Q4 2024 Post Holdings Inc Earnings Call
Speaker Change: [music].
Welcome to the post holdings fourth quarter 2024 earnings conference call and webcast.
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Speaker Change: I would now like to turn the call over to Daniel O'rourke Investor Relations for post. Please go ahead.
Daniel O'Rourke: Good morning, Thank you for joining us today for Post's fourth quarter fiscal 2024 earnings call.
Speaker Change: I'm joined this morning by Rob Vitale, our president and CEO, Jeff <unk>, our CFO and Matt Mainer, our CFO and treasurer.
Speaker Change: Robert Jeff and Matt will make prepared remarks, and afterwards, we'll answer your questions.
Speaker Change: The press release that supports these remarks is posted on both the investors and the SEC filings portions of our website and is also available on the Sec's website.
Speaker Change: As a reminder, this call is being recorded and an audio replay will be available on our website a post holdings dot com.
Speaker Change: Before we continue I would like to remind you that this call will contain forward looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements.
Speaker Change: These forward looking statements are current as of the date of this call and management undertakes no obligation to update these statements.
Speaker Change: This call will discuss certain non-GAAP measures for a reconciliation of these non-GAAP measures to the nearest GAAP measure see our press release issued yesterday and posted on our website.
That I will turn the call over to Ron Thank you Daniel and good morning, everyone.
We finished fiscal 'twenty four with a strong fourth quarter.
Ron: And I'm proud of the results for the full year.
Ron: The last two years have seen a step change in adjusted EBITDA growing by 45%.
Ron: Roughly half of this resulted from organic growth and half from the pet acquisition contribution.
Ron: In addition, we converted this this growth into strong free cash flow generating approximately $1 billion over the past two years.
Ron: In FY 'twenty for pricing caught up to input costs. We made continued improvement in our manufacturing supply chains and sustained the remark will start for our pet business, how that over to X Our acquisition case.
Ron: Meanwhile, our diversified portfolio price points and value added product offerings continue to provide volume offsets to a challenging consumer backdrop.
Ron: We are now at an attractive position to return to algorithmic growth with a high degree of Optionality provided by our capital structure.
Ron: Between the profit growth and cash flow generation I highlighted we have reduced net leverage by more than a full turn over the last two years.
Ron: In FY 'twenty five we expect a more normalized operating environment.
Ron: <unk> has leveled, but its not receded consumers and therefore volumes remain under pressure.
Ron: We believe the degree of category declines we experienced in FY 'twenty four will add with the recent cereal category performance as a good reference point.
Ron: From a capital allocation standpoint, we continue to evaluate M&A opportunities.
Ron: I have lately described our pipeline is very deep.
Ron: We remain extremely disciplined with respect to valuation.
Ron: If the right opportunity fairly priced presents itself, we're well positioned to react.
While competitive uses of capital are always available.
Ron: Sometimes overlooked is the option value created by the refinancings, we executed in FY 'twenty four.
Ron: They added significant runway to our maturity ladder and increase liquidity, providing for them for more opportunities for aggressive capital allocation.
Ron: Finally, I would like to thank all our employees for a very successful 2024.
Ron: The strength of our operating model, our diverse product offering and our exceptional management team continue to give me a great deal of confidence in our 2025 plan.
Ron: Lastly, before turning over to Jeff Congrats.
Ron: Congratulate Matt on his promotion that we announced in yesterday's press release.
Ron: Jeff.
Speaker Change: Thanks, Rob and good morning.
Speaker Change: PCB closed out an exceptional year with a very strong Q4, as both grocery and pet grew their relative profit contributions versus prior year.
Speaker Change: Major drivers were annualized pricing strong sustained performance in cost in manufacturing.
Speaker Change: And growth from our value product offerings more than offsetting lower cereal category volumes and higher advertising spend.
Speaker Change: Within cereal, we saw the rate of category declines slowed to two 6%, which is in line with the pre Covid historical trend.
Speaker Change: Our branded portfolio outperformed the category.
Speaker Change: Private label continues to grow which given our private label share accrued to our benefit.
Speaker Change: That consumption volumes were down roughly 2% versus a flat category.
Speaker Change: Driven by reduced distribution points for nutrition, and some price elasticity and gravy train.
