Q3 2025 Post Holdings Inc Earnings Call
Speaker #5: Please stand by. Your program is about to begin. If ou need audio assistance during today's program, please press star zero. Welcome to the Post Holdings third quarter 2025 earnings conference call and webcast.
Speaker #5: At this time, 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 one on your telephone keypad.
Speaker #5: If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly.
Speaker #5: We ask that you pick up our handset for best sound quality. Lastly, if you should quire operator assistance, please press star zero. I would now like to turn the call over to Daniel O'Rourke, investor relations for Post.
Speaker #6: Good morning. Thank you for joining us today for Post's third quarter fiscal 2025 earnings call. I'm joined this morning by Robert Vitale, our president and CEO.
Speaker #6: 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 estions.
Speaker #6: The press release that supports these remarks is posted on both the investor's and the SEC filings portions of our website and is also available on the SEC's website.
Speaker #6: As a reminder, this call is being recorded and an audio replay will be available on our website at postholdings.com. Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements.
Speaker #6: These forward-looking statements are current as of the date of this call and management undertakes no obligation to update these statements. This call will discuss certain non-GAAP measures.
Speaker #6: 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 Rob.
Speaker #7: Thank you, Daniel, and good morning, yone. Before commenting on the quarter, I want to mention the leadership announcements from last evening. Jeff has decided to retire at the end of the year.
Speaker #7: Jeff and I started at Post the same day, and he has been instrumental to our success. While I'm appy for him, he will be sorely missed.
Speaker #7: Nico is being named COO effective at the same time. For the time being, he will also continue as CEO of PCB. Nico has done an outstanding job leading PCB, especially the integration of our pet business.
Speaker #7: I look forward to working him, working with him in this role. Turning to the business, we had strong results in Q3, despite the challenging macro environment.
Speaker #7: With adjusted EBITDA approaching $400 million, diversification in our business segments continues to benefit us. We sequentially saw significant improvement in our cold chain businesses, more than offsetting a pullback at PCB.
Speaker #7: While these dynamics were anticipated heading into the quarter, the magnitude of each was a bit bigger than expected. Rounding out the portfolio, Wiedebig's maintained a steady improvement from the first half, which was impacted by their ERP conversion.
Speaker #7: Another highlight of Q3 was our acquisition of Eighth Avenue, which closed on July 1st. We are pleased to have the business fullly back in the Post portfolio.
Speaker #7: And while we see very clear synergies to PCB within nut butter and granola, we are waiting until FY26 to start integrating to provide some normalcy and stabilization for the business.
Speaker #7: Meanwhile, the broader M&A environment remains challenged given market volatility. However, we view the recently announced Kellogg's transaction as an encouraging sign, highlighting the potential for larger or transformative transactions.
Speaker #7: Beyond M&A, we continue to be aggressive in share buybacks. Having bought back 8% of the company fiscal year to date, subsequent to the closure of the Eighth Avenue transaction, we remain in a great spot from both a leverage and liquidity position to remain opportunistic with our capital allocation.
Speaker #7: While tariffs and regulatory changes to food ingredients continue to increase costs and create uncertainty, the recent tax law changes are projected to result in substantial financial benefits to Post, specifically bonus depreciation and interest deductibility changes will drive an estimated $300 million in reduction in cash taxes paid over the next five years.
Speaker #7: I am pleased with the overall state of our portfolio as we continue to perform well in a really tough environment. Food service has successfully navigated severe HPAI impacts this year and is executing a soft landing to normalcy.
Speaker #7: Pet is working through a challenging but much-needed portfolio transition, while continuing to sustain over 2X our acquisition underwriting case. Meanwhile, on the grocery side of PCB, we remain focused on executing cost optimization to offset pressured cereal volumes.
Speaker #7: Finally, both Refrigerated Retail and Wiedebig's continue to pursue their pipelines for targeted volume growth and cost reduction. With that, I will turn the call over to Jeff.
Speaker #8: Thanks, Rob. And good morning, everyone. Post Consumer Brands continued to face volume challenges in both cereal and pet, which drove the segment's performance decline.
Speaker #8: Cereal category volumes were down 4.1% year over year, and our branded portfolio was slightly behind the category, with a 4.9% decline. We remain on track with our iously announced cereal plant closures at the end of the calendar year to optimize our cost structure.
