Q1 2025 Post Holdings Inc Earnings Call
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Speaker Change: I would now like to turn the call over to Daniel O'Rourke, Investor Relations for Post.
Speaker Change: Good morning. Thank you for joining us today for POST's first quarter fiscal 2025 earnings call.
Speaker Change: I'm joined this morning by Jeff Zadoks, our COO, and Matt Mainer, our CFO and Treasurer. Jeff and Matt will make prepared remarks and afterwards will 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 at postholdings.com.
Speaker Change: Before we continue, I'd 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.
With that, I will turn the call over to Jeff.
Thanks, Daniel, and good morning, everyone.
Speaker Change: Before we get to our prepared remarks, I'm sure all of you are wondering why Rob isn't with us.
Speaker Change: Unfortunately, he caught the flu bug that's been going around the country and won't be with us today. I'm quite sure he's listening, however, and is going to be critiquing our performance, so Matt and I are going to do our best to get through this.
Speaker Change: Call, and hopefully get a good review from him when we talk to him later.
With that, I'll turn back to our prepared remarks.
Speaker Change: Fiscal 25 is off to a good start. Our strong Q1 financial results were driven by cost management and benefits we continue to see from our diversified portfolio.
Speaker Change: These results were delivered as we successfully executed major ERP conversions at PCBPET and Weedabix during the quarter.
Speaker Change: Given the potential pitfalls involved with these types of projects, the performance of our teams was commendable and we are grateful for their efforts.
Speaker Change: At PCB, Pet and Grocery had a strong quarter with improved gross margin in both, driven by cost performance.
Speaker Change: For grocery, we benefited from improved utilization due to our plant closure completed last September, as well as spray deficiencies.
For PET, we benefited from improved cost and plant performance.
Speaker Change: From a volume standpoint, the cereal category declined 3.2 percent, slightly more than our plan assumptions.
Speaker Change: PCB's pound share remained flat at 22% with solid performance across the portfolio.
Speaker Change: Meanwhile, pet category consumption was down approximately one percent, with our portfolio declining five percent, as we continued to lap lost distribution points in nutrition and experienced price elasticity in gravy train.
Our overall share was down slightly.
Speaker Change: We are now turning our attention to innovation for PET and Q2, led by the relaunch of Nutrish, which is underway now, with phasing throughout the balance of the fiscal year.
Speaker Change: In addition, we are rolling out innovation with new product launches in Nature's Recipe and Kibbles and Bits.
Speaker Change: Shifting to food service, overall we had a strong quarter driven by continued volume growth, ongoing avian influenza pricing from the May 2024 outbreak, and improved supply chain performance.
Speaker Change: While restaurant foot traffic remained soft, we saw some year-over-year stabilization.
Speaker Change: Nevertheless, we continue to grow our volumes in both egg and potato products with our higher value added eggs leading the way at plus 5%.
Speaker Change: The quarter ended on a challenging note as two of our third-party contracted farms were hit with avian influenza in December.
Speaker Change: While this did not have a material impact on Q1, when combined with the significant additional avian influenza outbreaks across the industry, our supply imbalance will cause sourcing and cost challenges, especially in our fiscal Q2.
Speaker Change: We have successfully priced through each avian influenza outbreak in the past, and while the magnitude of current market prices and volatility are unprecedented.
Speaker Change: We are confident in our ability to navigate through the current landscape.
Speaker Change: We estimate the cost before pricing impact on our fiscal second quarter will be a headwind in the range of 30 to 50 million dollars when compared to the fiscal first quarter results.
Speaker Change: Given the volatility in ag market prices, the actual result could vary, perhaps significantly, from this range.
Speaker Change: Importantly, however, we remain confident in our ability to recover any second quarter cost before pricing impact in the balance of the fiscal year.
Speaker Change: Please note this assumes we recover our lost egg supply as planned and see no additional avian influenza outbreaks within our controlled farms.
Speaker Change: Turning to refrigerated retail, Q1 adjusted EBITDA was down significantly to prior year. Roughly half of this decline was expected as last year benefited from customer sponsored promotion that did not repeat this year.
