respectively. This volume decline is largely attributable to heavier promotional activity in the prior year period and lapping new product pipeline fills. Average net pricing improved 0.3% as we benefited from a full quarter of last year's price increases, but they were largely offset by unfavorable mix skewed to private label versus branded products. We had a 230 basis point improvement in gross margins, driven by $5.1 million of cost savings from implementing our new integrated business planning process. These savings are incremental to our other continuous improvement initiatives. However, we had offsetting higher SG&A costs this quarter for consulting fees and warehousing costs related to implementing these new processes, including optimization of our inventory footprint.

Net of all of these factors, segment-adjusted EBITDA declined 3.4% compared to the prior year.

Weetabix net sales increased 0.6% over the prior year. This reflects an 8.7% improvement in average net pricing, partially offset by a 7.6% volume decline. Average net pricing benefited from targeted base price increases, less volume sold on promotion and favorable mix, while solid volume growth in biscuits was offset by declines in nonbiscuit products resulting primarily from capacity constraints on extruded products. The average U.S. dollar to pound sterling exchange rate in the quarter was flat with the prior year, and as a result, was not a significant variable in the year-over-year comparisons. Overall, Weetabix segment-adjusted EBITDA increased 17.7%.

Net sales in Foodservice increased 3.1%, with volumes up 3%, driven by strong growth in both egg and potato products. Despite this volume growth, adjusted EBITDA declined 2.3% from the prior year, driven by higher integrated supply chain costs, including start-up costs at our new precooked egg facility and unplanned downtime in our potato plants.

Refrigerated retail net sales and volumes declined 4.5% and 7%, respectively. Overall side dish volumes declined 5.2%, driven by capacity constraints, which led to customer allocations. However, Bob Evans branded side dishes grew 5.4%, as we prioritized allocations to this faster-growing portion of our business. Retail egg and cheese volume declined approximately 10% and 9%, respectively. Segment-adjusted EBITDA declined 8.8% this quarter, driven by overall volume declines, higher integrated supply chain costs as previously mentioned and lower contribution from our cheese business caused by lower sales volumes and higher commodity costs. These items were partially offset by an improved price cost relationship for sausage products.

BellRing net sales increased 31.3%, while adjusted EBITDA grew 40.9%. You can hear further detail about BellRing's results on their conference call later this morning.

Turning to our capital markets activities. During the quarter, we repurchased approximately 2.2 million shares at an average price of $102.97 per share. Our remaining share repurchase authorization is approximately $368 million. During the quarter, we repaid our legacy term loan in full, primarily from the proceeds of BellRing transaction. And subsequent to the quarter, we retired our 8% notes, eliminating the one outlier to our bond buyer pricing. As a reminder, neither BellRing nor Post are obligors or guarantors of the other party's debt. Accordingly, we report leverage statistics for Post independent of BellRing debt and adjusted EBITDA. Post pro forma net leverage on this basis was approximately 5x as of December 31. During the quarter, we generated $108.4 million of cash flow from operations, which was down from a year ago, driven primarily by $49 million in higher net settlements of our interest rate swaps and timing of working capital across several of our business segments. Capital expenditures were approximately $77 million, which included the purchase of our previously leased side dish manufacturing plant in Sulphur Springs, Texas and completion of our growth capital projects in eggs.

With that, I'd like to turn the call back to the operator for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Andrew Lazar with Barclays.

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Andrew Lazar, Barclays Bank PLC, Research Division - MD & Senior Research Analyst [2]

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Glad you're on mend, Rob. Two things, if I could. I guess, first, you talked about volumes in cereal were lower year-over-year, as I think you expected due to the timing of promotions and pricing moves in the period last year. I guess, would your expectation be that volume and sales begin to accelerate in this fiscal quarter, even in what looks to and I think what you expect it to be a somewhat more competitive arena this year? And does sort of slight growth in EBITDA in this segment for the full year still seem to make sense in terms of how you're thinking about it?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [3]

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Yes to both, I would say. To give you a little more color, we expect the beginning of the acceleration this fiscal quarter, but it to be more material next quarter. These were 2 relatively discrete, large events last year, one of which is being repeated in the second half, one of which was a margin decision. So as we lap that event or as we execute that event in the second half, we should see some of that acceleration. And in terms of the projection on adjusted EBITDA, we fully expect to be able to maintain or grow from 2019.

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Andrew Lazar, Barclays Bank PLC, Research Division - MD & Senior Research Analyst [4]

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Great. And then second would be, fiscal 1Q, as you mentioned, was the second quarter in a row in which Post bought back about sort of 3% of its share base or so. I guess, can you talk a little bit about what this says or maybe doesn't say about the attractiveness right now of the various sort of core avenues that Post typically looks at around its capital allocation model. And I assume -- I think the 46%, 47% EBITDA split is similar to what you had thought last quarter. I don't think there's a change to that, but just making sure.

