Branded cereals fuelling Ralcorp growth

By Jane Byrne

- Last updated on GMT

Related tags: Cent, Revenue

Branded cereals contributed nearly $60m to US cereal and pasta maker Ralcorp’s positive earnings for the second quarter of its 2011 fiscal year.

The US food group reported a 78 per cent hike in net income in the quarter ending March 31 to just over $83m compared to $46.7m in the same period in 2010.

For the quarter, the company revealed that its two flagship cereal brands, Honey Bunches of Oats and Pebbles, grew revenue 8 per cent and 18 per cent, respectively.

But it noted that private brand ready-to-eat cereal volume was down 7 per cent, as the “overall weakness in the ready-to-eat category and competitive promotional activities impacted sales to many of the segment's retail customers.”

Fruitful acquisitions

The group also reported that its 2010 acquisitions helped drive earnings and sales gains. The takeovers last year included American Italian Pasta, Sepp's Gourmet Foods, JT Bakeries, and North American Baking.

Our acquisitions completed in fiscal 2010 continued to perform well and produced 30c per share of accretion during the quarter,”​ said Kevin Hunt, co-chief executive officer.

In the company’s ‘other cereal products’ category, profit contribution fell 3 per cent during the second quarter to $21.3m from $22m, but sales were up 3 per cent at $198.9m, against $193.3m in the same quarter last year.

“Net sales increased 3 per cent fuelled by strong volume growth for nutritional bars (up 11 per cent),”​ said the group.

Profit contribution in the frozen bakery division rose 26 per cent to $22.9m from $18.2m while sales moved up 11 per cent to $192.7m.

Takeover denied

Meanwhile, the US manufacturer confirmed on Sunday that it had received an unsolicited takeover proposal from an unnamed third party in March, but its board of directors decided not to pursue the deal.

Ralcorp's board "unanimously concluded that the proposal is not in the best interests of shareholders.”

And its chairman William Stiritz stressed that no takeover talks are currently underway: "We have not met, and are not in discussions, with any third party regarding the sale of the company.”

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