Speaker Change: In addition, shelf-reset-leave relocations at a major customer created a temporary weakness in our side offerings.
Speaker Change: Finally, we experienced costs ahead of pricing for both sausage and eggs.
Speaker Change: Our focus in the balance of the year for this segment is to continue driving growth in our sides business while we maintain cost discipline.
Speaker Change: At Weedabix, business performance was down as expected as we pulled back on promotions while we worked through our ERP conversion.
Speaker Change: From a volume perspective, the serial category was down 1.6% with declines in both branded and private label.
Speaker Change: However, a bright spot was our core Weedabix product, which was up 3.6%.
Speaker Change: With the year peak conversion behind us, our focus shifts to ramping marketing to support and drive volume growth.
while we continue to execute our identified cost-out opportunities.
Speaker Change: Before turning the call over to Matt, I want to make a few comments on the macro consumer environment and capital allocation.
Speaker Change: The macro environment remains challenging with continued pressure on the consumer and therefore collective volumes across our sector.
Speaker Change: Adding to this, the new administration and its potential policies have driven uncertainty across the consumer landscape.
Speaker Change: We continue to see an active pipeline of potential M&A transactions, both large and small.
Speaker Change: However, just like with all of our capital allocation decisions, development of these opportunities will come down to valuation.
Speaker Change: Since the beginning of the fiscal year, our capital allocation has focused on share repurchase as we bought back over 4% of our shares while keeping our net leverage flat.
Speaker Change: Given our strong liquidity and cash flow, we continue to be well positioned to take advantage of the opportunities that will naturally result from the macro uncertainty, and we remain disciplined as we evaluate the optimal allocation of your capital.
With that, I'll turn the call over to Matt.
Matt Mainer: Thanks, Jeff, and good morning, everyone. First quarter consolidated net sales were $2 billion and adjusted EBITDA was $370 million.
Matt Mainer: Including acquisitions, net sales were flat to the prior year. Excluding acquisitions, sales decreased 2% as lower overall volumes in our retail businesses were partially offset by volume growth and elevated avian influenza-driven pricing in food service.
Matt Mainer: Excluding the benefit of the Perfection Pet Food Acquisition in the current and prior year, post-consumer brands' net sales decreased 6%, volumes decreased 9%, and average nets pricing increased 3%. Cereal volumes decreased 2%, slightly less than the broader category.
while pet volumes decreased 13 percent.
Matt Mainer: Approximately half of this decline is due to profit-enhancing decisions including the exit of co-man and low margin items and volume elasticities due to pricing actions and gravy train.
Matt Mainer: The remaining half is driven by timing related to changes in customer inventory levels in the current and prior year, plus lower consumption particularly in Nutrish.
Matt Mainer: Segment Adjusted EVA DOT increased 8% versus prior years. We benefited from the incremental contribution of Perfection PET and strong manufacturing and supply chain cost performance for both grocery and PET.
Matt Mainer: Food service net sales increased 9% and volumes increased 3%. Revenue reflects favorable volumes and elevated avian influenza-driven pricing. Volumes reflect distribution gains in both egg and potato products.
Matt Mainer: Adjusted EVA DOT increased 10% driven by favorable egg and potato volumes and favorable manufacturing and freight costs.
Matt Mainer: Refrigerated retail net sales decreased 5% and volumes decreased 4%. Favorable sausage volumes were offset by declines in side dish, egg, and cheese products. Segment-adjusted IVADA decreased 22%, driven primarily by lower side dish volumes and increased manufacturing and input costs.
Matt Mainer: Weedabix Net sales decreased 1% versus the prior year. Sales benefited from the DeSite acquisition and a foreign currency tailwind of 300 basis points from a stronger British Pound.
Matt Mainer: On a currency and acquisition neutral basis, net sales decreased 7% and volumes decreased 12%.
Matt Mainer: The strength we saw in yellow box consumption is more than offset by timing impacts of our ERP conversion as well as profit enhancing decisions around non-core product discontinuations and elasticities related to pricing decisions.
Matt Mainer: Segment adjusted EBITDA decreased 8% versus prior year, led by lower volumes and increased input costs.
