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Post Holdings suffers the ‘unfavorable commodity cost effect’

By Kacey Culliney , 30-Nov-2012

Commodity costs hits cereal business for Post
Commodity costs hits cereal business for Post

Unfavorable grain costs pressed full year earnings for Post Holdings, despite a sales surge in the fourth quarter, it said.

The US branded cereal firm said higher grain costs prompted an overall profit dip, despite efforts to counter-balance increased input prices with larger volumes and fixed cost absorption efforts.

It added that an overall full-year production volume decline hit business as it worked against cost absorption strategies.

Full year profits were pegged at $49.9m amid sales of $958.9m – a 1% decline on 2011’s $968.2m.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were down $34.3m on the year before at $214.6m.

Management has adjusted its EBITDA forecast for fiscal 2013 “after considering the estimated year-over-year unfavorable commodity cost effect”.

Grain prices, in particular wheat and corn, have been sky-high since August - putting pressure on bakery manufacturers across the globe. In the last quarter of 2012, prices did ease but Rabobank has forecast these are set to spike again at the beginning of 2013. See HERE .

Tasty Q4 couldn’t tip it…

Profits for the fourth quarter (Q4) were $10.8m with a sales surge of 4% - a surge predominantly driven by higher volumes of three brands - Honey Bunches of Oats, Great Grains and Pebbles. Compared to Q4 2011, volumes of Great Grains surged 13.5%, Honey Bunches of Oats 9.9% and Pebbles 9.5%.  

Full year volumes however dropped for the latter two brands. Great Grains was the only brand that continued to see volume increases with a year over year surge of 10.1%.

Ralcorp spin-off

Post Holdings was established in February 2012 as a spin-off from private label firm Ralcorp Holdings. The branded cereal company said costs of this transition and separation totted up to $2.1m for Q4 2012.

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