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Post cereals takes hit to profits; fears 2013 grain inflation

By Oliver Nieburg+

10-Aug-2012
Last updated the 10-Aug-2012 at 12:44 GMT

Post manufactures a range of branded breakfast cereals such as Honey Bunches of Oats
Post manufactures a range of branded breakfast cereals such as Honey Bunches of Oats

US cereal firm Post Holdings has reported a 5% fall in profits in its third quarter (Q3) results and fears ingredients cost inflation in 2013.

Branded cereal business Post Holdings was spun-off from private label firm Ralcorp in February this year, although Ralcorp still holds a 20% stake.

Post reported a 2% fall in sales for the quarter ended June 30 to $241.9m. Its profits were also hit. Adjusted EBITA stood at $61.4m, a drop of 5% compared to the same period last year.

The company put the results down to volume declines and flat growth in the ready to eat cereal category.

Post’s former controlling owner Ralcorp also experienced a tough Q3 as operating profit fell 9% to $105.3m. (See HERE )

Flat cereal market

Post pointed to data from market analysts Nielsen that showed that during Q3 sales in the ready to eat cereal category were flat at +0.1%.

The Nielsen data also showed that Post had lost market share during the quarter. Post’s share in the US ready to eat cereal market Food, Drug and Mass category fell 0.9 share pomts to 10.6%.

Post said that volumes deciilned across most of its portfolio, with Honey Bunches of Oats and Pebbles brands down the most.

In June, the company launched a new line of value price cereals under its Good Morenings brand. It intends to extend line further over the next year, including the launches of Grape Nuts Fit, new Great Grains flavours and a ‘chocolateier’ variety of Cocoa Pebbles.

Commodity worries

Post’s profit margins slumped 60 basis points largely due to higher grain costs.

The company reaffirmed its outlook for fiscal 2012, expecting adjusted EBITA of between $200m and $210. However, it was apprehensive about the outlook for 2013.

“While it is still early in Post's planning for fiscal 2013, the recent drought has created significant commodity price volatility,” the firm said in its financial release.  

“In 2013, Post management expects to see meaningful ingredient cost inflation, and will continue to monitor the commodity landscape closely and look for opportunities to mitigate increased costs,” it concluded.

The company will hold a conference call on its Q3 performance on Monday.

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