Q2 2025 Post Holdings Inc Earnings Call
Operator: Please continue to stand by. ♪ Stand by, your program is about to begin.
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[music].
Operator: Welcome to the Post Holdings Second Quarter 2025 Earnings Conference Call and Webcast. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2.
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Daniel O'Rourke: I would now like to turn the call over to Daniel O'Rourke, Investor Relations for Post. Good morning. Thank you for joining us today for POST's second quarter fiscal 2025 earnings call. I'm joined this morning by Rob Vitale, our President and CEO, Jeff Zadoks, our COO, and Matt Mainer, our CFO and Treasurer. Rob, Jeff, and Matt will make prepared remarks, and afterwards, we'll answer your questions. 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. As a reminder, this call is being recorded and an audio replay will be available on our website at www.postholdings.com.
Speaker Change: I would now like to turn the call over to Daniel O'rourke Investor Relations for pest.
Speaker Change: Good morning, Thank you for joining us today for Post's second quarter fiscal 2025 earnings call.
Speaker Change: I'm joined this morning by Rob Vitale, our President and CEO, Jeff Statics are C O O and Matt <unk>, our CFO and treasurer.
Speaker Change: Rob, 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 at post holdings Dot com.
Daniel O'Rourke: 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. These forward-looking statements are current as of the date of this call and management undertakes no obligation to update these statements.
Speaker Change: Before we continue I would like to remind you that this call will contain forward looking statements.
Speaker Change: 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.
Daniel O'Rourke: 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.
Speaker Change: This call will discuss certain non-GAAP measures.
Speaker Change: For a reconciliation of these non-GAAP measures to the nearest GAAP measure see our press release issued yesterday and posted on our website.
Rob Vitale: With that, I will turn the call over to Rob. First, we performed well in a difficult environment. I expect that to continue. Second, trade policy and regulations continue to grab headlines. We will manage those as they develop. Third, consumer sentiment is weak. We expect we will need to focus on demand drivers and flawless supply chain execution.
Speaker Change: With that I'll turn the call over to Rob. Thank you Daniel and good morning all.
Rob: I'm going to make sense, Amanda comments, and Jeff and Matt will take you through the quarter.
Rob: First we performed well in a difficult environment.
Speaker Change: Environment. Thanks.
I expect that to continue.
Speaker Change: Second trade policy and regulations continuing to grab headlines we will manage those as they develop.
Third consumer sentiment is weak we expect we will need to focus on demand drivers and flawless supply chain execution.
Rob Vitale: First and last. Uncertainty in the capital markets complicates M&A valuation.
Speaker Change: First and last.
Speaker Change: Uncertainty in the capital markets complicates M&A valuations.
Jeff Zadoks: With that, I will turn the call over to Jeff and Matt, who will take you through the quarter. Thanks, Rob. And good morning, everyone. Given the volatile macro backdrop and challenges associated with avian influenza, we are especially pleased with our Q2 results. Our Putsum team did a fantastic job navigating incredibly difficult egg markets as they prioritize customer supply while at the same time mitigating some of the expected Net Cost Impact. Meanwhile, our retail businesses offset volume pressures with cost control and supply chain execution. As a reminder, last quarter we guided that Q2 would be down $30 to $50 million compared to Q1 as a result of avian influenza costs ahead of pricing impacts in food service.
Speaker Change: With that I will turn the call over to Jeff and Matt who will take you through the quarter Jeff.
Jeff: Thanks, Rob and good morning, everyone.
Jeff: Given the volatile macro backdrop and challenges associated with avian influenza, we are especially pleased with our Q2 results.
Jeff: Our puts and his team did a fantastic job navigating incredibly difficult AG markets as they prioritize customer supply while at the same time mitigating some of the expected.
Jeff: Net cost impact.
Jeff: Meanwhile, our retail businesses offset volume pressures with cost control and supply chain execution.
Jeff: As a reminder, last quarter, we guided that Q2 would be down $30 million to $50 million compared to Q1 as a result of avian influenza costs ahead of pricing impacts in foodservice.
Jeff Zadoks: Actual Q2 food service adjusted EBITDA was approximately $20 million lower than Q1, as $30 million of costs ahead of pricing impact was partially offset by manufacturing and supply chain performance improvements. Setting aside the temporary impact of avian influenza, underlying business trends versus last year remain encouraging, despite a backdrop of poor food service foot traffic. Our selling proposition continues to prove out as our mix of higher value added egg products grew once again. Looking to the balance of the fiscal year, additional avian influenza pricing became effective starting in April. and our flock repopulation is on track.
Jeff: Actual Q2 foodservice adjusted EBITDA was approximately $20 million lower than Q1 is $30 million of cost ahead of pricing impact was partially offset by manufacturing and supply chain performance improvements.
Jeff: Setting aside the temporary impact of avian influenza underlying business trends versus last year remain encouraging despite a backdrop of poor foodservice foot traffic.
Jeff: Our selling proposition continues to prove out as our mix of higher value added egg products grew once again.
Jeff: Looking to the balance of the fiscal year additional avian influenza pricing became effective starting in April.
Jeff: And our flock Repopulation is on track.
Jeff Zadoks: Assuming no additional outbreaks in our network, we expect to balance our egg sourcing and demand by Q4, and we continue to expect we will recover the unfavorable cost ahead of pricing impact we saw in Q2 during the remainder of fiscal 25.
Jeff: Assuming no additional outbreaks in our network.
Jeff: We expect to balance our AG sourcing in demand by Q4, and we continue to expect we will recover the unfavorable cost ahead of pricing impact we saw in Q2 during the remainder of fiscal 'twenty five.
Jeff Zadoks: Moving on to post-consumer brands, we had a solid quarter while navigating volume declines in both grocery and pet. In Grocery, our cost structure continued to benefit from last September's plant closure. However, the cereal category declines accelerated to down 3.7%, with our branded portfolio slightly behind at down 4.5%. Category declines continue to pressure our manufacturing utilization and cost structure, which drove our recent decision to close two more plants by the end of the calendar year. Our pet volume consumption was down 4.5% versus a flat category as we continue to face declines in nutrition demand and distribution.