Our overall share remained relatively flat with our premium brands continuing to show sequential stabilization, which was a key priority coming out of the acquisition.
Speaker Change: As we move into fiscal 2025, we shipped our attention from stabilizing to strengthening our premium brands led by our nutrition relaunch that kicks off at the beginning of the calendar year.
We completed the closure of our Lancaster cereal plant on time and on budget.
Speaker Change: While this improves our capacity utilization within cereal, we will continue to evaluate our network for further optimization.
Speaker Change: At the start of November we exited the smokers TSA and moved the pet business onto our own systems, while too soon to declare victory. The cutover, thus far has been without significant disruption.
Speaker Change: Moving to foodservice, we delivered a very strong quarter overcoming challenges from our H P. A I driven supply constraints, a pullback in restaurant foot traffic.
Speaker Change: And continued challenges in our shake co manufacturing startup.
Overall volumes were up three 6% led by distribution gains in both the eggs and potatoes are.
Speaker Change: Our highest margin precooked egg products led the way up seven 5%.
Speaker Change: While as expected Q4, adjusted EBITDA trailed prior year, given the significant H P. A a pricing benefit in fiscal 2023.
Speaker Change: You did outperform the expectations, we set on our last call.
Speaker Change: The drivers of this outperformance were twofold.
Speaker Change: First was stronger than expected mix.
Speaker Change: Second was our ability to utilize our inventory to better match the cost impacts of our H P. A a supply imbalance with our pricing adders.
Speaker Change: As expected our refrigerated retail business had sequential improvement in Q4, as we course corrected the trade issues experienced in Q3, we saw year over year volume growth of 6% within our side dishes. Despite less support from our Recalibrated trade spend.
Speaker Change: <unk> manufacturing supply chain and cost control continued to support this business.
Speaker Change: Lastly, our Weetabix UK cereal category volumes pulled back to down 2% for the quarter with our branded biscuits down 3% as we lapped heavier promotion last year and we focused on inventory build.
Speaker Change: For our Q1 ERP conversion this year.
Speaker Change: We are now live on our new ERP and the early read indicates it is progressing as planned.
From a macro environment standpoint, we are seeing some green shoots in the U K as inflation levels off and consumer confidence improves. While this is encouraging our path to margin recovery continues to be the multi year execution of cost out opportunities identified during fiscal year 2024.
Speaker Change: With that I'll turn the call over to Matt.
Matt Mainer: Thanks, Jeff and good morning, everyone fourth quarter consolidated net sales for 2 billion and adjusted EBITDA was 349 million net sales increased 3% driven by acquisitions, excluding acquisitions sales were flat as lower overall volumes in our retail businesses were offset by volume growth and favorable mix shift in foodservice.
Matt Mainer: SG&A increase in the quarter, primarily due to targeted marketing investments in our retail businesses excuse.
Matt Mainer: Excluding the benefit of perfection pet food acquisition post consumer brands net sales decreased 3% and volumes decreased 6%.
Matt Mainer: Average net pricing increased 3% and volumes declined mainly due to smokers Q1 repatriation of pet food, we manufactured for them.
Matt Mainer: Segment, adjusted EBITDA increased 2% versus prior year as we benefited from the contribution of perfection pet and fruit branded cereal performance and strong manufacturing and supply chain cost performance for both grocery and Pat.
Matt Mainer: Foodservice net sales increased 5% and volumes increased 4% revenue reflects favorable volumes and mix shift to higher value added products.
Matt Mainer: Items reflected just distribution gains at both egg and potato products.
Matt Mainer: Adjusted EBITDA decreased 8% as we saw elevated a cost ahead of pricing and occurring here and lapped avian influenza price benefits in the prior year. These headwinds were partially offset by a favorable mix shift to higher margin pre cooked eggs.
Matt Mainer: Refrigerated retail net sales decreased 3%, while volumes increased 1% favorable side dish and sausage volumes were offset by distribution losses in egg and cheese products segment, adjusted EBITDA increased 3% driven primarily by manufacturing cost control.
Matt Mainer: <unk> net sales increased 4% year over year sales benefited from the D side acquisition and a foreign currency tailwind of 270 basis points from a stronger British pounds.
Matt Mainer: On a currency and acquisition neutral basis, net sales decreased 4% and volumes decreased 7% driven by the decline in non biscuit products.