Speaker #8: And we will continue to pursue additional cost-out opportunities to mitigate the current cereal category trajectory. In fact, cost optimization efforts already implemented along with favorable product mix enable us to maintain cereal profitability relatively flat sequentially despite the volume challenges.
Speaker #8: Our pet volume consumption was down 3.7% year over year, versus a flat category as we saw continued gravy-trained price elasticities and accelerating declines in nutrition from its relaunch.
Speaker #8: As we learned our mom cereal reset a few years ago, we expected short-term volume challenges as we overhauled the nutrition brand but the magnitude has been larger than anticipated.
Speaker #8: We're making some course corrections based on market feedback and therefore expect the brand recovery timeline to be extended. With regard to gravy train, we have some price pack architecture changes hitting the market over the next few quarters, which we believe will set the proper balance between profitability and volumes for that brand.
Speaker #8: Turning to food service, as expected, Q3 was a much stronger quarter sequentially driven by temporary avian influenza pricing to recover Q2 costs ahead pricing, and to offset continued elevated egg costs.
Speaker #8: In addition, we saw volume growth in both eggs and potatoes driven by improved market egg availability and improved breakfast foot traffic for our customers.
Speaker #8: We expect to wind down our temporary HPAI pricing and fully recover our egg supply by the end of Q4. Setting us up to enter fiscal '26, at a normalized run rate.
Speaker #8: Although still early in our planning process, our early read of the normalized quarterly adjusted EBITDA run rate of our food service business is approximately 115 million.
Speaker #8: Similar to food service, refrigerated retail benefited in the quarter from temporary avian influenza-driven pricing adders in liquid eggs. Along with the shifting of the Easter holiday into Q3, volumes were higher in nearly all categories.
Speaker #8: We are progressing well on the integration of the recently acquired PPI business, seeing the benefits of an optimized manufacturing mix and the elimination of tolling charges. We are also seeing further benefits from warehousing and freight efficiencies.
Speaker #8: Turning to Wiedebig's, our flagship yellow box product grew consumption volumes 2.4% year over year, in a category that was down 1.8%. We attribute this to a return to marketing and promotion after limiting those activities in the first half of the fiscal year as we executed an IT systems conversion.
Speaker #8: In addition, UFIT had a strong quarter, growing volumes by 31% over the prior year. We are looking to expand the UFIT brand with new high-protein cereal and granola products, that are now in stores.
Speaker #8: More broadly, we remain focused on executing our cost-out opportunities to drive our multi-year margin recovery. Despite the challenging macro backdrop, we are expecting a strong finish for fiscal 2025 as we remain focused the things we can control such as cost-out optimization and making targeted investments to drive volumes.
Speaker #8: With that, I'll the call over to Matt.
Speaker #7: Thanks, Jeff. And good morning, everyone. Third quarter consolidated net sales were $2 billion and adjusted EBITDA was $397 million. Sales increased 2% as avian influenza-driven pricing and volume growth in our cold chain businesses was partially offset by a lower pet food and cereal volumes.
Speaker #7: Turning to our segments, Post Consumer Brands' net sales decreased 9%, driven by lower volumes in both grocery and pet. Cereal volumes decreased 6% due to category dynamics, with private labels seeing steeper declines than branded.
Speaker #7: In pet, our volume declines accelerated to down 13%. As a reminder, we expected high single-digit declines for the second half of fiscal '25 until we lapsed prior year profit-enhancing decisions and completed the relaunch in nutrition.
Speaker #7: Bridging the additional decline this quarter is twofold. First are the incremental consumption declines Jeff discussed for both nutrition and gravy train. And the second is the loss of some private label business for which we expect to replace by early FY26.
Speaker #7: Segment adjusted EBITDA decreased 8% versus prior year as improved cost performance for both grocery and pet was not enough to offset the impact of lower volumes, particularly in pet.
Speaker #7: One call out is the ter cost performance is net of $5 million severance charge taken this quarter as PCB optimized its SG&A workforce to better align with our smaller cereal footprint.
Speaker #7: Moving to food service, net sales increased 19% and volumes increased 7%. Excluding impact of our PPI acquisitions, volumes increased 4% driven by the inclusion of shake volumes in the quarter and higher customer foot traffic benefiting both eggs and potatoes.
Speaker #7: Beyond volume, avian influenza-driven pricing drove the revenue increase. Adjusted EBITDA increased 32%, driven by increased pricing to recover elevated egg costs and continued volume growth in both our value-added egg and potato products.