Jeff: Moving on to post consumer brands, we had a solid quarter, while navigating volume declines in both grocery and pet <unk>.
Jeff: In grocery our cost structure continued to benefit from last september's plant closure.
Jeff: However, the cereal category declines accelerated to down three 7% with our branded portfolio slightly behind sat down four 5%.
Jeff: Category declines continue to pressure, our manufacturing utilization and cost structure.
Jeff: Which drove our recent decision to close two more plants by the end of the calendar year.
Jeff: Our pet volume consumption was down four 5% versus a flat category as we continue to face declines in nutrition demand in distribution.
Jeff Zadoks: and Gravy Train Price Elasticity. We were able to offset these lower pet volumes with improved supply chain and SG&A cost performance. Finally, a relaunch of the Nutrish brand is currently hitting the shelves, and while it is very early, the first reactions are encouraging. Turning to refrigerated retail, Q2 adjusted EBITDA was down versus prior year primarily because of Easter timing, which fell during Q2 a year ago. In addition, similar to our food service business, we experience costs ahead of pricing in eggs. with pricing taking effect in April, which will benefit Q3. Our focus continues to be on driving volumes in our sides business, driving lower costs, and integrating our newly acquired PPI business.
Jeff: And gravy train price elasticities.
Jeff: We were able to offset these lower pet volumes with improved supply chain and SG&A cost performance.
Jeff: Finally, a relaunch of the nutrition brand is currently hitting the shelves and while it is very early the first reactions are encouraging.
Jeff: Turning to refrigerated retail Q2, adjusted EBITDA was down versus prior year, primarily because of Easter timing, which fell during Q2 a year ago.
Jeff: In addition, similar to our foodservice business, we experienced cost they had a pricing in eggs.
Jeff: With pricing taking effect in April which will benefit Q3.
Jeff: Our focus continues to be on driving volumes in our sites business driving lower costs and integrating our newly acquired PPI business.
Jeff Zadoks: At Weedabix, performance improved after our ERP conversion last quarter. While we still limited promotional activities in Q2, we saw yellow box consumption relatively in line with the category, which was down 1.5%. We expect to improve margins in the back half of the year through sequential volume growth as we ramp up marketing with targeted activation. and further execute our cost out initiatives.
Jeff: Weetabix performance improved after our ERP conversion last quarter.
Jeff: Well, we see while we still limited promotional activities in Q2, we saw yellow box consumption relatively in line with the category, which was down one 5%.
Jeff: We expect to improve margins in the back half of the year through sequential volume growth as we ramp up marketing with targeted activations and further execute our cost out initiatives.
Jeff Zadoks: Before turning the call over to Matt, a couple of comments on M&A and capital allocation. The recent tariff actions and volatility in capital markets have slowed what was an active M&A pipeline for us. The uncertainty in this environment points to smaller tactical transactions such as our recent acquisition of PPI, or transactions where we have clear line of sight to synergy.
Jeff: Before turning the call over to Matt a couple of comments on M&A and capital allocation.
Jeff: The recent tariff actions and volatility in capital markets have slowed what was an active M&A pipeline for us.
Matt: The uncertainty in this environment points to smaller tactical transactions, such as our recent acquisition of PPI.
Matt: Our transactions, where we have clear line of sight to synergies.
Jeff Zadoks: With that said, we have continued to lean into share repurchases and have now bought approximately 6% of the company since the beginning of the fiscal year. From both a leverage and a liquidity position, we remain very well positioned for opportunistic capital allocation.
Matt: With that said, we've continued to lean into share repurchases and have now bought approximately 6% of the company since the beginning of the fiscal year.
Matt: Both our leverage and liquidity position, we remain very well positioned for opportunistic capital allocation.
Matt Mainer: With that, I'll turn the call over to Matt. Thanks, Jeff, and good morning, everyone. Second quarter consolidated net sales were $2 billion and adjusted EBITDA was $347 million. Sales decreased 2% as lower overall volumes and our retail businesses were partially offset by elevated avian influenza driven pricing and food service and volume growth and shake. Turning to our segments, post-consumer brands, net sales decreased 7% driven by lower volumes in both serial and pet. Serial volumes decreased 6%, primarily due to category dynamics. Pet volumes decreased 5% as we continue to lap reductions in lower-margin business and gravy-train pricing elasticities, along with lower consumption, particularly in Nutrish.
Matt: With that I'll turn the call over to Matt.
Matt: Thanks, Jeff and good morning, everyone second quarter consolidated net sales were 2 billion and adjusted EBIDTA was $347 million sales decreased 2% as lower overall volumes in our retail businesses were partially offset by elevated avian influenza driven pricing in foodservice and volume growth in checks.
Matt: Turning to our segments post consumer brands net sales decreased 7% driven by lower volumes in both cereal and pet.
Matt: Total volumes decreased 6%, primarily due to category dynamics.
Matt: Volumes decreased 5% as we continue to lap reductions in lower margin business and gravy train pricing elasticities, along with lower consumption, particularly in nutrition as.
Matt Mainer: As expected, these pressures were partially offset by customer inventory recovery from deloading last quarter due to our TSA cutover. Segment-adjusted EBITDA increased 2% versus prior year as we benefited from improved cost performance for both grocery and pet. Food service nut sales increased 10% and volumes increased 3%. Revenue reflects elevated avian influenza-driven pricing and higher shake sales. Excluding shakes, volumes were down. by 1% driven by HPAI dynamics impacting eggs and lower customer foot traffic impacting both eggs and potatoes. Adjusted EBITDA decreased 6% driven by avian influenza cost ahead of pricing, partially offset by improved manufacturing and supply chain performance.
Matt: As expected these pressures were partially offset by customer inventory recovery from de loading last quarter due to our TSA cutover.
Matt: Segment, adjusted EBITDA increased 2% versus prior year as we benefited from improved cost performance for both current grocery and pet.