Matt Mainer: Segment, adjusted EBITDA increased 30% versus prior year led by lower advertising and trade spend in the current year.
Matt Mainer: Turning to cash flow, we had another strong quarter generating $235 million from operations and approximately $100 million in free cash flow net of Capex spend for the fiscal year, we generated approximately $500 million in free cash flow net of elevated capex behind key investments in cereal network optimization.
Matt Mainer: Food safety capacity, and R&D, plus foodservice investments for the expansion of Precut and cage free capacity.
Matt Mainer: In addition, we repurchased 400000 shares in Q4 at an average price of 100 748 per share, bringing our fiscal year total to approximately 3 million shares at an average price of approximately 102.
Matt Mainer: From a debt management standpoint, we acted on what turned out to be a temporary pullback in interest rates and issued $1 8 billion in debt. This added cash to our balance sheet and pushed out our 2028 28 bond maturity to 2034, while maintaining our net leverage at four three times.
Before we get to Q&A I have a few comments on our fiscal 2025 guidance.
Matt Mainer: As stated in our earnings release last night, we expect FY 'twenty five adjusted EBITDA to be in the range of $1 four 1 billion to 146 billion.
Matt Mainer: On a consolidated basis, we expect our quarterly adjusted EBITDA cadence to be balanced across the year with offsetting variations between our segments.
Matt Mainer: Finally, our capex guidance of $380 million to $420 million remains elevated as we continue to spend on the same key investments with M. P. C V. In foodservice that we started in FY 'twenty four.
Matt Mainer: These investments will complete in FY 'twenty five however, there will be some tail into 'twenty six.
Speaker Change: Thank you for joining us today, and I will now turn the call back over to the operator.
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Speaker Change: <unk>.
Speaker Change: Our first question will come from Andrew Lazar with Barclays. Please go ahead.
Speaker Change: Great. Good morning, Thanks for the question.
Speaker Change: Sure.
Speaker Change: Rob you know, obviously I know post focus is more.
Speaker Change: More on EBITDA and capital allocation.
Speaker Change: And not sort of topline growth for topline growth sake.
Speaker Change: But I know that other than in foodservice this past quarter, the topline declines it sort of all the other segments and I realize there are different reasons in each case, some of which are the TSA shift over or maybe declines in some lower margin businesses.
Speaker Change: Yes. My question is at what point do you maybe some of the declines start to be more of a concern and that ultimately you're right. The topline enables continued EBITDA growth. Once you know much of the margin opportunity is sort of leveraged.
Speaker Change: Sure.
Speaker Change: I don't think there's any argument, we can't shrink our business to prosperity.
But what we do aggressively do is manage out lower margin business and not worry about that volume reduction.
Speaker Change: While I'm and I'm really focused primarily on cereal in this response, because food service volumes to have some volatility but have a pretty good strong upward momentum.
Speaker Change: On cereal, we have a more flexible footprint, having purchased most of our plants and as a result, we have miles to go with respect to optimizing the network.
Speaker Change: We believe at the same time that the trends will start to come back to.
Speaker Change: Closer to flattish over time.
But the but the point excuse me by which it becomes an issue is one of the plants become deleveraged and we no longer have the ability to shrink capacity, we're quite a ways from that because of the way we compiled the portfolio of businesses.
Speaker Change: Great that's really helpful.
Speaker Change: I guess secondly, the.
Speaker Change: The large private label player earlier this week.
Speaker Change: So private label volume in their categories declined in the mass channel in the third quarter.
Speaker Change: I'm just wondering if you've seen something like this in private label in your categories.
Speaker Change:
Speaker Change: So I guess, it's the age old question Whats your latest thoughts on sort of where where the volumes going at this stage, because I'm sort of running out of.
Speaker Change: Options around or excuses.
Speaker Change: Where it's going and it's still a bit of a puzzle to me. Thanks, so much.
Speaker Change: We have not seen any erosion in our categories in terms of private label penetration. So it's S.
Speaker Change: So.
Speaker Change: I think it was Jeff who mentioned that we've seen some growth in private label in cereal and the same is true of eighth Avenue. So I think it's very much category by category question.
Speaker Change: In terms of volumes I think that with the things settling down post election, with the inflation settling down a bit that we will start to see a reversion to norm.
