ST. LOUIS — Despite a challenging cost environment, Post Holdings, Inc. finished fiscal 2018 near the high-end of its initial targets, taking strategic actions with the acquisition of Bob Evans Farms and the recapitalization of 8th Avenue Food & Provisions, said Robert V. Vitale, president and CEO.
Net income at Post in the year ended Sept. 30 totaled $467.3 million, equal to $6.87 per share on the common stock, up sharply from $48.3 million, or $0.05 per share, in fiscal 2017. Fiscal 2018 results included a $270.9 million one-time income tax net benefit, a $95.6 million gain primarily related to non-cash mark-to-market adjustments on interest rate swaps and a $31.1 million net loss on extinguishment of debt. Meanwhile, net earnings for fiscal 2017 included a $222.9 million net loss on extinguishment of debt and a $91.8 million gain primarily related to non-cash mark-to-market adjustments on interest rate swap.
Adjusted net earnings were $309.6 million, which compared with $211 million a year ago.
Net sales in fiscal 2018 totaled $6,257.2 million, up 20 percent from $5,225.8 million.
Operating profit in the company’s Post Consumer Brands segment fell 7 percent to $329.2 million in fiscal 2018, down from $354.9 million a year ago. Net sales increased 5 percent to $89.2 million. Post said the decrease in operating profit primarily was due to unfavorable manufacturing costs of $20.1 million, in part due to higher-than-expected conversion costs associated with new product introductions. Profit also was adversely affected by higher raw material costs of $8.9 million and higher freight costs of $17 million during the year.
In the Weetabix business, segment profit climbed to $87.2 million from $14.5 million, while sales increased 277 percent to $423.4 million from $112.4 million.
During a conference call with analysts on Nov. 16, Vitale said Post will shrink cereal capacity next year by closing two facilities acquired with Weetabix: one in the United States and one in the United Kingdom.
Operating profit in the Refrigerated Food segment increased to $247.6 million in fiscal 2018 from $110.6 million a year ago. Sales in the segment also improved, climbing to $2,337.9 million from $1,870.8 million.
Operating profit in the Active Nutrition segment totaled $124.4 million in fiscal 2018, up 29 percent from $96.4 million a year ago. Sales increased 16 percent to $827.5 million from $713.2 million.
“Despite adding capacity in fiscal 2018, the contract manufacturers that support our shake business are operating at full capacity,” Vitale said. “In fact, shake sales in the back half of fiscal 2018 outstripped our capacity. This depleted our inventory and created challenges in maintaining our high service levels. We ended fiscal ‘18 with insufficient inventory. Although we are bringing on additional capacity in the first half of fiscal 2019, we’ve had to make choices to navigate the short-term supply constraints. To minimize line downtime and maximize output, we’ve elected to temporarily limit production to our two most popular flavors, chocolate and vanilla, and rebuild our seven-flavor portfolio during the second quarter.
“While we expect meaningful year-over-year sales growth in 2019, this constraint will cause the first quarter to be relatively flat. We anticipate shake growth to significantly accelerate the balance of the year as this bottleneck lessens.”
Post announced on Nov. 15 that it plans to pursue an initial public offering of its Active Nutrition business. Post said the decision aligns with its focus on creating long-term shareholder value and gives the company the ability to pursue both organic and merger and acquisition opportunities.
Under terms of the separation, Post said it intends to sell approximately 20 percent of the ownership of the new company. The new company will have corporate headquarters in St. Louis with the operating business based in Emeryville, California.
In the company’s Private Brands unit, operating profit increased 5 percent in fiscal 2018 to $60.8 million from $58.1 million, while sales rose to $848.9 million from $791.2 million.
Jeff A. Zadoks, executive vice president and chief financial officer, said Post spent $225 million on capital expenditures during fiscal 2018. In fiscal 2019 the company plans to invest between $300 million to $310 million.
“While this is a step up from historical spending levels, the increase primarily relates to growth in our egg business and capital for network consolidation and optimization in our North American and UK cereal businesses,” he said.