Matt: Foodservice net sales increased 10% and volumes increased 3% revenue reflects elevated avian influenza driven pricing and higher shake sales, excluding shakes volumes were down by.
By 1% driven by HPA, I dynamics impacting eggs and lower customer foot traffic impacting both eggs and potatoes.
Matt: Adjusted EBITDA decreased 6% driven by avian influenza cost ahead of pricing, partially offset by improved manufacturing and supply chain performance.
Matt Mainer: Refrigerated retail nut sales decreased 7% and volumes decreased 5%. Volumes across all products were affected by the timing of Easter, which was in Q2 last year. Egg volumes were impacted further by limited availability due to avian influenza. Segmented adjusted EBITDA decreased 14% driven primarily by lower volumes and cost ahead of pricing in eggs and sows. Weedabix net sales decreased 5% versus the prior year. Foreign currency represented a headwind of 70 basis points. Volumes decreased 7% driven by lower promotions due to our Q1 ERP conversion, non-core product discontinuations and elasticities related to pricing decisions, which we will lap later in the fiscal year.
Matt: Refrigerated retail net sales decreased 7% and volumes decreased 5% volumes across all products were affected by the timing of Easter, which was in Q2 last year.
Matt: Volumes were impacted further by limited availability due to avian influenza.
Matt: Segment, adjusted EBITDA decreased 14%, driven primarily by lower volumes and costs ahead of pricing and eggs and sauce.
Matt: <unk> net sales decreased 5% versus the prior year foreign currency represented a headwind of 70 basis points.
Matt: <unk> decreased 7% driven by lower promotions due to our Q1 ERP conversion noncore product discontinuation that elasticity is related to pricing decisions, which we will lap later in the fiscal year.
Matt Mainer: Segmented adjusted EBITDA increased 9% versus prior year, led by increased net pricing from our prior year profit-enhancing decisions, partially offset by increased input costs and lower volumes from promotional blackouts. Turning to cash flow, we generated $160 million from operations and approximately $70 million in free cash flow, net of capex spent. This is a decrease sequentially from last quarter, which is primarily due to working capital timing. Year-to-date free cash flow was $240 million. From a capital allocation standpoint, we favored share repurchases as we repurchased 1.7 million shares at an average price of approximately $110 per share.
Matt: Segment, adjusted EBITDA increased 9% versus prior year led by increased net pricing for our prior year profit enhancing decisions, partially offset by increased input costs and lower volumes from promotional blackouts.
Matt: Turning to the cash flow, we generated 160 million from operations and approximately $70 million in free cash flow net of Capex spent.
Matt: This is a decrease sequentially from last quarter, which is primarily due to working capital timing.
Matt: Free cash flow was $240 million.
Matt: From a capital allocation standpoint, we favor share repurchases as we repurchased one 7 million shares at an average price of approximately a $110 per share. In addition, we spent 124 million to acquire a P. P. I.
Matt Mainer: In addition, we spent $124 million to acquire PPI. The net effect of our capital allocation versus free cash flow this quarter increased our net leverage slightly to 4.5 times. With our earnings release last night, we increased our Adjusted EBITDA guidance range to $1.43 billion to $1.47 billion. While we plan to recover Q2 food service costs ahead of pricing in the second half, we expect this to be largely offset by lower performance in PCB from continued elevated cereal category volume declines and anticipate disruption in Nutris as we fully ramp its relaunch.
Matt: Net effect of our capital allocation versus free cash flow this quarter increased our net leverage slightly to four five times.
Matt: With our earnings release last night, we increased our adjusted EBITDA guidance range to $1 four 3 billion to $1 four 7 billion.
Matt: We plan to recover in Q2 foodservice costs ahead of pricing in the second half we expect this to be largely offset by lower performance in PCB.
Matt: <unk> elevated cereal category volume declines and anticipated disruption in nutrition as we fully ramp is relaunch.
Operator: Thank you for joining us today, and I will now turn the call back over to the operator. 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. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality.
Matt: Thank you for joining us today, and I'll now turn the call back over to the operator.
Matt: Okay.
Matt: The floor is now open for questions.
Matt: At this time, if you have a question or comment please press star one on your telephone keypad.
Matt: Any point. Your question is answered you may remove yourself from the queue by pressing star two.
Matt: Again, we ask that you pick up your handset when posing questions to provide optimal sound quality.
Operator: Thank you.
Andrew Lazar: Our first question is coming from Andrew Lazar with Barclays. Please go ahead. Thank you so much. Good morning. I know Post has already raised several times its view on the structural run rate it expects from the food service unit, and it looks as though the underlying segment, again sort of excluding the cost ahead of pricing piece, was again above that level.
Matt: Our first question is coming from Andrew Lazar with Barclays. Please go ahead.
Speaker Change: So much good morning.
Speaker Change: Post has already raised several times its view on the structural run rate it expects from the foodservice unit and it looks as though the underlying segment EBITDA again sort of excluding the cost ahead of pricing piece was again above that level.
Andrew Lazar: Is the long-term run rate here now even higher than you thought previously or are there other reasons why maybe it came in so much better than we and some others had modeled this quarter? Go ahead.
Speaker Change: Is the long term run rate here now even higher than you thought previously or are there other reasons why maybe it came in so much better than we and some others had modeled this quarter.
Speaker Change: Yes.
Rob Vitale: Andrew, I think it's hard to completely parse out Avian Influenza, but I think your comment that, hey, does that indicate 126 relative to the 105 we've talked about in the past, I think in reality it's somewhere between those two numbers, but we need a couple quarters of normalcy to get the Avian Influenza behind us and back in balance in terms of our supply and demand, and then we can make a better call on what that run rate is, but clearly higher than 105. All right. Okay. Thanks for that.
Speaker Change: Andrew I think it's it's hard to completely parse out avian influenza, but I think your comment that as I'd indicated 126 relative to the 1105, we've talked about the mass I think in reality, it's somewhere between those two numbers.
Speaker Change: Uh huh.
Speaker Change: A couple of quarters of normalcy.
Speaker Change: Get the avian influenza.