Matt Mainer: Turning to cash flow, we had a strong quarter generating $310 million from operations and approximately $170 million in free cash flow net of CapEx spent.
Matt Mainer: This partially benefited from working capital timing, which we'll reverse in Q2.
Matt Mainer: We used our strong cash flow to repurchase 1.6 million shares of common stock at an average price of approximately $114 per share, while remaining leverage neutral in the quarter at 4.3 times.
Matt Mainer: In addition, we repurchased a million shares so far in Q2, bringing our total since the beginning of the fiscal year to 2.6 million shares.
Matt Mainer: Last night, we raised the bottom end of our FY25 Adjusted EBITDA guidance by $10 million to the range of $1.42 billion to $1.46 billion.
Matt Mainer: Sequentially, from Q1, we expect Q2 to be down in line with the cost-aheading pricing dynamic Jeff discussed in food service.
Matt Mainer: Thank you for joining us today and I will now turn the call back over to the operator.
Speaker Change: The floor is now open for questions. At this time, if you have a question or comment, please press Star 1 on your telephone keypad.
Matt Mainer: If at any point your question is answered, you may remove yourself from the queue by pressing Star 2.
Matt Mainer: Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you.
Speaker Change: Our first question is coming from Andrew Lazar with Barclays. Please go ahead.
Andrew Lazar: Great, thanks so much. Good morning. Hope Rob feels better quickly and is on the mend and I know he's a tough grader but I'm sure the review will go well, Jeff.
Thank you.
Speaker Change: I guess my question is, you know, historically, when valuations in the group get to sort of these sorts of compressed levels...
Speaker Change: Post is certainly well known for being opportunistic, right, when it comes to M&A, and you've cited an increase of activity on your past several calls. I guess in this vein,
Speaker Change: Sort of at current valuations, does this increase the likelihood that that post would or could consider a more transformational deal? We talked about the significant share of purchase of late And I'm just wondering if this sort of precludes a larger scale transaction or or single than an acquisition like that is more unlikely at this time
Speaker Change: Let me try and address that in two parts. First, your...
Speaker Change: comment about whether or not we think there's going to be more activity. I think we agree with that hypothesis. I think we're going to see
Thank you. Thank you.
Speaker Change: broad activity. Peers looking for carve-outs and whole company transactions, private equity that have reached their investment horizon. So I do think that there's going to be more activity. If you specifically look at post,
Thank you. Thank you.
Speaker Change: to the last part of your question as we try to address in the prepared comments. We think we're, in spite of the share buybacks that we've done...
Speaker Change: We think we're well positioned to entertain any opportunity that would come forward, be it large or small, given where we are with our leverage compared to levels we've had in the past, as well as the cash flow profile that we have.
Speaker Change: So, even though there's been a bit of a dearth of activity that you see, there's not a slowdown in activity based on the opportunities that we're reviewing. The pipeline continues to be pretty robust.
Speaker Change: I think you used the term less sexy. We really enjoy synergy deals as we've had in the past. So we don't really consider those less sexy. We consider those right in our wheelhouse.
Speaker Change: So, it's a long way of saying we're still looking and we think the opportunities are going to be out there and we think we're well positioned to take advantage when the right one comes along.
Speaker Change: Great, now thank you for that. And then you talked about some of the actions you're taking to stabilize the Atrish brand.
Speaker Change: I'm just wondering how much flexibility POST might have to optimize the supply chain sort of in PET.
Speaker Change: given all the work that's already been done as part of the integration.
Speaker Change: you know, the serial category being in decline, but you've got quite a bit of manufacturing, you know, optimization opportunity work that can still be done there if, you know, that business proves to be, you know, more in sort of longer term structural decline. I'm just trying to get a sense of what type of opportunity might still exist in PET. Thanks so much.
Speaker Change: to do the things we've been doing up to now, you know, a lot of our
Speaker Change: volume decline is from actions that we've chosen to take, so pairing back on low margin opportunities to free up capacity to do our higher margin products.
Speaker Change: everything that we want to insource and recall that we still have some product through March that's being prepared for us manufactured for us by Smucker still so we still have to insource
capacity within our network that isn't currently there.
