Earnings results

Hostess Brands plans new acquisitions after delivering strong growth in Q4 and 2017

By Douglas Yu contact

- Last updated on GMT

Hostess reorted a staggering 58.5% revenue increase in its in-store bakery segment for 2017. Pic: Mike Mozart
Hostess reorted a staggering 58.5% revenue increase in its in-store bakery segment for 2017. Pic: Mike Mozart

Related tags: Sweet baked goods, High-fructose corn syrup

Hostess Brands reported it will focus on future acqusitions beyond the sweet baked goods ca in light of its 9.7% quarterly and 6.7% full-year net revenue increases.

The Twinkies maker reported the 9.7% increase in the quarter represents the company's “best organic growth rate”​ for the year, mainly led by the introduction of Hostess Bakery Petites - a premium snacking platform made without artificial flavors, colors or high fructose corn syrup - that contributed 3.1% to its $196.2m revenue increase.

Full-year sales were also driven by product innovations, contributing $62.5m to its $776.2m net revenue.

According to Bill Toler, president and CEO of Hostess, the company is also optimistic about the growth opportunities from the new breakfast opportunities from the acquisitions of the Big Texas and Cloverhill brands.

Hostess acquired​ the US breakfast assets of Aryzta in February this year, including its Chicago Cloverhill bakery facilities.

The merger is also expected to reduce Hostess’ reliance on co-manufacturing - the company had outsourced production to Aryzta until June 2017 - forecast to add $60m-$70m to overall net revenue for 2018.

This year, Toler said the Massachusetts-based company will focus on distribution and white space expansion, as well as future acquisitions.

“We plan to grow well above the sweet baked goods category,”​ he said.

Superior boosts in-store bakery sales

Hostess reported its sweet baked goods segment reached $773.8m in 2017, increasing 4.7% year-on-year, while the in-store bakery segment jumped a remarkable 58.5% to $42.4m, compared to $26.7m a year ago.

The company accounts the increase of its in-store bakery sales to the Superior acquisition and subsequent growth in in-store bakery products.

Hostess acquired Superior Cake Products​ - ​which produces the Superior on Main brand - in June 2016.

Quarterly revenue of the segment increased by 6.5% to $10.9m.

Hostess noted higher transportation costs caused a 250 basis point decrease in gross margin.

“The decrease was also attributed to increased ingredient and storage costs," ​it added.

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