Speaker Change: And us and back in balance in terms of our supply and demand and then we can make a better color on what that run rate is but clearly higher than 105.
Speaker Change: Okay. Thanks for that and then.
Rob Vitale: And then, you know, in the quarter, it looks like you were able to maintain pretty solid margins in PCB despite the volume declines you saw in Ready to Eat and PET. I guess, would your expectation be that the recent announcements you made around the incremental, you know, asset optimization moves in cereal should allow you to maintain strong profitability in this segment going forward, even if sort of cereal category volume trends remain, you know, as challenged as what we saw this past quarter? Thanks so much. So, Andrew, clearly that's the objective, is to do our best to manage our costs, to maintain the profitability.
Speaker Change: In the quarter.
Speaker Change: It looks like you were able to maintain pretty solid margins in PCB. Despite the volume declines you saw and ready to eat.
Speaker Change: Pat.
Speaker Change: Would your expectation be that the recent announcements you made around the incremental asset optimization moves in cereal.
Speaker Change: Allow you to maintain strong profitability in this segment going forward, even if sort of cereal category volume trends remain challenged as what we saw this past quarter. Thanks, so much.
Speaker Change: So Andrew I clearly that's the objective is to do our best to manage our cost to maintain the profitability.
Andrew Lazar: If we're seeing 4% or 5% year-on-year declines, that's going to be challenging. Our expectation would be, in the medium term at least, that that would start to temper and that we would get back to. one to two percent down, probably not in the second half of this year, but longer term. So if we can get the category to more of that historic decline, we think that those actions would enable us to maintain our margins along with the normal cost-out activities that we would do on a regular basis. Great. Thanks so much. Thank you.
Speaker Change: If were seeing four 5%.
Speaker Change: Year on year declines, that's gonna be challenging our expectation would be in the medium term at least that that would start to temper in that we would get back to.
Speaker Change: 1% to 2% down probably not in the second half of this year, but longer term. So we can get the category to more of that historic decline, we think that those actions would enable us to maintain our margins along with the normal cost out activities that we would do on a on a <unk>.
Speaker Change: <unk> basis.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Thank you and your next question comes from the line of David Palmer with Evercore ISI. Please go ahead.
David Palmer: And your next question comes from the line of David Palmer with Evercore ISI. Please go ahead. Yeah, thanks. So just building on that line of questioning from Andrew, I'm thinking about PCB for Fiscal 26 and how you're generally thinking about the setup there. You know, clearly you have the plant closures and the tailwinds continuing there and the big two with PET and cereal. And I can imagine that cereal might be a back-weighted situation or one that just slowly gets better in your thinking. And maybe that's offset by maybe some of the things that you've been talking about, the drags ending and the co-man agreements and the improvements in nutrition.
Yeah. Thanks, So just building on that line of questioning from Andrew I'm thinking about PCB for fiscal.
Speaker Change: Fiscal 'twenty, six and how you're generally thinking about the set up there you know clearly you have the plant closures and the tailwind continuing there and then the big two with pet and cereal and I can imagine that cereal.
Speaker Change: Might be a back weighted situations, where one that just slowly gets better in your thinking and maybe that's offset by.
Speaker Change: Maybe some of the things that you've been talking about the the drags ending the co man agreements end.
Speaker Change: The improvements in nutrition, maybe you'd be thinking about.
David Palmer: Maybe you'd be thinking about that PET business perhaps offsetting cereal next year.
Speaker Change: That.
Speaker Change: That pet business, perhaps offsetting.
Speaker Change: Cereal next year, but so rough strokes how are you thinking about the.
Rob Vitale: So rough strokes, how are you thinking about your businesses within PCB and your ability to have at least a little bit of EBITDA growth from PCB next year? Thanks. I think you laid it out exactly how we're thinking about it. This year has been a transition year for PET. So we had to get off the TSA with Smucker. We had to do some of the heavy lifting on the brand relaunch for Nutrish. And obviously, we expect that those activities will bear some fruit into next year and would enable us to offset some of the headwinds that we're seeing.
Speaker Change: Your your businesses within PCB and your ability to have at least at least a little bit of EBITDA growth from from P. C. P next year. Thanks.
Speaker Change: I think you laid it out exactly how we're thinking about it.
Speaker Change: This year has been a transition year for pet.
Speaker Change: So we had to get off the TSA with smucker.
Speaker Change: We had to do some of the heavy lifting on the brand relaunch for.
Nutrition.
Speaker Change: And obviously, we expect that those activities will.
Speaker Change: Bear some fruit into next year.
Speaker Change: Enable us to offset some of the headwinds that we're seeing in.
Rob Vitale: the serial business. At the same time, we're going to do what we can on the serial side to manage our costs, look to innovation and renovation to drive some volume, even if the category continues to be challenging. So the combination of those things, we think, will enable us to, you know, mitigate the headwinds we're seeing to the best of our ability. Thank you.
Speaker Change: The cereal business at the same time, we're going to do what we can on the cereal side to manage our costs.
Speaker Change: Look to our innovation and renovation to.
Speaker Change: Drive some volume.
Speaker Change: Even if the category continues to be challenge.
Speaker Change: So the combination of those things, we think will enable us to.
Speaker Change: Mitigate the headwinds we're seeing to the best of our ability.
Speaker Change: Thank you.
Speaker Change: Yeah.
Ken Goldman: And now our next question comes from the line of Ken Goldman with J.P. Morgan. Please go ahead. Hi. Thank you. On PCB, the price mix downturned this quarter.
Ken Goldman: Thank you and our next question comes from the line of Ken Goldman with Jpmorgan. Please go ahead.
Ken Goldman: Hi, Thank you.
Ken Goldman: On PCB the price mix downturn this quarter.
Ken Goldman: I'm just wondering if you could elaborate a little bit on the key drivers there and how we might think about that line item ahead for the rest of the year. Yeah, I think as I talked about second half PCB down over first half, it's going to offset some of the pricing recovery we have in food service. And our expectation in the near term is the category remains where it's at, you know, for the balance of the fiscal year which will put some pressure on cereal year over year for sure. Again, we've seen in terms of a mixed standpoint this past quarter, we saw customers shift to larger pack sizes, which hurts mix a little bit.
