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Refrigerated dough fuels growth for Ralcorp

By Oliver Nieburg , 08-Feb-2012

US-based cereal and snacks firm Ralcorp has recorded improved sales driven by refrigerated dough operations in its first quarter (Q1) results.

Net sales for the company’s frozen bakery segment soared 59% thanks to Ralcorp’s acquisition of North American firm Refrigerated Dough from Sara Lee.

Site closure

The company also announced that it would close a production site for its Bloomfield cereal business after failing to reach an agreement with “a nutritional bar customer “on a co-manufacturing contract.

Ralcorp said this customer accounted for 4% of total group sales for Ralcorp in fiscal 2011.

Results roundup

Ralcorp net sales in Q1 rose 18% compared to the same quarter last year to $1.04bn.

Operating profit was up 3% to $165.4m, though some of the company’s business segments were hit by high raw material costs.

The company’s branded cereal business was rocked by higher costs of wheat, nuts and corn and suffered lower volumes as a result. This led to a 30% decline in operating profit for this segment.

Ralcorp announced just two days ago that it had completed the spin=off of its Post cereal business, which it expects will help it to improve performance. The company incurred $2.7 million of costs related to the separation primarily in professional service fees.

Refrigerated dough

This quarter marks the first time Refrigerated Dough has been included in Ralcorp’s financial results.

Had it not been for the acquisition, operating profit for the segment would have declined.

However, Refrigerated Dough helped Ralcorp boost profits for the frozen bakery arm of the business by 47% to $33.9m.

Raw material costs

The company’s profit margins were hurt by high raw material costs.

“Base-business raw material and freight costs were approximately $112 million higher, with the most significant impact in snack nuts (included in the Snacks, Sauces & Spreads segment) and durum wheat (included in the Pasta segment),” said Ralcorp.

However, the company said it expects profits to improve in these segments in Q2 as pricing and commodity increases become better aligned.

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