Post Foods earnings slide on increased breakfast competition, costs and higher prices

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Related tags: Cereal, Ralcorp

Post Foods earnings slide on increased breakfast competition, costs and higher prices
Post Foods recorded a slide in second quarter earnings as it struggled with increased competition in the breakfast market from quick serve restaurants, higher ready-to-eat cereal prices, and costs from its spin-off from Ralcorp Holdings.

Second quarter sales were down 3.3% year on year, from $259m to $250.5m, while net earnings were $10.5m, down 63% from $29.1m in the prior year period. Post – the maker of Grape-Nuts, Raisin Bran and Honey Bunches of Oats – said that sales volumes were down 8% for the quarter ended March 31, and this was only partially offset by higher prices.

“Management believes the category volume decline is largely attributable to higher every day and promoted average prices and increased competition from cereal substitutes such as quick service restaurants and other breakfast items,”​ the company said in a statement.

The company said that volumes declined across its product portfolio, with the exception of Great Grains, which saw 14% higher sales volume in the quarter on the back of a brand relaunch.

Ralcorp Holdings completed the separation of its Post Holdings cereals business through a tax-free spin-off to Ralcorp shareholders earlier this year.

Post also revised its fiscal 2012 outlook upward, with adjusted EBITDA expected in the range of $210m to $220m, up from $200m to $210m.

The company said the revised forecast was due to “management's objective to stabilize market share with appropriate trade and pricing strategies,” ​and investment in promotion and advertising of its brands.

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