Ken Goldman: Wondering if you could elaborate a little bit on the key drivers there and how we might think about that line item ahead for the rest of the year.
Ken Goldman: Yeah, I think as I talked about a second half PCB down over first half, it's going to offset some of the.
Ken Goldman: Pricing and recovery, we have in foodservice and our expectation in the near term as the category remains where it's at for the balance of the fiscal year, which will put some pressure on cereal and a year over year for sure.
Ken Goldman: Again, we've seen in terms of our next standpoint, this past quarter, we saw customers shift to larger pack sizes, which hurts it hurts makes a little bit.
Rob Vitale: I think for right now, we're kind of holding firm to what we saw in Q2 for the balance of the year.
Ken Goldman: I think for right now, we're kind of holding firm to what we saw in Q2 for the balance of the year.
Ken Goldman: All right, thank you for that.
Speaker Change: Alright. Thank you for that and then just as we get closer to the debt maturities for eighth Avenue do you have any updated thoughts on the potential optionality of that business and maybe post potential role within that.
Rob Vitale: And then just as we get closer to the debt maturities for 8th Avenue, do you have any updated thoughts on the potential optionality of that business and maybe Post's potential role within that? Well, we have a lot of confidence on the in the business operations itself. Obviously, we have to resolve the near term maturities and we will have a resolution some one way or the other fairly Okay, thank you. Thank you.
Speaker Change: Well, we have a lot of confidence in the business operations itself, obviously, we have to resolve the.
Speaker Change: Near term maturities and we will have resolution one way or the other fairly soon.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you and our next question comes from the line of Michael Lavery with Piper Sandler. Please go ahead.
Michael Lavery: And our next question comes from the line of Michael Lavery with Piper Sandler. Please go ahead. Thank you. Good morning. morning.
Michael Lavery: Thank you and good morning.
Michael Lavery: Just was looking to get a little better sense of how to think about some of the savings from the cereal plant closures you just announced. And we can get a little bit of an idea of the timing just that it's the end of the calendar year. But are there potential offsets or how do you know any maybe magnitude you can give or just how to think about the impacts on that? Yeah, I think we called out about a $20 million annualized benefit from the plant closures as that happened. Those are on track for the end of the calendar year, so you would get three-quarters of that next fiscal year.
Michael Lavery: Just was.
Michael Lavery: Looking to get a little better sense of how to think about some of the savings.
Speaker Change: Savings from the cereal plant closures, you just announced.
Michael Lavery: We can get a little bit of an idea of the timing just yet.
Speaker Change: The end of the calendar year, but.
Speaker Change: Are there potential offsets or you know how do you know any maybe magnitude you can give or just how to think about the impact from that.
Speaker Change: Yeah, I think we called out about a $20 million annualized benefit.
Speaker Change: From the plant closures that happened those are on track for the end of the calendar year. So you would get a <unk>.
Speaker Change: Three quarters of that next fiscal year.
Matt Mainer: I think, you know, if the category slows down to a more normalized down 1 to 2 percent. You know, that's going to be in line with what we're seeing on the volume decline impact versus the cost savings of the plant shutdown. I think the challenge is if the category doesn't slow down, then we've got some more optimization to do and we have some more leverage we can pull. And I guess maybe specifically was trying to get at how much that's net or gross relative to things like operating de-leverage or, you know, just the lost volume piece.
Speaker Change: Think if the category slows down to a more normalized down to 1% to 2%.
Speaker Change: You know that's that's going to be in line with what we're seeing on a volume decline impact versus the cost savings or the plant shut down.
Speaker Change: The challenges that the category it doesn't it doesn't slow down and then we've got some more optimization to do when we have some more levers we can pull.
Speaker Change: And I guess, maybe specifically it was getting kind of get at how much that's net or gross relative to things like operating deleverage or.
Speaker Change: Just the.
Speaker Change: The lost volume piece is that just the gross.
Matt Mainer: Is that just the gross piece from the facility savings, or does it kind of bundle it all together? That would be the gross savings. So to the extent that there's incremental deleveraging beyond that would be an offset.
Speaker Change: <unk> piece from the facility savings or does it kind of bundle it altogether.
Speaker Change: So that would be the gross savings so to the extent that there's incremental deleveraging beyond.
Speaker Change: That that would be an offset.
Matt Mainer: Yeah, and to be fair, we are in the early stages of our planning for FY26, so we don't wanna run our plan. exponent until we're ready. No, fair enough.
Speaker Change: Yeah and to be.
Speaker Change: Further we are in the.
Speaker Change: Early stages of our planning for FY 'twenty six so we don't want to run our <unk>.
Speaker Change: Plan.
Speaker Change: And until.
Speaker Change: Until we're ready.
Speaker Change: No fair enough and just on the pet piece of the business.
Michael Lavery: And just on the pet piece of the business, if you... have a consumer that's getting more cautious. I know you have a few brands positioned differently, but how much can you characterize the benefit from trade down? Would that generally be a net positive? How do you think about just the impact from those share moves if you get a more stretched or cautious consumer overall? Yeah, there's a meaningful shift down that would tend to favor us because a large number of our brands tend to be on the value side of the equation. We do have some brands that play in the more premium side as well, but we tend to be up and down the value chain with a skew towards the lower price point.
Speaker Change: Uh huh.
Speaker Change: I have a consumer that's getting more cautious and I know you have the brand's position differently, but how much can you characterize the benefit from trade down.
Speaker Change: Would that generally be a net positive how do you think about just the.
Speaker Change: The impact from those share moves if you get a more stretched or cautious consumer overall.
Speaker Change: Yes, theres, a meaningful shift down that would tend to favor us because we are.
Speaker Change: A large number of our brands tend to be on the value side of the equation. We do have some brands that play in the more premium side as well, but we tend to be up and down the value chain.
Speaker Change: With a skew towards the lower margin or excuse me lower price point.