Speaker Change: Then we will.
Speaker Change: Be able to stop guessing.
Speaker Change: Yep Yep.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question will come from Ken Goldman with J P. Morgan. Please go ahead.
Speaker Change: Hi, good morning, and thank you.
Hi, just wanted to start by asking on eggs obviously.
You know the market price has been volatile I know that doesn't really tell your story, but just in an H P. A I type world what.
Speaker Change: What are your latest thoughts on <unk>.
Speaker Change: You need to take some price your ability to take some price I know you've talked in the past about how you've taken pricing.
Speaker Change: The underlying egg went down and so I just wanted to kind of get your latest thoughts there on on and that situation just given some of the volatility we're seeing again just in market prices.
Speaker Change: Well in general we're less susceptible to the volatility that are shelled egg compatriots because of our value added offering.
Speaker Change: But we obviously do face some cost pressures and when they occur we are generally in a position of either taking pricing, we're allocating to customers and we leave that to their discretion. So.
Speaker Change: Well we.
Speaker Change: We're not immune from the effect of avian influenza, we are mitigated in terms of our value added.
Speaker Change: Pricing model, both on the pass through basis and on a market basis.
Speaker Change: Okay, and just shifting topics as we think about the EBITDA range.
Speaker Change: This is the upper and lower end you know besides the obvious factors of demand for your product and operational efficiencies. So forth just how do you think about the key factors that might bring your year towards that upper end towards that lower end, but are there any kind of unique.
Speaker Change: X factors for lack of a better phrase that you were thinking about this year in particular.
Speaker Change: We got ERP conversions occurring in a couple of locations that add some a little bit of uncertainty theres been some pressure on Bob Evans side dishes that we need to pay attention to and bring growth back to there are any number of areas where there's.
Speaker Change:
Speaker Change: Opportunities to build upon that guidance and threats to see lower end, but one of the other I think aspects of our guidance as we ended the year quite strong. So if you look at the high end of our range, we're very comfortable with the.
Speaker Change: The algorithm on the low end, it's a little soft, but that's as much a function of where we ended rather than where we start.
Great. Thanks very much.
Speaker Change: Q.
Thank you. Our next question will come from Matt Smith with Stifel. Please go ahead.
Speaker Change: Hi, good morning, Thanks for the question.
Matt Smith: I wanted to follow up on the 20th the fiscal 'twenty five EBITDA question and more specifically on the foodservice side last quarter, you talked about the run rate being around 105 million.
Matt Smith: Can can can you talk about the levers for growth on EBITDA for foodservice, specifically for the upcoming year.
Matt Smith: When you face a pretty tough comparison, so just understanding where you're starting from and your expectations for the business next year.
Speaker Change: Well the key drivers are a foot traffic volume in <unk>, and secondly mix migration to greater value added products. So between the two of those trends we feel comfortable are meeting our growth targets within foodservice.
Speaker Change: Now on the other side of the Ledger AI is just an uncertainty and as we just talked about hey, I would say pricing reaction rather than it is something we plan for it.
Speaker Change: Thanks, Robin and maybe a follow up we haven't talked about the progress you're making on the a septic shake manufacturing footprint. There how how is the business running today is there still room for continued improvement in the output there.
Speaker Change: So there's a lot of room for continued improvement in the output. We are running we are running at lower than our expected run rate, we expect to get to the run rate.
Speaker Change: Closer to the second half of FY, 'twenty, five which is a year later than we expected.
We've had some challenges with equipment, we've had some challenges with lead times and receiving and replacement parts critical parts. In fact, and then finally, we've had some labor issues that have all led to about a year delay in getting to the run rate we need to deliver.
Speaker Change: Thanks, I appreciate the time I'll pass it on.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question will come from Michael Lavery with Piper Sandler. Please go ahead.
Speaker Change: Thank you and good morning.
Speaker Change: Touched on.
Speaker Change: How pet is exceeding.
Speaker Change: More than kind of double your planned EBITDA.
But with the protection deal I think you were also able to.
Speaker Change: Rearrange or your geographical approach a little bit can you just give us a sense of.
Speaker Change: What some of the savings or efficiencies there might might look like and what the timing could be and how we should think about that coming through.