Thank you.
should we look out a year or two and are
Speaker Change: work on nutrition, other brands to stabilize and then begin them to grow. There are opportunities for further optimization, but that's a longer tail item.
Our next question comes from David Palmer with Evercore ISI.
Thanks, good morning. First one on food service, EBITDA, DRAG.
Speaker Change: Do you think, I mean you mentioned that you plan to make that up in Fiscal 25. I wonder though, is there any degree that you think that this might represent easy comparisons going into Fiscal 26?
that this might be just...
Speaker Change: Something you're making out elsewhere that that there's still going to be some net impact in fiscal 25
Speaker Change: and then on food service as well, I'm wondering what you're feeling about demand this year.
Speaker Change: It feels like restaurants have been weak, but we see some notable customers that are getting better, like Starbucks. I'm wondering how you think about demand throughout this fiscal year.
Speaker Change: You know within a materiality threshold is that we think the recovery is self-contained within food service. We're not
Speaker Change: banking on overperformance somewhere else in the portfolio? Now to be fair, we're talking large numbers and lots of things that are outside of our control, so is it possible that there's some...
Speaker Change: You know, some of that lingering effect in the 26, sure that's possible, but that's not our current expectation.
with regard to foot traffic.
Speaker Change: in both eggs and potatoes is to take labor out of the system.
which is a evergreen benefit to our customers.
Speaker Change: that doesn't change with their foot traffic. So we can continue to get growth from that simply because it improves their margin profile by eliminating labor and simplifying.
Speaker Change: Another interesting thing that's happening in the current environment for eggs in particular, or eggs especially, is
Speaker Change: with shell egg prices as high as they are, realizing that liquid egg is also very high but not quite as inflated as shell eggs.
Speaker Change: It brings to the forefront in our customers or potential customers' minds.
Speaker Change: The fact that they could go to liquid at a lower price than shell egg and those Folks that can convert easily are trying to do that now. Unfortunately, there's not enough supply available to meet all the customer demand
Speaker Change: that we're seeing for liquid egg, but as our supply comes back...
Speaker Change: That's something that we could take advantage of in the short term and hopefully in the medium to long term to continue to add to our volumes, even if the broader category remains soft.
Speaker Change: That's interesting, thanks. I just wanted to ask you, just on PET, you mentioned some steps you're taking that are hurting your volume. Presumably there's some SKA rationalization there, but when it comes to demand creation and plans for Nutrish or whatever brands you have planned,
Speaker Change: How are you planning on demand the rest of this fiscal year shaping up in PET?
Speaker Change: First bucket around, as you talked about, some of these profit-enhancing actions that we took, and those are exiting low-margin business. Pricing elasticity we're seeing around GravyTrain, so lower volume on GravyTrain, but we're making more money. And the other item is really just freeing up some capacity so we can bring over Nature's Recipe as it comes off Coman with Smuckers.
Speaker Change: These will continue to be a drag as we move through the fiscal year, and in terms of that negative 13 percent, it's about half the variance. So think of year-over-year continuing down 6 percent until we lap that as we get into Q3 and Q4.
Second bucket is really customer inventory levels.
Speaker Change: and two components to this that are pretty equal. A year ago, we had a positive in that we came off allocation for nine lives.
Speaker Change: That's a headwind this year and then we had a bit of the opposite this year as the ERP conversion caused a deload of customers
Speaker Change: We'll see some benefit in Q2 as that reverses, but think of that bucket after Q2 as going away, so that's a 4% improvement over the 13.
Speaker Change: And then the final bucket is the smallest, and that's around consumption and your question on what we're seeing mainly in nutrition. And that's a 2 to 3 percent drag over last year when we think about the quarter. That's where the innovation comes in. I think we're
Speaker Change: rational about the innovation. That's not going to turn the corner immediately. This is a phased rollout in particular for nutrition. As Jeff mentioned, we've got other innovation and the other products. We think that starts to turn the tide as we end the fiscal year and see a benefit for that as we enter fiscal 26.
Speaker Change: So I guess to summarize, down 13% would be to say we expect the balance of 25% to be down more like 7% to 9% once we get past that Q2 customer inventory bucket.