Rob Vitale: products, particularly in dog, dry dog food. And wouldn't it be fair to characterize it similar to serial where obviously you could lose some share on the branded side, but more than make up for it with what you gain on the low end? Well, that depends on a lot of variables. I mean, clearly in cereal, we have a much higher percentage of the low end of the values value chain given our position in private label as well as bagged cereal. Our position in pet on the low end is not nearly the same market share that we have in cereal.
Speaker Change: Our products, particularly in and dog dry dog food.
Speaker Change: And would it be.
Speaker Change: Fair to characterize it as similar to cereal, where obviously you could lose some share on the branded side, but more than make up for it with what's your game on the low end.
Speaker Change: Well.
Speaker Change: That depends on a lot of variables.
Speaker Change: Clearly in cereal, we have a much higher.
Speaker Change: Higher percentage of the low end of the values the value chain, given our position in private label as well as bagged cereal our position in pet on the low end is not nearly the same market share that we havent cereal.
Michael Lavery: Fair enough. That's a great color. Thanks.
Speaker Change: Fair enough that's great color. Thanks.
Operator: Thank you.
Speaker Change: Thank you and our next question comes from the line of John Baumgartner with Mizuho Securities. Please go ahead.
John Baumgartner: And our next question comes from the line of John Baumgartner with Mizzou Health Securities. Please go ahead. Good morning. Thanks for the question. Hey, good morning.
John Baumgartner: Good morning, Thanks for the question.
John Baumgartner: I wanted to hey, good morning, I wanted to come back to refrigerated retail and the Bob Evans side dishes.
John Baumgartner: I wanted to come back to refrigerated retail and the Bob Evans, the side dishes. I think expansion opportunities have been one of the aspirations there over the years, and we've seen some innovation here and there and some emphasis, de-emphasis on different segments. And I think in general, we've seen some encouraging volume signs at retail in the last couple of quarters. I'm wondering if you could speak at this point to what you're seeing in the category, expectations for distribution expansion over the next 12 months in terms of what your supply chain allows, returns on recent efforts and innovation, just kind of broader thoughts on expectations for retail going forward.
John Baumgartner: Expansion opportunities have been one of the aspirations there over the years and we've seen some innovation here and there and some emphasis de emphasis.
John Baumgartner: Print segments and I think in general we've seen some encouraging balling signs at retail in the last couple of quarters I'm wondering if you could speak at this point to what Youre seeing in the category expectations for distribution expansion over the next 12 months in terms of what your supply chain allows.
John Baumgartner: Returns on recent.
John Baumgartner: Efforts in innovation, and just kind of broader thoughts on expectations for retail going forward. Thank you.
Rob Vitale: Thank you. Yeah, so clearly the PPI acquisition gives us capacity to do a number of things that maybe we couldn't have done before. We've also improved our capacity through internal improvements in our own plants that we've owned even prior to the PPI acquisition. So we've got You've been with us a long time, so you remember the years when we had to stop preparing certain products because we couldn't meet customer demand. Those days are behind us, so now we can play more offense than we have in the past. What we're seeing in the category is there's a trade-down that's occurring with private label, which is a phenomenon that has not been an issue in that category years ago.
John Baumgartner: Yes so.
John Baumgartner: It clearly that PPI acquisition gives us.
John Baumgartner: Capacity due to number of things that maybe we couldnt have done before we've also improved our capacity through internal improvements in our own plants that we own even prior to the <unk> acquisition. So we've got a.
Speaker Change: You you've been with US a long time, so you remember the years when we had to stop.
John Baumgartner: Preparing certain products because we couldnt are we.
Speaker Change: We couldnt meet customer demand.
Speaker Change: Days are behind Us and now we can play more offense than we have in the past what we're seeing in the category is there's.
Speaker Change: There, there's a trade down that's occurring with our private label, which is a phenomenon that has not.
Speaker Change: Not been an issue in that category.
Speaker Change: Years ago, what we saw years ago was that private label really didn't have the quality and it would come in and out but it never really stuck.
Rob Vitale: What we saw years ago was that private label really didn't have the quality, and it would come in and out, but it never really stuck. This time around, we're seeing that private label has better quality, and it's... taking some demand away from products like ours. So with the new capacity that we have available, it enables us to think about how we look at other categories, you know, does it make sense to play in private label, does it make sense to play up and down the value chain while continuing to maintain our significant market share in the Bob Evans brand.
Speaker Change: At this time around we're seeing that private label has better quality and it's.
Speaker Change: Taking some demand away from products like ours, so with the with the new capacity that we have available.
Speaker Change: And it enables us to think about how we look at other categories.
Speaker Change: Does it make sense to play in private label.
Speaker Change: Does it make sense to play up.
Speaker Change: And down the value chain, while continuing to maintain our our significant market share.
Speaker Change: And in the Bob Evans brand.
Rob Vitale: In terms of innovation or renovation in that brand. We put a lot of that on hold given the issues that we had through COVID and even prior to COVID with our capacity utilization.
Speaker Change: In terms of innovation.
Speaker Change: Or or renovation and that brand.
Speaker Change: We've put a lot of that on hold given the issues that we had through COVID-19 and even prior to COVID-19 with our capacity utilization now with the availability of capacity.
Rob Vitale: Now with the availability of capacity, we can begin to do more of that which we would expect to do in the latter half of this year and into next Okay, thanks for that.
Speaker Change: We can begin to do more of that which we would expect to do.
Speaker Change: The latter half of this year and into next year.
Speaker Change: Okay. Thanks for that and then just to come back to PCB and some of the cereal category headwinds I think you had seen this about a decade ago, where birth rates were down and you had some shifts substitute proud I think you were back then it was frozen breakfast and restaurants now you could argue it's more protein shakes. So the macro headwinds we've seen these cycles before.
John Baumgartner: Then, to come back to PCV and some of the cereal category headwinds, I mean, I think you had seen this about a decade ago, where birth rates were down, you had some shift to substitute products. I think, you know, back then it was frozen breakfast in restaurants. Now, you could argue it's, you know, more protein shakes. So the macro headwinds, we've seen these cycles before. And I'm curious, if you put that to the side, do you see anything else fundamentally having changed, whether it's, you know, broader shift, you know, towards protein that's stickier this time around?