Speaker Change: Well I think ultimately we're still looking at the network that we've both acquired in the two acquisitions and that had been built by smucker and trying to determine if we have the right geography. So theres network optimization work that will continue to be done there.
Speaker Change: Perfection acquisition was in part a opportunity to gain some access to western manufacturing and distribution. So it was a network opportunity. It was also an entry into co man, we will likely shrink some of that co man business and ultimately move some of our business out west as we determine what the.
Speaker Change: Optimal footprint.
Speaker Change: Foot print is for delivering to our customers.
Speaker Change: So we've embedded that in the in the FY 'twenty five guidance I think additional benefit from that won't come until 26, when we complete that network optimization work.
Speaker Change: Okay. That's really helpful and just looking at Weetabix those margins had some pretty significant pressure.
Two years ago.
Speaker Change: Cloud some of that back out what should we think in terms of.
Speaker Change: Kind of the runway for.
Speaker Change: Can you get back to the margins you had and how long might that take.
Speaker Change: Yeah. So.
Speaker Change: We're looking at that as a multiyear journey and we've talked a little bit about work, we've done to identify cost out and some opportunities to simplify the portfolio.
Speaker Change: That's a multi journey or multiyear path I'd say in the current year, we talked a little bit about ERP conversion and when you think of that sequential margin certainly going to play a little pressure on what we saw in Q4 and Q1 and Q2, just given some of the disruption around how big of a conversion that is what you would expect in the back half of the year to kind of really.
Regain our momentum along that cost out and again, we see that as probably a.
A couple three year path to get back towards our 30% level.
Speaker Change: Okay, great. Thanks, so much.
Speaker Change: Thank you. Our next question will come from David Palmer with Evercore ISI. Please go ahead.
David Palmer: Hi, Thanks, just a.
Just good morning, just looking at the consumption data if you were to look at Siri.
David Palmer: Cereal pet refrigerated you know all we're doing low single digit type consumption down in the last 12 weeks.
David Palmer: So maybe it consistent starting points. If you if you had to guess coming you know looking at your plans your growth plans going through that through fiscal 'twenty five.
David Palmer: What are the likelihood what's the likelihood for each of those areas in terms of returned to organic growth and.
David Palmer: How do you plan to add that that maybe playing out sequentially from here. Thanks.
Speaker Change: Well, we tend to think of cereal is in long term sequential very low single digit decline so between zero and 1% we've been a bit more bearish and our assumptions for 'twenty five but longer term, we think it gets to that range and with some of our other categories.
Speaker Change: We expect it to be zero to 2% growth.
Speaker Change: And any and in that how youre thinking about it for fiscal 'twenty five as well.
Speaker Change: <unk>.
Speaker Change: The other thing I wanted to ask you about was in foodservice I was really bracing for impact to some degree on the top line because of what we've seen in Starbucks and Duncan and it was really a rough quarter for those players is.
Speaker Change: It's getting better with Dunkin' it hasn't been getting better yet with Starbucks I know there was a big value add type.
Speaker Change: Customers I'm wondering how big of a variable is that in in the year. If we do see for example, Starbucks get much better from here and if you like U S or animal spirits get.
Speaker Change: Pick up demand, there's a lot of people are anticipating how much could that really helped the margins are in the run rate in that.
Speaker Change: 105 per quarter type EBITDA.
Speaker Change: Well the benefit of that particular growth in the accounts that you named is that they tend to be more value added products. So there is the benefit of volume the benefit of absorption and the benefit of mix so to.
Speaker Change: To the extent there is to use your term animal spirits that are.
Speaker Change: Show, some vibrancy coming out of that that benefits us meaningfully.
Speaker Change: We do not plan on major changes in trends on a short term so we tend to.
Speaker Change: Keep the trend intact and.
Speaker Change: Assume that that kind of opportunity as longer term.
Speaker Change: Great. Thank you thank.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question will come from John Baumgartner with Mizuho. Please go ahead.
Speaker Change: Good morning, Thanks for the question good.
Morning.
Speaker Change: Rob I wanted to come back to pet and your thinking in terms of future development as you assess the landscape, whether it's by price here or across brands.
Speaker Change: You have some rebranding efforts now I think in your branded business. How much reinvestment are you willing to deploy to sort of drive growth or accelerate that business and alternatively, how do you think about the value just sort of inherent in the manufacturing assets being a best in class producer for private label or smaller brands.
