Post Holdings, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and first six months ended March 31, 2021; comparisons are with the periods ended March 31, 2020. Amounts are in millions of dollars except per-share data. Post is a consumer packaged goods holding company with five segments: Post Consumer Brands, Weetabix, Foodservice, Refrigerated Retail and BellRing Brands.
Financial performance
| Metric | Three months ended March 31, 2021 | Six months ended March 31, 2021 |
|---|---|---|
| Net sales | $1,483.3; down 0.7% year over year | $2,941.3; down 0.3% |
| Gross profit / margin | $451.0 / 30.4%, versus $438.8 / 29.4% | $906.4 / 30.8%, versus $910.3 / 30.9% |
| Operating profit / margin | $145.1 / 9.8%, versus $153.5 / 10.3% | $311.4 / 10.6%, versus $349.5 / 11.8% |
| Net earnings (loss) | $109.9, versus $(191.4); diluted EPS $1.69, versus $(2.76) | $191.1, versus $(92.2); diluted EPS $2.90, versus $(1.32) |
| Operating cash flow | $162.3 for six months, versus $89.0 |
- Quarterly operating profit declined despite higher gross profit; six-month operating profit fell 11%, reflecting lower segment profit, especially in Foodservice, BellRing Brands and Post Consumer Brands.
- Net earnings comparisons were heavily affected by swap mark-to-market results: a $185.6 gain in the quarter and $227.2 gain for six months in 2021, versus losses of $224.6 and $163.2, respectively, in 2020. The quarter also included a $94.7 debt extinguishment and refinancing loss.
- At March 31, cash and cash equivalents were $740.5, down from $1,187.9 at September 30, 2020. Total current assets were $2,065.5 and current liabilities $890.1.
- Debt principal totaled $7,075.1, including $74.3 current and $6,981.0 long-term carrying value. Post reported $730.7 available capacity on its revolver and BellRing reported $200.0 available. The company said it believed liquidity and expected operating cash flows were sufficient for foreseeable needs.
- Six-month investing cash use was $256.5, including acquisitions and $99.4 of capital expenditures. Financing cash use was $362.7, including $315.3 of share repurchases.
Material changes and segment performance
- Foodservice: Six-month sales fell 9% to $723.7 and segment profit fell 72% to $19.6. Lower away-from-home demand and volume, weaker fixed-cost absorption, higher egg input costs and pandemic-related expenses weighed on results.
- BellRing Brands: Six-month sales rose 13% to $564.5, while segment profit declined 25% to $63.4. Growth in protein products was offset by $18.1 of accelerated amortization following the decision to discontinue Supreme Protein, as well as higher product costs and restructuring expenses.
- Post Consumer Brands: Six-month sales declined 3% to $924.9 and segment profit declined 6% to $162.3. Results included Peter Pan; sales also faced tough comparisons with pandemic-related pantry loading, production shutdowns and employee absences.
- Refrigerated Retail: Six-month sales increased 3% to $502.6 and segment profit increased 3% to $57.9, despite higher raw material, manufacturing and freight costs.
- Weetabix: Six-month sales rose 6% to $226.9, mainly due to favorable foreign exchange; segment profit rose 4% to $54.0.
- Post acquired Peter Pan and Almark in January and February 2021, respectively. It also issued $1.8 billion of 4.50% senior notes due 2031 and used the proceeds to redeem its 5.00% notes due 2026. BellRing refinanced its term loan, reducing its interest-rate margin by 100 basis points.
Outlook, risks and unusual items
- The filing provides no quantified company-wide earnings or sales guidance. Management said it expected positive operating cash flows and believed available liquidity was sufficient, while emphasizing uncertainty from COVID-19.
- Management described retail demand as benefiting from pandemic-era at-home consumption, but noted the risk that these gains or improved category trends may not persist. Foodservice volumes remained sensitive to restrictions on mobility and gatherings; BellRing’s bars continued to decline even as liquid and powder categories returned to growth.
- Higher freight, raw material and manufacturing costs, supply-chain disruption, production interruptions, employee absences and elevated leverage are significant risks. Post reported approximately $9.8 of estimated lost revenue in the first half from COVID-related cereal-plant shutdowns and absences.
- Three unresolved egg-product antitrust claims by opt-out plaintiffs remain against a subsidiary. Post had accrued $3.5; the filing says a material adverse outcome remains possible, although management stated the likelihood had been significantly reduced by prior settlements.
- Post reported a $15.0 provision for legal settlement affecting Post Consumer Brands segment results. BellRing’s restructuring was expected to be completed by June 30, 2021, with $0.1 of expected charges remaining at March 31.
- Management identified the planned SPAC offering and related uncertainty as a risk that could require additional costs and management attention, and could be delayed or not completed.
Most important facts for investors to verify
- How much reported earnings reflect recurring operations versus volatile swap gains and the debt-refinancing loss.
- Whether Foodservice demand and segment profitability recover, and whether input-cost and freight pressures can be offset.
- Post’s leverage, refinancing needs, cash generation and continued share repurchases relative to liquidity.
- The final purchase-price allocations and integration outcomes for Peter Pan and Almark.
- Developments in the remaining egg antitrust claims and the planned SPAC offering.