Speaker Change: And then meanwhile, of course, we're benefiting from a more profitable, more efficient portfolio.
Speaker Change: And then as we get to the end of the year, we will lap those profit-enhancing decisions. So, you know, down 7 to the 9, we drop to really down 2 to 3, which is that consumption piece. And, again, we think we'll address that as we move into 26 with the innovation and hopefully show some growth there.
That's helpful, thank you.
We'll go next to Ken Goldman with J.P. Morgan.
Hi, thank you
Speaker Change: You took the bottom end of guidance up, it's only 10 million, it's not large obviously in the scheme of things.
Speaker Change: or were there other factors that we should keep in mind?
Speaker Change: So, the raising of the bottom end is largely a reflection of Q1 performance, which part of that was getting through the ERPs.
with Relatively Unscathed.
Speaker Change: Not to say it wasn't without some bumps in the road, but got through those better than better than well we had
Look at that.
allow for some risk there.
Speaker Change: The other part of your question and it dovetails into why we didn't raise the high end of our range You know, unfortunately, we've traded ERP risk for other risks. So now We've got avian influenza that again, as we said we think we can work through but
Speaker Change: we thought it prudent not to raise the the high end of our range because of those variables.
Speaker Change: Got it. Okay. And when you think about the main risks on the food service side, the egg side, is it more on your ability to procure eggs? Is it more on the price that you might pay? Or your ability to pass that on? Or is it all of the above? I just want to get a better sense for, you know, where those risks are. With the obvious, you know,
Speaker Change: know what's ahead given, you know, this is kind of a unique situation here.
Speaker Change: for sure, and $20 million is a pretty wide range in what we gave in our commentary.
Speaker Change: That risk is because we don't know where markets are going, so between now and the end of the quarter we don't really have levers to pull that quickly that would mitigate what would be an end quarter effect of those price changes.
Speaker Change: For the full year, the variability is going to come from the timing and the amount of pricing, obviously the timing, and how successfully our supply comes back online.
Speaker Change: whether or not there are other outbreaks in the industry and to what degree. So those are the things that we'd be concerned about and trying to navigate as we get into the second half of the year.
Great, thanks so much.
We'll go next to Matt Smith with Stiefel
Thank you.
Speaker Change: Hi, good morning. Jeff, maybe just a follow-up on the avian influenza impact to post.
Speaker Change: I'm trying to understand how post-disruption from avian influenza compares to the rest of industry at this point. I know a few months ago...
Speaker Change: Post had more disruption relative to the industry, but has that shifted and are you seeing a pricing benefit For the portion of your business where your supply has not been impacted
Speaker Change: So, our best guess right now is that we're about on par with the percentage of our supply affected compared to the broader network. It's somewhere in the neighborhood of 12 to 14 percent, depending on different sources of supply.
Speaker Change: of information, and unfortunately some of the information is harder to get now with the change in administration, the APIS website isn't as up to date as it used to be.
Speaker Change: but we get information from anecdotal discussions around the industry etc so that's our best guess.
Speaker Change: In terms of pricing benefit, we are continuing to get the pricing benefit from
Speaker Change: the adders that we had for the May 2024 outbreak and those are gonna continue. And we still do have some portion of our business that is a market-based.
Speaker Change: market-based pricing, but that it's a will generate some revenue benefit, but doesn't necessarily create a margin benefit because
Speaker Change: typically we're supplying those those eggs on a on a market base.
Speaker Change: So, in the short term, what you're going to see is the benefit of the AI adders.
Speaker Change: Our expectation would be that there will be an extension of those adders along with new adders on top of that But that's going to be out into You know April and beyond
Thanks Jeff, I'll leave it there. Thank you.
We'll go next to Michael Laverie with Piper Sandler.
Thank you.
Michael Laverie: Thank you. Good morning. I just wanted to start with a follow-up to Ken's question, just really trying to understand maybe if you've got the visibility, even with some range on the kind of nearer term, more upfront costs.
Michael Laverie: from the Flu Impact. What are just the key things, I guess, to watch?
Michael Laverie: or that you're watching in the second half to make sure it comes.
