Post Holdings Inc (POST) 2012 Q1 法說會逐字稿

Welcome to the Post Holdings first quarter earnings conference call and webcast. Hosting the call today from Post is Terry Block, President and Chief Operating Officer, and Rob Vitale, Chief Financial Officer. Today's call is being recorded, and will be available for replay beginning at 10 AM. The dial-in number is at 800-585-8367. All participants have been placed in a listen-only mode. It is my pleasure to turn the call over to Pia Koster, Director of Investor Relations for introductions. You may begin.

Thank you, and good morning everyone. Welcome to Post Holdings conference call to discuss results for the first fiscal quarter ended December 31, 2011. With me today is Terry Block, our President and COO, and Rob Vitale, our CFO. During this call we will review our financial results and initiatives. We will not we taking any questions after the prepared remarks. The press release and 10-Q filing that support remarks today are posted on our website at www.postfoods.com.

Before we continue, I would like to remind you that this conference call will contain forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For more information regarding the risks and uncertainties and the updated press release, please visit SEC filings in the Investor Relations section of our website at www.postfoods.com.

These statements speak only as of the date of this call, and management undertakes no obligation to update or revise the statements. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. While evaluating Post's business and securities, investors should give careful consideration to these risks and uncertainties. As a reminder, this call is being recorded for audio replay.

With that, I will now turn the call over to Terry to review our initiatives.

Good morning, and thank you for joining us today for our initial earnings call to review the first quarter of fiscal 2012. As you are all aware, this was our last full quarter as an integrated company with Ralcorp, having completed the tax-free spinoff on February 3, 2012. I want to congratulate everyone who worked so diligently to make that happen. Since July 14 when it was announced, the spinoff could not have occurred successfully without everyone's hard work. We certainly wish Ralcorp continued success in their endeavors, as we at Post look ahead to our future as a standalone entity.

We have a rich heritage of product and brand building that we are committed to support. Beginning in 1895, when C.W. Post made his first batch of Postum, cereal beverage and two years later introduced Grape Nuts, as one of the first ready to eat cold cereals. We continue to produce great tasting high quality and nutritious products for generations ribs of families. Today we own the third largest brand in an almost $9 billion ready-to-eat cereal category, and we believe we have opportunity to grow.

Our strategy is to rebuild the strength of our brands through ongoing and impactful marketing support in order to first stabilize, and then to grow our revenues and market share. Just recently we have launched new programming supporting our Great Grains portfolio and our Honey Bunches of Oats fruit blends. These commercials and digital media are starting to roll out nationally, and you will begin to see these more on television and in the digital space. We intend to expand our platform of iconic brands into new product lines or markets that we identify, and additionally we will pursue acquisition opportunities that would strengthen our current offering, or enable us to expand into complementary categories, regions, or channels.

As a standalone entity we have started first and foremost to focus on stabilizing market share, and on creating value for our shareholders. We are doing this through a focus on the scope of operations, an increased ability to incentivize management, better access to capital as a pure play company, and a an improved ability to pursue organic growth and acquisitions. Let's briefly discuss the key strategies that have been an area of focus.

First, we have committed to increasing our sales network so that 85% of our customers will be serviced through a Post direct sales force. This decision is the as a result of our recognition that selling our products through a broker network diluted our customer focus. To date, we have hired more than half of our target, and hope to be fully positioned in the third quarter. Our second strategy is to improve trade spending effectiveness through improved analytics and the focus that will come from our own direct sales force. Third, we are improving the overall value proposition to correct what we view as a pricing and promotion strategy that has historically been inconsistent.

Next, we are focusing on the brand portfolio more broadly, and putting business leaders in charge of all of the brands. Retooling our agency roster and optimizing our use of social and digital media. And finally, there is innovation. The last major innovation at Post was 1989 with the advent of Honey Bunches of Oats. We intend to be much more active in the innovation and renovation area, investing in research and development to fill gaps in consumer tastes and the demand landscape.

I will now turn to Rob to discuss our results for the first quarter of 2012.

Thank you, Terry. Good morning everyone. If you are following Ralcorp, you may recognize some of the following commentary from their 10-Q filing and earnings announcements. This filing schedule is dictated by the mid-quarter spin date therefore this discussion may seem to you like old news. Going forward our quarterly earnings calls will, of course, become more timely.

During our first quarter net sales were $219 million, down 2% from the previous year quarter, resulting from a decrease in overall volume. On a volume basis, Honey Bunches of Oats and Pebbles, our largest brands, were each down 4% versus the same time period a year ago. Great Grains was the one brand in the portfolio that experienced an increase in volume, up 13% over the prior year. This increase was primarily driven by a national advertising campaign in support of the brand relaunch. We hope the extension of the success of this campaign to other brands will demonstrate our ability to stabilize and ultimately grow across our portfolio.

On an RT category basis revenue increased approximately 1% for the 13 weeks ended December 31, 2011 compared to the prior year. Category volume declined almost 6%, but was offset by increased average selling prices. In addition to consumer price elasticities, we attribute primary drivers of this decline to increased competition from quick service restaurants, and other breakfast items such as Greek yogurt. Terry spoke of our strategy to grow revenue and stabilize market share erosion witnessed during the last several years.

We are pleased to see stabilization in our share as we begin to deploy these initiatives. Nielsen reported monthly market share for Post as 10.7% for October, 11.5% for November, and 11.5% for December, an increase from the 10.4% share from the end of fiscal 2011. We hope to see our market share continue to show stability over the coming months,as we execute on our plan and position the brands for growth.

From a profitability perspective, gross profit margins decreased 360 basis points for Q1 versus prior year, as a result of higher raw material costs and unfavorable fixed cost absorption. SG&A as a percentage of net sales increased 320 basis points driven by higher advertising costs. These higher advertising costs support our national campaign related to the Great Grains brand relaunch, and modest increases related to Pebbles and the HBO line. Excluded from the SG&A are $2.7 million of costs to effectuate the spinoff from Ralcorp. Adjusted EBITDA for the quarter was $45.6 million, a 24% decrease from the prior year. We are measuring EBITDA on an adjusted basis which excludes certain noncash and one-time costs, but includes an estimate of the costs Post would have incurred had it been a standalone public company during the entire period. There is a reconciliation table for adjusted EBITDA in yesterday's press release.

As Terry noted, these results occurred while Post remained part of Ralcorp. In connection with our legal separation which was completed February 3, 2012, Ralcorp distributed one share of Post common stock for every two shares of Ralcorp common stock held. Ralcorp retained approximately 6.8 million shares of Post common, or almost 20% of our total shares outstanding. We issued $775 million of 7.375% senior notes maturing February 2022, and entered into a $350 million five-year senior secured facility, comprised of $175 million term loan and an unfunded revolving line of credit.

In concluding, I would like to add that this is an exciting time at Post. We believe we have identified key issues to drive revenue growth and improve our operating performance. While this quarter review clearly is retrospective of operations prior to the split from Ralcorp, we are one month into the operations of our second quarter, and more importantly, one month into our life as an independent public company. Our Q2 earnings call will include results that demonstrate these initiatives forming and taking place. Thank you very much for listening, and we look forward to working with you all.

The replay of this presentation will be available via webcast on the website at www.postfoods.com. Also an audio replay will be available for 48 hours by dialing 800-585-8367, and entering ID number 59263037. Thank you. This concludes today's conference. You may now disconnect.