Speaker Change: Just your thoughts on relative returns on capital the risks entailed in sort of the relative rewards and pursuing each of those paths.
Speaker Change: Well in the short term I think our greatest opportunity is to.
Speaker Change: Drive the existing portfolio that we have make sure that we do a good job relaunching our premium brands those had suffered from neglect for a period of time and they need some investment behind them.
Speaker Change: A meaningful amount of investment is already baked in the FY 'twenty five guidance.
Speaker Change: When you step back and go longer term I think the.
Speaker Change: First of all the answer to your question is that we certainly do look from an asset utilization perspective at other channels, whether there are opportunities in private label or contract manufacturing or whatever the case might be and we're willing to use the assets appropriately.
Speaker Change: But we also may look at shrinking the assets if there are opportunities to be more protocol.
Speaker Change: Greater productivity and fewer plant, so I wouldn't presume one direction or another just yet.
Speaker Change: We look at growth in that area as both an opportunity to show some organic growth and the way we've talked about and then some inorganic growth because of the category remains rich with opportunities that you saw one yesterday there others that are.
Probably in a price point that make more sense for us and we continue to evaluate those so we certainly look at it.
Speaker Change: There's an opportunity for growth both that we can drive ourselves and that we can acquire.
Speaker Change: Okay. Okay, and then foodservice you are sustaining some really good momentum still in value added eggs you referenced the distribution growth and potatoes can you can you discuss the fundamentals potatoes, it a bit more just given the dislocations, we're seeing within the frozen segment, the excess capacity at a deep value promotions at retail in the Q S ours.
Speaker Change: How do you see some of these whipsaw as any industry, I guess, either accelerating or challenging margin low growth for the refrigerated segment. I mean are you seeing conversations sort of changing with operators as their new found interest how do you think that the potato side of the business.
Well I think it's a different category than the frozen business.
Speaker Change: So we tend to succeed.
Speaker Change: Succeed by converting from fresh users to value added users and.
Speaker Change: And we see no.
Speaker Change: Pressure on that trend. So we continue to believe that both from a margin and a volume perspective foodservice refrigerated potatoes are growth segment.
Speaker Change: Where we are seeing some pressure is on the retail side, where all of the volume trends and some of the competitive dynamics are making it a bit more challenging but on the foodservice side, we feel very comfortable with that trend.
Rob Vitale: Thanks, Rob.
Rob Vitale: Hmm.
Thank you. Our next question will come from Rob Dickerson with Jefferies. Please go ahead.
Rob Dickerson: Great. Thanks, so much.
Speaker Change: Good morning, just a first quick question kind of simple is just you know I think you made the comment.
Speaker Change: Next year.
Speaker Change: Within the EBITDA guide for the year, we should expect you to fairly kind of balanced EBITDA per quarter.
Speaker Change: But then you also made the comment that you know kind of hopefully a you know as we get through the year kind of the volume pressure right kind of abbs, maybe the consumer gets a little bit better.
Kind of start to find a bottom at least in some of these categories.
Speaker Change: Simplistically like kind of within the guide is the expectation that kind of hopefully maybe.
Speaker Change: Revenue growth gets a little bit better as we get through the year, but maybe EBITDA just kind of stays at a similar fashion is that is that fair.
Speaker Change: I think Thats fair I mean, again I think Rob mentioned, we're not really forecasting significant changes and parents volume trajectories in our plan. So it's got some level of a just status quo in terms of that but we do think.
Speaker Change: As we get into the back half of the year into next year again. Some of this is transitory items like we're seeing in cereal as an example has seen that category come from being down four to five per cent to normalize more like down 2% ourselves of late.
Speaker Change: But we really don't have any significant less in terms of category changes in our guidance right now.
Okay Fair enough and then just secondly on cereal.
You made the comment earlier just now it's just kind of a round starting I guess to get less bad right.
Speaker Change: The rate of decline is is is improving maybe just kind of unpack that a little bit just maybe if you could just speak to kind of what youre seeing.
Speaker Change: With respect to competitive activity like are kind of you know.
Speaker Change: Our promotional level stepping up or not really just given you know maybe it is kind of more of a slight.
Slight secular declining category.
Speaker Change: Because I'm just also trying to understand.