Michael Laverie: through on the recovery side. Is it rebuilding your own supply as the key or is it the market pricing? Is it a bit of both? Just kind of want to make sure I understand what the key factors are and where maybe the risk or watch outs are.
Michael Laverie: Yes, the return of our supply is key. The other key will be the timing and magnitude of the pricing.
Michael Laverie: we've passed through compared to how the market changes. So if the market comes down quickly, we will recover more quickly. If the market stays elevated, longer or...
Michael Laverie: higher, that would have a tendency to extend the recovery period. So those are really the key variables. Now there are there are lots and lots of variables but those are the key ones.
Okay, yeah, that's helpful.
Speaker Change: Just curious if you could elaborate a little bit on you touched on distribution gains
for both eggs and potatoes.
Speaker Change: Is that new to the quarter? How do we think about the runway there? A little more color there if you can, that'd be great.
Speaker Change: No, it goes back to what I said earlier, it's a number of things, but the general, and this is true of our ownership period as well as the pre-ownership period for this business, the way we drive growth.
is a combination of variables. One is adding new customers.
who are converting from shell eggs to liquid eggs.
We then add, by
Speaker Change: moving them up the value chain. So typically customers start with more commoditized liquid egg and then we endeavor to move them up the chain to pre-cooked.
Speaker Change: and then the labor component. So, you know, our value proposition is to attempt to convince our prospective customers that they can drive more efficiency and better performance out of their restaurants by eliminating the manual activities that are involved.
either in Cracking Eggs or...
you know manually peeling potatoes.
We expect period-on-period we'll continue to drive growth.
in the business.
Speaker Change: We obviously endeavor to add new customers all the time. We endeavor to get larger percentages of the volumes of our customers.
Speaker Change: So, those are the things that we're focused on when we're lucky enough not to be.
dealing with AI.
Speaker Change: No, that's helpful. And maybe just lastly on the ready-to-drink shakes, the ramp up there is taking some time to get where you want and just update on, you know, kind of the run rate expectations there.
Speaker Change: Yeah, we've seen some modest improvement, but we're still a ways away from where that needs to be. So its contribution is minimal at the moment.
Speaker Change: we're putting all the resources we can put our hands on towards identifying the problems and fixing the problems and again we're making progress but it's it's slower than we wish it would be.
Speaker Change: Once again, if you do have a question, you may press Star 1 on your telephone keypad at this time.
Speaker Change: We'll go next to John Baumgartner with Mazzuho. Please go ahead.
Hey, good morning. Thanks for the question. Hey, John.
John Baumgartner: Jeff, I wanted to ask about the egg business in light of the macros. When Michael was acquired, the thesis was it was a strong play on protein, even at that time. But as you look at the evolution of the category over the past decade, influenza now seems to be a normalized event with the associated volatility. We've also seen the demand stress tested with
Speaker Change: pretty favorable elasticity. There's new segments such as pasture raised, which are seeing very solid demand. So I'm curious how you think about navigating this evolution. Is there a case to make for larger exposure to retail at this point? Is there a case to make to play more in premium? Or does it go the other way where the volatility hurts valuation and makes you less interested in the category? I'm just curious how you can be opportunistic with the model at this point, either organically or inorganically.
Yeah, so...
Speaker Change: It's hard for us to say that the current business doesn't have volatility given what we've seen, but I know you've been following us long enough to know that the...
Speaker Change: We haven't given up hope that AI will go away or become less of an event, but obviously we need to plan for it being a more frequent visitor.
Speaker Change: But it doesn't change our view of the shell egg market, which...
Speaker Change: Even in normal times is volatile and that's not really what we're interested in in getting into
Speaker Change: and I think you had another part of that question and it slipped my mind but did I cover that question or is there something else do you want me to try and address?
Speaker Change: Yeah, I mean, I think tied with that, just looking at, you know, sort of the volatility on some of the parts basis and, you know, to the extent that it impacts evaluation for a post more broadly, does it, you know, sort of make you less interested in being in the category, you know, over time? Yeah.
