Post Holdings (POST) Gains From Acquisitions, SG&A Costs High
Post Holdings, Inc. POST has been gaining from its focus on acquisitions, which has bolstered its portfolio. Efficient pricing has been aiding the company amid high SG&A costs and supply-chain hurdles. These factors were visible in fourth-quarter fiscal 2023 results, wherein sales and earnings improved year over year, and the bottom line surpassed the Zacks Consensus Estimate.
Acquisitions, a Key Driver
Post Holdings’ acquisitions have been helping it expand its customer base. The company expects to close the buyout of Perfection Pet in the first quarter of fiscal 2024. Also, POST’s fourth-quarter sales included $404.5 million from its latest Pet Food acquisition. On Apr 28, 2023, Post Holdings unveiled that it completed the acquisition of a select pet food brand from The J.M. Smucker Co. This acquisition provides Post Holdings with a compelling entry point into the attractive and growing pet food category.
On Apr 5, 2022, POST acquired Lacka Foods Limited, which is a UK-based marketer of high-protein, ready-to-drink (RTD) shakes under the UFIT brand. In June 2021, the company stated that it had completed the acquisition of the PL RTE Cereal Business of TreeHouse Foods.
Post Holdings acquired Almark Foods (or Almark) on Feb 1, 2021. Almark, which is renowned for its hard-cooked and deviled egg products, provides conventional, organic and cage-free products. Also, on Jan 25, 2021, Post Holdings acquired Conagra Brands’ Peter Pan peanut butter brand. On the same day, Post Holdings unveiled a collaboration with Hungry Planet, which is a plant-based meat company.
Some other notable buyouts include Henningsen Foods, Inc. in July 2020, Bob Evans in January 2018, Latimer Newco 2 Limited in July 2017, National Pasteurized Eggs, Inc. in October 2016 and MOM Brands Company in May 2015. On the flip side, on Mar 10, 2022, Post Holdings concluded the distribution of 80.1% of its interest in BellRing Brands, Inc. (BellRing) to its shareholders. Apart from this, POST divested the Willamette Egg Farms business on Dec 1, 2021.
In the Post Consumer Brands segment, fourth-quarter fiscal 2023 sales increased 71.5% to $1,008 million, which mainly included gains from the Pet Food acquisition. Although volumes decreased 6.2%, excluding the benefit of Pet Food, it received partial respite from private-label cereal. The segment’s adjusted EBITDA increased 73.1% to $199.7 million.
Post Holdings, Inc. Price, Consensus and EPS Surprise
Post Holdings, Inc. price-consensus-eps-surprise-chart | Post Holdings, Inc. Quote
High Costs & Supply-Chain Woes
Post Holdings has been seeing a rise in SG&A costs for a while. In the fourth quarter of fiscal 2023, SG&A expenses escalated 38.3% year over year to $309.5 million due to the company’s targeted marketing investments in its retail businesses as well as higher employee incentives. SG&A expenses, as a percentage of sales, came in at 15.9%, up from 14.2% reported in the year-ago quarter. The persistence of this headwind is a concern.
Post Holdings has long been bearing the brunt of supply-chain bottlenecks. On its fourth-quarter fiscal 2023 earnings call, management stated that although the supply-chain scenario and customer order fill rates have been improving, there is still significant room for enhancement in both areas. Cost inflation is another hurdle, although it is moderating.
Wrapping Up
POST has been benefiting from effective pricing actions, as seen in the fourth quarter of fiscal 2023. Results reflected gains from pricing actions in most segments to counter inflation. For fiscal 2024, management expects overall adjusted EBITDA of $1,200-$1,260 million compared with $1,233.4 million registered in fiscal 2023.
Shares of this Zacks Rank #3 (Hold) company have dropped 3.7% in the past three months compared with the industry’s decline of 4%.
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