Speaker Change: And I'm curious if you put that to the side do you see anything else fundamentally having changed whether it's post inflation price points for the category.
Speaker Change: Whether it's a broader shift towards protein it's stickier this time around.
Rob Vitale: I guess, is there anything in the environment that that's been more structurally changed that would sort of, you know, change how you grow the category, your aspirations for the category, your ability to kind of, you know, circle the wagons on the value price point? Any thoughts there? We haven't moved GLP1s in that. So there's certainly some impact on GLP1s in the demand. And I think there will be some lapping that has to occur in the next, you know, six to 18 months. So that's the one difference in the next, you know, in the prior decade that we didn't have.
Speaker Change: I guess is there anything in the environment that does mean more structurally changed that would sort of thing.
Speaker Change: How you grow the category your aspirations for the category or your ability to kind of circle. The wagons on the value price point any thoughts there in terms of the GOP launching that so theres certainly some impact on <unk> and the demand and I think there'll be some lapping.
Speaker Change: That has to occur in the next.
Speaker Change: 862.
Speaker Change: 18 months. So that's the one difference in the next.
Speaker Change: Prior to <unk>.
Speaker Change: Decades, it we didn't have.
Speaker Change: Okay. Okay. Thanks, Rob Thanks, Jeff.
Operator: Thanks, Rob. Thanks, Jeff. Thank you. And once again, if you do have a question, you may press star one on your telephone keypad at this time.
Speaker Change: Okay.
Speaker Change: Thank you Andrew.
Speaker Change: Once again, if you do have a question you May press star one on your telephone keypad at this time.
Scott Marks: And your next question comes from the line of Scott Marks with Jeffries. Please go ahead. Hey, morning, guys. Thanks for taking my questions.
Scott Marks: And your next question comes from the line of Scott marks with Jefferies. Please go ahead.
Scott Marks: Hey, good morning, guys. Thanks for taking my questions.
Scott Marks: First thing I wanted to ask about is we've heard from some of your competitors recently, notably in serial, about more so increasing promotional activity to drive value for consumers. And I don't think I heard that mentioned, kind of in your prepared remarks, you know, more so around innovation and renovation. So just wondering if you can share any color on your thoughts into kind of the trade spend piece. So our view of the category, serial, we're talking about, is that promotional activities are at what we would call normal levels. Certainly you go through ebbs and flows in a given year or a given time period within a year where one producer might be promoting more and others not, and vice versa in subsequent periods.
Scott Marks: First one I wanted to ask about is we've heard from some of your competitors recently, notably cereal about more so increasing promotional activity to drive value for consumers and I don't think I heard that mentioned kind of in your prepared remarks.
Scott Marks: More so around innovation and renovation. So I'm just wondering if you can share any color on your thoughts on just kind of the trade spend piece.
Scott Marks: So our view of the category cereal, we're talking about Ah is that promotional activities are at.
Scott Marks: What we would call normal levels.
Scott Marks: Certainly you go through ebbs and flows in a given year or given time period within a year where we.
Scott Marks: John.
Scott Marks: The producer might be.
Scott Marks: Promoting more and others not and vice versa. In subsequent periods. So we haven't seen anything that we would consider to be.
Rob Vitale: So we haven't seen anything that we would consider to be, you know, out of the ordinary for any significant stretch of time. Our personal approach is to continue to do the types of programs that drive value. So we have seen that promotion for promotion's sake does not generate the return in volume that you give up in price. So you have to find the sweet spot that works for your products and works for your profitability. And that's the plan that we have now and going forward. Got it.
Scott Marks: You know out of the ordinary for any significant stretch of time.
Scott Marks: Our personal approach is to continue to do the types of programs that drive value. So we have seen that promotion for promotion sake does not generate the return in volume that you would give up in price. So you have to find the sweet spot that.
Scott Marks: So it works for your products.
Scott Marks: And it works for your profitability.
Scott Marks: Profitability and that's the plan that we have.
Scott Marks: Now and going forward.
Scott Marks: Got it and then last one for me.
Rob Vitale: And then last one from me. I know it's still early in the, you know, the acquisition of PBI, but just wondering if you can share any color on initial learnings or insights that you have from that and how you plan on leveraging that. Thanks. Yeah, it is early. I think the thing I would say is that there are some synergies that we probably didn't realize are there that in the longer or medium to long term that will be there.
Scott Marks: No it's still early in the.
The acquisition of PPI, but just wondering if you can share any color on initial learnings or insights that you have from that and how you plan on leveraging that thanks.
Scott Marks: Yes. It is early I think the the thing I would say is that.
Scott Marks: There are some synergies that we probably didn't realize or their debt in the longer or medium to long term and that will be there.
Rob Vitale: Probably the other learning is that the initial integration or acquisition, we had some upset in our employee population there that was probably a little bit more significant than we thought going in. So the ramp up that we're going to see is going to be slower than perhaps we initially expected, but it's going to fit well into our network. It's going to provide us opportunities, like I mentioned before, to think about that category in a different way compared to the way we've had to think about it based on some constraints we've had before we acquired it.
Scott Marks: Probably the other learning is that the initial.
Scott Marks: Integration.
Scott Marks: Our acquisition the we had some upset in our.
Employee population there are that was probably a little bit more significant than we thought going in so the ramp up that we're going to see is going to be slower than perhaps we initially expected, but it's going to fit well into our.
Network is going to provide us opportunities like I mentioned before to think about that category in a different way compared to the way we've had to think about it based on some constraints we've had before we acquired it.
Scott Marks: Yeah.
Scott Marks: Understood. Thanks so much.
Speaker Change: Understood. Thanks, so much.
Operator: Thank you.
Speaker Change: Thank you and your next question comes from the line of Marc <unk> with Wells Fargo. Please go ahead.
Marc Torrente: And your next question comes from the line of Marc Torrente with Wells Fargo.
