Post Holdings’ potential Active Nutrition IPO is ‘on track’ with SEC and a strong second quarter

By Elizabeth Crawford contact

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Post Holdings’ potential Active Nutrition IPO is ‘on track’ with SEC and a strong second quarter

Related tags: Post holdings

The initial public offering of Post Holdings' fast-growing Active Nutrition segment, which includes the iconic PowerBar brand, remains “on track for a fall execution,” but may not happen before the end of the fiscal year, the company’s President and CEO Rob Vitale told investors during a May 3 earnings call.

He explained that while “we previously discussed execution in our fiscal year,” ​which ends Sept. 30, “we have examined the calendar for financing, tax structuring and other activities, [and determined] the process may extend into October, subject to market conditions.”

He added that the company has received and responded to comments from the SEC following the April 8 filing of a confidential draft registration statement for the IPO of its Active Nutrition business, which Post previously announced in November that it hoped to spin off this fiscal year.

Post’s Chief Financial Officer Jeff Zadoks noted that the filing would become “public-facing right before we begin our road show, and probably not too far in advance of that.”

He added that the “road show timing is, of course, timed against when we would expect to issue the shares to the market.”

Post previously said it planned to offer 20% of the shares, which if the IPO is successful would leave it with a dominating investment in what likely would be a lucrative business based on the segment’s performance in the past few years and the current macro trends that have consumers clamoring for more protein and functional products.

When Post announced its intent to spin out its Active Nutrition business last November, it reported the business “has achieved rapid growth in recent years, with net sales increasing at a compound annual growth rate of 30% since 2014, attributable to industry leading growth in its Premier Protein ready-to-drink shake products driven by strong velocities, distribution gains and new flavors.”

Active Nutrition continues its strong performance

The segment continued its strong track record during the firm’s second quarter, which ended March 31, in which net sales increased 5.5% to $216.5 million compared to the same time last year.

Much of this growth came from a 13% increase in net sales growth of RTD shakes, which saw volume increase 4.8%, despite “short term capacity constraints”​ that previously prompted the company to reduce inventory of its flavors from seven to two, according to the company.

By tapping into existing cash stores, Post was able to restore inventory levels and once again begin shipping all seven of the shake flavors near the end of the quarter, Vitale said.

He noted that the reintroduction of the shakes is currently at 85% with a “modest amount yet to go,”​ but once “we nail the execution of a pretty complicated reintroduction that involved getting to capacity of timing and the capacity of customer acceptance” ​in line, Post will be able to focus on innovation.

Previously, Post had hinted at the use of alternative protein sources, such as egg protein and others, but Vitale said he “wouldn’t want to announce in this kind of forum”​ what innovations might be on the horizon for the format. Although he did confirm that “we certainly have innovation plans.”

Bars take a bite out of the shake business’ success

The segment’s success with the shakes was partially offset by declines in the nutrition bar segment, which Vitale acknowledge has been a sticking point for the business.

“We have a great protein shake platform within Premier and it’s performed, frankly beyond our expectation during the time in which we’ve owned it, but we have been frustrated with our ability to take that brand into traditional forms as effectively as we have in shakes,”​ he said.

He noted the segment has a “decent-sized business in powders and … in bars, but it is clearly sub-scale when compared to our shake business.”

To remedy this, he said Post is exploring “some better flavoring or more indulgent products”​ that it will work into the “overall Premier protein brand promise in a manner that tries to complete the promise of the shake,”​ he said.

However, he also noted that the bar category “frankly is more competitive because the barriers to entry are lower,”​ resulting in a space that is much more fragmented and has a higher churn rate than shakes.

“So,”​ he added, “we are cautiously optimistic, but we want to have a very cool eye to where the potential for that form exists.”

Overall sales and volume down

Beyond the Active Nutrition business, Vitale said that Post Holdings “had a solid quarter in which we overcame some external headwinds to deliver a good result.”

Despite his assessment, net sales for the company fell 12.5% to $1.38 billion compared to the prior year, and gross profit fell $21.1 million to $451.2 million compared to the same time last year. Within this, Post consumer Brands, which includes the company’s RTE cereal business, saw a 0.7% decrease in net sales to $459.1 million and volume decline 3.6% compared to the same time last year.

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