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [5]

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Yes. In reverse order, it's the same as we thought last quarter. With respect to share buybacks versus other uses of capital, everything is a relative comparison. So if the market for M&A is 12 or 13x and the multiple proposed as x, it's simply a comparison of would we rather invest in Post or something different. And it may not always just be a simple mathematical calculus. There may be capabilities that we're trying to buy or a market that has a different growth rate, but it starts with a relative analysis of our business versus competitive alternatives.

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Operator [6]

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Your next question comes from the line of Chris Growe with Stifel.

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Christopher Robert Growe, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Analyst [7]

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Rob, hope you feel better there. I was curious about -- just a follow-up question on the Post Consumer Brands business. The -- I think, Jeff, you mentioned some cost savings coming through, some of the great business planning-type savings coming through. I assume those are sustainable and should continue. There's a lot of activity that occurred last year. Does that then kick up in Q2, 3 and 4? Or is that we hitting a run rate for those savings? Just curious how that influences the EBITDA in that division?

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Jeff A. Zadoks, Post Holdings, Inc. - Executive VP & CFO [8]

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Yes. It's a progression throughout the year. So we would expect to build upon the savings that were achieved in Q1 with incremental savings throughout the course of the year. And of course, some of that's necessary to offset inflation that we're seeing in the business, but definitely a progression. And that's one of the reasons that Rob called out for some of the second half loading of our overall plan.

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Christopher Robert Growe, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Analyst [9]

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Okay. And then just an idea, if I could, on the Foodservice division on those costs for Norwalk. Did you quantify those in the quarter? If you could, it would be great. And then, just to understand, it sounds like those continue a bit into Q2. Is there a number you -- maybe given for the year in terms of the effect on that division's profitability?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [10]

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There's 2 different buckets. One is just direct cost, which is roughly $3 million, but there's also ramp-up costs, which effectively are inefficiencies that we have not tracked and separately isolated. So that's a difference between the factory running as fully operational versus the learning curve process to get there is a, I would estimate, in the low handful millions of dollars.

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Operator [11]

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Your next question comes from the line of John Baumgartner with Wells Fargo.

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John Joseph Baumgartner, Wells Fargo Securities, LLC, Research Division - VP and Senior Analyst [12]

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Rob, if we go to PCB and we look at your niche of the cereal category in that value segment, and that's obviously been very stable, outperformed over time. And I'm curious, given this run we've had of stronger wage growth of that low-end consumer, are you seeing any changes in terms of the dynamic? Are folks trading up? Are they trading out of the category? Or is loyalty generally pretty stabilized as it's ever been?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [13]

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No, we're seeing good loyalty within the entire bag segment. So we haven't seen any changes of consumer trading up and out of it.

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John Joseph Baumgartner, Wells Fargo Securities, LLC, Research Division - VP and Senior Analyst [14]

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Okay. And then just a follow-up on Foodservice. Wondering if you could speak high level in terms of any activity or just level you're seeing from C-stores doubling down -- QSRs doubling down on breakfast or C-stores coming in, in prepared foods. How do you -- I guess, how is the opportunity set emerging for you, preimposed by the -- in terms of cross-selling or having you gain that new volume growth going forward?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [15]

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Well, you've probably seen Wendy's has gone to breakfast and, not QSRs, but C-stores have become a significant source of convenient breakfast. So we're continuing to see it as a material trend across the country. And where we have best seen the results of the Bob Evans acquisition and cross-selling is in our potato business, where we're seeing really quite extraordinary growth rates. We have seen some in sausage, but it's a more competitive, a bit more commoditized business. Where we're really unique is in that sausage -- excuse me, in that potato and egg category.

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John Joseph Baumgartner, Wells Fargo Securities, LLC, Research Division - VP and Senior Analyst [16]

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So you're ramping up the cross-selling pretty well already in that space?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [17]

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Particularly in potatoes.

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Operator [18]

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Your next question comes from the line of Bill Chappell with SunTrust.

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William Bates Chappell, SunTrust Robinson Humphrey, Inc., Research Division - MD [19]

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I'm sorry, can you just give me a little more color on the unplanned downtime at the plant on the Refrigerated side and just what actual impact it had in the quarter and going forward?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [20]

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So the unplanned downtime, we talked a little bit about that last quarter. It was some unforeseen mechanical failures at one of our plants, in particular, that required us to take down the plant in order to replace the, I'm going to misspeak here, but it was a coil on a refrigerator of some kind. So we ended up sacrificing some downtime of a couple of days so that we can get that replacement in the production. And then there were some other one-off events, weather-related events, that also kind of hit us this quarter.