Speaker Change: Kind of the profit opportunity in cereal, which is a big category for you that's also scaled and attractive margin.
Speaker Change: As we get through next year, let's just say if it were to go back right, even though youre not projected yet, let's say if it were to go back kind of to.
Speaker Change: Normalized let's say flat to down one volume category like is that you know a.
Fairly attractive profit opportunity. Thank you.
Speaker Change: Yes to the second point is the category where to get to flat or have some level of slight growth that would be meaningful to our.
Speaker Change: Our business for sure in terms of what we're seeing currently in the category you know competitors remain rationale for promotional standpoint, obviously as you can expect we're hearing more from retailers around that but I think as we think about that.
Speaker Change: For the end of any of that it would be more get something in return in terms of shelf place space or additional distribution, but right now I'd say, it's a pretty rational environment.
Speaker Change: Alright Super El Paso.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question will come from Marci <unk> with Wells Fargo. Please go ahead.
Speaker Change: Hey, good morning, and thank you for the questions first looking at your recent presentation. It appears you rebalance some of the underlying drivers here at 3% to 4% EBITDA growth algorithm.
Speaker Change: Maybe could you help frame some of those changes there in the context of the longer term outlook and then with that bridging to the 25 EBIT guide.
Speaker Change: Segments, where you would expect to be above below those long term targets on the base and then Larry on any other puts or takes to call out.
Speaker Change: Sure. So I think the updates we made in our prior presentation a year ago I think we had more significant growth around PCB just given.
Speaker Change: What we saw coming and Pat obviously, we accelerated a lot of that growth and more than over delivered what we expected. So we've recalibrated that it more like a 2% growth rate over time, driven by category and in Perth, as we see growth in our cereal category that we see flattening.
Speaker Change: And then cost out continue to be a driver and when you think about network optimization in both.
Speaker Change: So each service we updated two 5% in terms of the growth rate and that's really in line with historical CAGR and obviously, we are still working through our challenges on the the shake co man startup the top of that we will get that in order and that will provide some growth over the over the five year horizon as well.
Speaker Change: Because I think we just updated a little last year gross but that's off a much lower base as we've talked about.
Speaker Change: Given the pullback in margin and again, that's driven by cost out and simplification in the portfolio and we have identified projects for that in your refrigerator is really the same again.
Speaker Change: Driven by half of that portfolio is sides, we've seen that in the past the high single digits, We think we'll get back to that and the other half of the portfolios of our commodity exposed and flattened combined gets you to the 5% in terms of this fiscal year I would say.
Speaker Change: With the exception of we did that because like I said, we think the ERP conversion is going to cause a drag year over year. So I don't see them generating growth in relation to the algo the other three.
Speaker Change: Definitely more in line with algo.
Speaker Change: With some conservatism around nutrition reset within pet they expect to cause essentially potentially some disruption in the second half of the year as you think about changing over the shelf.
Speaker Change: And then we also have obviously the conversion from speakers that were alive on right now.
Speaker Change: But again I think Rob talked about the the higher side of our guidance is is that combined algo and then you know we've been a little more conservative given some of the ERP and nutrition reset in terms of the midpoint.
Speaker Change: Okay. Thank you that's very helpful. And then on refrigerated retail you called out some distribution losses, and some lower margin products any more color on the impact there how long will this cycle through and will you look to backfill. Some of those are just continuing to shift focus to more profitable areas of the business sure.
Speaker Change: So that was in eggs and cheese on the cheese side of things.
Speaker Change: He led the way with lap that in Q2 of this fiscal year again, that's a business we continue to evaluate in terms of alternatives there.
Speaker Change: I think on the AG side of things, we will lap that distribution loss in Q1.
Speaker Change: We then previous supply I think the challenge there is avian influenza in egg prices in general are extremely elevated these days, which put some pressure on that does us a we've got supply in a better spot. So I think opportunities. If we can get some I'd say more normal environment in terms of egg pricing.
Speaker Change: Okay. Thanks, I'll pass along.
Speaker Change: Thank you at this time, we've reached the end of our Q&A session.
Speaker Change: This will also conclude today's post holdings fourth quarter 2024 earnings conference call and webcast.
Speaker Change: Please disconnect. Your line at this time and have a wonderful day.
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