Twinkies maker on sweet ride from breakfast goods and Cloverhill acquisition

By Gill Hyslop contact

- Last updated on GMT

Twinkies maker on sweet ride from breakfast goods and Cloverhill acquisition

Related tags: Hostess brands, Twinkies, Cloverhill Bakery, Earnings before interest and taxes

Hostess Brands has baked up better-than-expected first-quarter sales, driven by innovation in the breakfast goods category and the acquisition of Cloverhill in February 2018, which is finally bearing fruit.

Hostess posted a 6.7% sales increase of $14m in net revenue to $222.7m for the first quarter ended March 31, 2018, of which the Cloverhill business accounted for $6.8m.

“Our disciplined operational and integration efforts resulted in a positive contribution from the Cloverhill business,”​ said Andrew Callahan, Hostess Brands’ president and CEO.

“We continue to expect Cloverhill profitability to improve as the year progresses.”

The company also believes its sweet run will continue through the year.

“As we grow through innovation, we are pleased with customer acceptance of the Hostess’ breakfast products​ thus far and expect to grow these products to increase as we progress through 2019,”​ said Callahan.

“We believe breakfast and indulgent premium snacking are strategic growth platforms over the next few years. They are both highly incremental to our business and extendable.”

New distribution center

The Kansas City-based snack cake company also believes growth will be derived from expanded distribution and improved merchandising, and is moving its prime distribution operation from Illinois to Kansas.

The new center – located close to the company’s largest bakery – will support profitable growth, better service to our customers and increase cost efficiencies,” said Callahan.

According to its quarterly report, Hostess received a tax incentive of $6m from the State of Kansas because of the move, which it expects to do when construction of the new building is completed in the first quarter of 2020.

Price increase boost

The company also accredited the stronger sales to ‘multifaceted prices increases’ for its sweet baked goods and instore bakery products at the end of last year, which helped offset slight increases in transportation and other costs.

  • Net revenue increased to $222.7m
  • Net income decreased to $26.6m, down from $29.3m a year ago
  • Adjusted net income was $20.3m, compared to $20.5m in the first quarter of 2018
  • Adjusted EBITDA increased by 5.1% or $2.4m to $49.4m.
  • Full year 2019 adjusted EBITDA guidance is $200m-$210m, an increase of 7%-13% over 2018

Revenue in sweet baked goods came in at $212.9m, up from $199.3m a year ago. Instore bakery segment revenue was $9.9m versus $9.5m in the year-earlier quarter.

Net income in the first quarter was down 11% from $29.3m, or 23c per share, to $26.6m, or 21c per share. Sales rose 7% from $208.7m to $222.7m.

Hostess left guidance for 2019 unchanged from its earlier forecasts.

“We are encouraged by our strong start to 2019 fueled by the breadth and depth of our sweet baked goods product offerings,”​ said Callahan.

“Our team is executing on our 2019 pillars for growth, including the strengthening of our core Hostess brand, expansion of breakfast and accelerating growth of our value brands fueled by the acquisition of the Cloverhill business.”

Related topics: Cakes & Pastries, Snacks, Manufacturers

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