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William Bates Chappell, SunTrust Robinson Humphrey, Inc., Research Division - MD [21]

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Any way to quantify like what the impact was, just for comparability?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [22]

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I mean, it's really difficult to do that because it was a couple, 2, 3 days of production. But translating that into what it might have been in terms of profit is really difficult. We know that it led to lost sales, but to further quantify, it's pretty hard to do.

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William Bates Chappell, SunTrust Robinson Humphrey, Inc., Research Division - MD [23]

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Got it. And then just switching to 8th Avenue. It seemed like one of the better quarters 8th Avenue has had in quite some time. Is that kind of on the uptick as a business? And with the acquisition, does that help the margins meaningfully?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [24]

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The -- I would say, right now, it is in stabilization. So we've kind of bottomed and are making sure that we've got a stable foundation upon which to build. In terms of the second part of your question, it will certainly expand dollar profit. This is largely co-man business, so it will come at an average margin that's a bit lower, but a very high return on capital to what we paid for.

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Operator [25]

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Your next question comes from the line of Michael Lavery with Piper Sandler.

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Michael Scott Lavery, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [26]

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With the FTC's objections on TreeHouse, how much visibility do you have on that? And specifically, what I'm trying to just make sure I got my hands around is, how much of that is private-label specific? Or do you imagine this could sort of foreshadow any potential issues with any other cereal deals?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [27]

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No, we believe it is 100% private-label specific, that they felt that the combination of Post and TreeHouse would effectively eliminate competition in the private label subsegment. And what we felt was novel and, in our opinion, inappropriate was having such a narrow definition of the market, that 7% of the market and drive competition in that big a category we found counterintuitive, and we argued that it was actually consumer-friendly, but to no avail.

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Michael Scott Lavery, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [28]

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Yes, that's really helpful. And then just on potatoes. They've turned much more inflationary. Can you just give us some color on how that -- how you pass that through and how manageable do you see that being?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [29]

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We have been able to pass-through the ingredient inflation quite effectively. Where we're struggling a bit is some of the labor inflation, unrelated to the potato crop, but related to the potato factories.

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Michael Scott Lavery, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [30]

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And is that something that you think might persist through the year?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [31]

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We eventually should be able to price it, but it will persist for at least through the quarter.

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Operator [32]

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Your next question comes from the line of David Palmer with Evercore ISI.

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David Sterling Palmer, Evercore ISI Institutional Equities, Research Division - Senior MD & Fundamental Research Analyst [33]

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Just a quick observation. It feels like there's breakfast wars going on inside the supermarkets, but also in the restaurant channel, and you might have different feelings about either one, but you certainly are a participant in both. You're seeing Kellogg's trying to perhaps get in the game with the taste and fun cereals and perhaps teeing up more promotional activity this first half of the calendar year. And I suppose you're bracing for impact a little bit there, but also on the breakfast side away-from-home not just Wendy's, but McDonald's is getting in the game there, and obviously, Dunkin' has a very successful new breakfast sandwich as well. So I would imagine you're looking at a very good demand year, perhaps a really special year on the Foodservice side, from a demand perspective. But the way that this is shaping up competitively in supermarkets might be tough for the next 6 months at least. What are your thoughts there?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [34]

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Well, I think you said it fairly well. I think in my prepared remarks, I commented on that we were early in licensed sweets with our Oreo product. And had very good growth in, say, 2018 or early 2019. And there was a competitive reaction to that as we would expect. And there was an onslaught of innovation based around licensed sweets from both Kellogg's and General Mills. And we've seen just greater competitive intensity is that demand state gets potentially oversaturated. And what we need to effectively compete at the retail level is better, bolder innovation, and that's nothing new. We probably said that as long as the category has been around. But we feel pretty good about our innovation pipeline right now. And I think what we're seeing in our immediate quarter is a conscious decision to cede some territory rather than fight for share in that environment in a category that is a bit overheated. So we're trying to pick our battles carefully, fight for the right share, not just all share and be selective in retail. In Foodservice, I don't have much to add to what you said. We're seeing very strong unit volume growth across most of our categories in support of the trend that you mentioned.

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David Sterling Palmer, Evercore ISI Institutional Equities, Research Division - Senior MD & Fundamental Research Analyst [35]

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On that Foodservice side, on the value-added egg side, in particular, it seems like this next 12 months, if we get past some of these friction costs, should be a very good one for the incrementality of the new manufacturing and value-added eggs. I mean, you spent $60 million, $70 million on capacity there. I would imagine you're thinking that, that could be a double-digit EBITDA millions boost at some point during this fiscal year. How should we think about that kicking it up and benefiting you in terms of EBITDA?

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [36]

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I don't think it's all unreasonable to think about it exactly as you just characterized it as a exiting the year run rate.