Marc Torrente: Please go ahead. Hey, good morning, and thank you for the questions. I guess just first, grocery in general, category volumes remain under pressure, a lot of that consumer pressure that we're seeing out there, but thinking more in terms of relative performance, who are you seeing outperforming? Is it more value in private label? Is it smaller players? And then since quarter end, have you seen any sequential improvement in any of your category trends?
Marc: Hey, good morning, and thank you for the questions.
Speaker Change: It gets just first grocery and general category volumes remained under pressure a lot of that.
Speaker Change: It is a consumer pressure that we're seeing out there, but thinking more in terms of relative performance through using outperforming is it more value in private label with smaller players and then since quarter end have you seen any sequential improvement in any of your category trends.
Rob Vitale: For more information, please visit www.FEMA.gov So the first part of your question, I think it's a real dichotomy. There's take serial category as an example. You see some of the more premium, organic, natural, you know, marketed as healthier for you, but fairly expensive, not fairly, really expensive price points doing well in the category, while the overall category is not performing well. So I think what we're seeing consumers is there's a pocket of consumers that are spending for what they perceive as better for them and are willing to pay essentially whatever necessary to get that type of product.
Speaker Change: So the first part of your question.
Speaker Change: I think it's a real dichotomy, there's there's take cereal category as an example.
Speaker Change: You see some of the more premium organic natural.
Speaker Change: Oh.
Speaker Change: Marketed as healthier for you.
Speaker Change: But fairly expensive not fairly really expensive price points.
Speaker Change: Doing well in the category while the overall category is not are not performing well. So I think what we're seeing consumers as there's there's a pocket of consumers that are spending for what they perceive as better for them and are willing to pay essentially whatever whatever necessary to get that type of product and then you've got other consumer.
Rob Vitale: And then you've got other consumers who are cutting back significantly and deloading their pantries and buying less frequently, which is affecting the, you know, the expandable demand that we see in more normal times with cereal, where people have products in their pantry and they tend to eat it when it's available. What we're seeing is that they're just deloading their pantries because they don't have the money to go and restock.
Speaker Change: Who are cutting back significantly and de loading their pantries and buying less frequently.
Speaker Change: Which is affecting the.
Speaker Change: The expandable demand that we see in more normal times with cereal where people have products in their pantry and they tend to eat eat it when it's available what were seeing is that they're just the loading their pantries because they they don't have the money to go and restock.
Rob Vitale: And then I'm sorry, I zoned out on the second part of your question. Yeah, just any sequential improvements since quarter end in any of your categories. Yeah, it's not great improvement, but the worst months for serial were February and March. little bit of improvement in April, but we're clearly not ready to claim victory in that regard.
Speaker Change: And then I'm, sorry, I zoned out on the second part of your question.
Speaker Change: Yes, just any sequential improvement since quarter end in any of your categories.
Speaker Change: Yes.
Speaker Change: I guess, it's not great improvement, but.
Speaker Change: The worst months for cereal were February or March a little bit of improvement in April.
Speaker Change: But we're clearly not ready to claim victory in that regard.
Marc Torrente: Okay, and then just an update on the RTD shake manufacturing ramp. Shakes were called out as the driver of positive food service volumes. Did you make better progress during the quarter than you expected? And is your outlook for the contribution there still consistent with prior?
Speaker Change: Okay, and then just an update on the RTD shakes manufacturing rant shapes were called out as the driver of positive foodservice volumes did you make better progress during the quarter than you expected and is your outlook for the contribution they are still consistent with prior thanks, but keep in mind that that.
Rob Vitale: Thanks. Keep in mind that the baseline comparison was essentially zero for shakes. So, compared to last year, any production would have been an improvement. We are seeing improvement sequentially. It's slower than what we would like it to be, but it is trending in a favorable direction. But it is still not a material contributor to profit at the current levels. So, we would expect continued ramp up, again, maybe a little bit slower than we had hoped when we communicated this six, nine months ago. But in the long run, we still see the same finish line in terms of where that profitability can take Thank you.
Speaker Change: Baseline comparison was essentially zero for shakes, so compared to last year.
Speaker Change: Any production would have been an improvement.
Speaker Change: We are seeing improvement sequentially.
Speaker Change: It's slower than what we would like it to be but it is trending in a favorable direction, but it's still not a material contract contributor to profit at the current levels. So we would expect the continued ramp up again, maybe a little bit slower than than we.
Speaker Change: Had hoped when we communicated this six nine months ago.
Speaker Change: But in the long run we still see the same finish line in terms of where that profitability can take us.
Speaker Change: Yeah.
Speaker Change: Thank you and your next question comes from the line of Carla Casella with JP Morgan. Please go ahead.
Carla Casella: And your next question comes from the line of Carla Casella with J.P. Morgan. Please go ahead. Hi, thank you. One follow-up on Ken's question about 8th Avenue.
Carla Casella: Hi, Thank you one follow up on Ken's question about eighth Avenue, what are the options there and is there a is there a scenario where you part.
Rob Vitale: What are the options there and is there a scenario where you buy in and reconsolidate that business? Well, I think I would start with recalling that we wrote this to zero, two or three years ago. With that, we consider it like a new investment opportunity, with which we have a great deal of prior experience and knowledge. Beyond that, I'm not going to comment on the various iterations of opportunities that could exist for the Okay, great, thank you. Thank you.
Carla Casella: Hi Inn and re consolidate that business.
Carla Casella: Well I think I would start with recalling that we wrote this two zero.
Carla Casella: Two or three years ago.
Carla Casella: With that we.
Carla Casella: We consider it like a new investment opportunity with which we have a great deal of prior experience and knowledge.
Carla Casella: That I'm not going to comment all the various iterations of opportunities that could exist for the company.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you.
Operator: This concludes today's Post Holdings second quarter 2025 earnings conference call and webcast. Please disconnect your line at this time and have a wonderful day. the the then the
Speaker Change: This concludes today's post holdings second quarter 2025 earnings conference call and webcast. Please disconnect. Your line at this time and have a wonderful day.
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