Speaker Change: What we try and tell people, and it's true, if you look at the trend line of that business,
Speaker Change: If you trendlined it, it grows three, four percent, maybe even a little bit more than that over that 20, now 25 year period. Unfortunately, there's been some volatility that's been experienced mostly in the last...
Speaker Change: a handful of years with COVID and avian influenza, but we come out of each of these events.
Speaker Change: and the business is stronger than it was before. So, we'd like to convince people to see through the volatility and look at the trend line and it continues to be a very strong business.
Speaker Change: that delivers growth over the long term and for that reason we view it as one of our better businesses, obviously recognizing that we've had some volatility in the recent past.
Yep, very fair point there. My follow-up on serial and...
I guess tied in with the protein team.
Speaker Change: We're seeing a bifurcation with significant volume growth in dairy products like yogurt, cottage cheese.
Speaker Change: higher protein products where cereal is more challenged to compete. At this point, are you sort of thinking that normalized volumes for the cereal category may settle at a weaker point than history, you know, down that, you know, 1% or so? And what do you think the category can do from here? Is there an innovation lever that can be hit? Does the category need to maybe a broad pricing reset and play more in the relative value equation for breakfast? Just your high-level thoughts there. I appreciate it.
Speaker Change: Yeah, that's a complicated question, difficult to answer, but we definitely see the benefit forward.
Speaker Change: more niche cereals gaining share and growing. It's been a challenge for the large manufacturers to succeed in that space, partly because
Speaker Change: You know an older Older population to recognize them. Maybe some of the young demographic doesn't
Speaker Change: doesn't resonate with them. So, you know, we're looking at things like the Premier brand, which we already have serials and perhaps extending upon that.
Speaker Change: looking for other benefit forward criteria that would enhance things. And your comment about playing the value chain, that's obviously what we believe because we do and have and will continue to play.
Speaker Change: up and down the value chain on serial, and we think that's the right way to go.
Speaker Change: With regard to your comment about the long-term growth rate, I don't think we're yet prepared to declare that the 3% we saw this last quarter is now the new permanent run rate.
but we're definitely preparing strategies that...
Speaker Change: would enable us to perform well if that turns out to be the case, but also planning for strategies that hopefully would help turn around that trajectory.
Thanks, Jeff. Thanks a lot.
We'll go next to Mark Torrente with Wells Fargo.
Mark Torrente: Hey, good morning. Thank you for the questions. First, I guess it seems as though profit delivery was perhaps a bit better in PCB and food service versus plan, but maybe a bit softer elsewhere. The PCB upside in particular stood out and feels sustainable.
Mark Torrente: First, is that all a fair assessment? And then maybe excluding expected AI impact. Has your outlook for contribution or cadence by segment underlying your guidance changed at all?
So the first part, I think that's fair.
Mark Torrente: Obviously, PCB had the biggest risk associated with it with regard to the ERP conversion. It was...
Mark Torrente: It kind of doesn't do it justice to call it an ERP conversion because it involves a lot more things than that, you know, changing distribution networks, among other things.
Mark Torrente: So, it certainly performs better than what we thought in the first quarter.
Mark Torrente: And the margins in that business continue to be strong, very strong, which is something we expect to continue. With regard to the second part of your question, absent the AI,
Mark Torrente: on food service in Q2 and the subsequent impact in the second half. The rest of our guidance and segment expectation is comparable to what it was at the beginning of the year.
Speaker Change: Okay, thank you. And then CapEx for the quarter is about a third of the full year spend. How should we think about phasing through the year? Are you tracking ahead?
Mark Torrente: It gets trying to get a sense of project timing and perhaps run rate exiting into
Mark Torrente: 26, understanding some of the current projects underway could likely carry over. Thanks.
Mark Torrente: Sure. So, obviously, Q1 was a little bit elevated relative to just an even run rate for our guidance. That's really just timing around, you know, just projects and progress there. So I don't think anything more to read into it. We still think guidance range is appropriate, so would expect subsequent quarters to be a bit lower.
Speaker Change: Thank you. This concludes today's Post Holdings First Quarter 2025 Earnings Conference Call and Webcast.
Speaker Change: Please disconnect your line at this time and have a wonderful day.