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Operator [37]

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Your next question comes from the line of Ken Zaslow with Bank of Montreal.

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Kenneth Bryan Zaslow, BMO Capital Markets Equity Research - MD of Food & Agribusiness Research and Food & Beverage Analyst [38]

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Can you talk about the dynamics, the cereal dynamics in the U.K. How is it progressing? And I believe you were trying to take out some capacity there. Have you tightened that up? And just give a little thought on the Weetabix business.

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [39]

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Yes. The general demand is flat to slightly down. We have had a bit more decline in volume than the market because of our aggressive moves on price as we saw to restore the traditional pricing dynamic and margin structure. We have taken out capacity. We may have overshot a little bit in taking out capacity because we're now putting a little capital back in to make sure that we keep our service levels where they need to be. But that has gone well, and we expect there to be some significant cost savings, again, like my last answer, as we approach the end of FY '20 and having fully annualized in '21.

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Operator [40]

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Your next question comes from the line of Rob Dickerson with Jefferies.

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Robert Frederick Dickerson, Jefferies LLC, Research Division - MD & Senior Research Analyst [41]

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(technical difficulty) year-over-year in Q1...

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [42]

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We didn't hear the first part of your question, Rob.

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Robert Frederick Dickerson, Jefferies LLC, Research Division - MD & Senior Research Analyst [43]

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No, I'm sorry. Yes, just a question on SG&A, right, just -- and the trend cadence for the year. It was up a decent amount in Q1 despite, let's say, offset decent impressive gross profit growth. Is there any way you could just kind of simplistically bucket what's driving that increase in that SG&A? And then why or why not that might ease as we go through the year? And then I have a quick follow-up.

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [44]

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Sure. There is no single significant driver. So it's several smaller items that tend to add up. As far as the segment that's driving most of it, it's the BellRing segment. And it's a handful of activities there ranging from some increased warehousing costs as their inventories have gotten more stabilized. Some cost for some consulting, not in BellRing, but some costs in consulting activities around the company, as we mentioned in the PCB business. So it's really a handful of -- couple of million dollars items. And I neglected to mention earlier on BellRing, there is some incremental public company costs, as we did the IPO during the quarter. And that's the sort of thing that will be ongoing. The consulting fees we would expect to diminish as the year goes on.

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Robert Frederick Dickerson, Jefferies LLC, Research Division - MD & Senior Research Analyst [45]

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Okay. Great. And then -- sorry, go ahead.

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [46]

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No, we were done. Go ahead.

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Robert Frederick Dickerson, Jefferies LLC, Research Division - MD & Senior Research Analyst [47]

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Okay. Great. Sorry. And then just in terms of capital structure, you finished the year with decent cash balance kind of as you have in the past. Like you said, leverage is low relative to history for you. And then, obviously, you don't pay dividend. So you bought back some stock in Q1. You went through that rationale. Just kind of thinking forward, though, if your stock, let's say, were even less expensive or kind of where it is today and the cash balance is still strong, is it rational to think that repurchase activity overall for the year could be up relative to history? Or do you just say, hey, we're -- obviously, we're always opportunistic, we're always looking at the trade-off and our pipeline is very strong as of now on the M&A front.

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [48]

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Well, I would say the latter. The pipeline is strong, but we always look at it in the context of all of our choices for allocating capital. I wouldn't want to get into predicting what we're going to do next. I would rather just give you the conceptual framework and let you work from there.

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Operator [49]

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Your next question comes from the line of Brian Holland with D.A. Davidson.

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Brian Patrick Holland, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [50]

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Most of my questions have been answered. So Rob, I think you alluded to this, though, in your prepared remarks. I'm curious about your thoughts on the M&A landscape right now in the U.K. Weetabix appears a solid beachhead for you. I presume valuation is perhaps more palatable there than here. But obviously, a challenging market with perhaps lower visibility right now. So I guess just looking for a refresh on your thoughts about the landscape on that side of the pond.

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Robert V. Vitale, Post Holdings, Inc. - President, CEO & Director [51]

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Well, we're very pleased with the execution that the team has performed in the last 2 years. And it's a team that we think can do more, so we would like to give them the opportunity to do more. But at the same time, as you've just rightly highlighted, it's a choppy environment. It's incrementally less choppy, now that we at least have clarity that Brexit is going to occur. We have another milestone in terms of understanding exactly how it occurs. So we're not likely to rush in with both feet. But we wouldn't mind finding something small to tuck-in under them and give them expanded dominion there.

I think that's our last question, and I just want to, again, apologize for some of the coughing and hacking in the background here. So thank you, and we'll talk to you all next quarter.

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Operator [52]

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Thank you for your participation in today's conference. You may now disconnect.