Speaker #7: Refrigerated retail net sales increased 9% and volumes excluding the impact of PPI increased 1%. Volumes across all products benefited from the timing of the aster, which was in Q2 last year.
Speaker #7: Segment adjusted EBITDA increased 94% as we lapped a particularly weak quarter last year, marked by trade overspend, while this year we benefited from avian influenza pricing adders and Easter-driven volume increases.
Speaker #7: Wiedebig's net sales increased 1% versus the prior year, foreign currency represented a tailwind of $560 basis points. Volumes decreased 3% driven by non-core discontinuations.
Speaker #7: However, as Jeff mentioned, our core yellow box product grew volumes 3% and UFIT grew volumes 31%. Segment adjusted EBITDA decreased, excuse me, decreased 4% versus prior year, led by lower volumes and increased inflation-driven costs.
Speaker #7: Turning to cash flow, we generated $226 million from operations and approximately $95 million in free cash flow. Net of accelerated capital spend on our key estments in both PCB and food service.
Speaker #7: From a capital allocation standpoint, we have repurchased approximately $1.6 million shares since the beginning of Q3 bringing our fiscal year total to approximately $5 million, or 8% of the company.
Speaker #7: Our Q3 results drove our net leverage down slightly to 4.3 times, however, adjusting for July 1st closing of Eighth Avenue our leverage is 4.5 times.
Speaker #7: With our earnings released last night, we increased our adjusted EBITDA guidance range from 1.5 billion to 1.52 billion. At the midpoint, this suggests Q4 will be approximately flat to Q3 with the inclusion a full quarter of Eighth Avenue results offsetting some normalization within the balance of the portfolio.
Speaker #7: Sequentially, we expect our cold chain businesses to decline as AI pricing adders wind down throughout the quarter. This will be partially offset by an increase in PCB due to back-to-school seasonality in cereal and the absence of Q3 severance charges.
Speaker #7: Thank you for joining us today, and I will now turn the call back over to operator.
Speaker #1: The floor is now open for questions. At this time, if ou have a question or comment, please press star one on our telephone keypad.
Speaker #1: If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your question to provide optimal sound quality.
Speaker #1: Thank you. And our first question is coming from Andrew Lazar with Barclays. Please go head.
Speaker #9: Thanks. Good morning. thanks so much. Good morning, everybody. all the best on your return and Jeff. Yep. And congratulations to Nico on the COO role.
Speaker #9: Rob, I know it's early to provide specific guidance on on fiscal '26, but maybe you can lay out some of the the key puts and takes to consider.
Speaker #9: I think I was as you've talked about food services as over-delivered this year, suggesting maybe some give back next year. The cereal category trends have obviously remained quite weak, and the pet turnaround is taking more time.
Speaker #9: I guess on the flip side, you've got the contribution from Eighth Avenue, cost savings from asset optimization moves, and I think some contribution from the shake co-packing dynamic.
Speaker #9: So guess, I'm going to write on those. What others might I be missing? And then I guess when you knit all out, would you still anticipate at least some modest EBITDA growth in fiscal '26?
Speaker #6: I think you laid it out pretty well. And, the way we are thinking, first of all, I should, say we are still in the planning process for '26.
Speaker #6: But the way we are thinking about it is, if we normalize full food service for the AI impact, it's essentially an on-algorithm year. So again, with the caveat that we're still in the level of planning.
Speaker #6: Yep. Beyond that, I think you laid out the different puts and takes pretty well. Are there any that you want to add to, Matt?
Speaker #7: No, no, I think you captured everything, Andrew and, , you know, like you, you know, you took fiscal '25 and put in a full year of Eighth Avenue, and then normalized our cold chain businesses for AI, Jeff laid out, ou know, the run rate we see food service at, and we think it can grow in a in accordance with algo from there, just given the the value proposition and just where we sit in the marketplace.
Speaker #7: so I, I, I think we we feel od about our prospects for next year off a normalized '25.
Speaker #9: Great. Okay. Thank you for that. And then I'm ious, Rob, maybe just a little more detail on what you're seeing, you know, in cereal category at this point.
Speaker #9: and I guess why would why would I'm just curious why private label would be underperforming, branded in category the way that it is.
Speaker #6: Yeah, it's a bit of a mystery to me as well. I, I think perhaps some of the degree of promotion is, bringing the, price gaps down a little more than it should.
Speaker #6: I think that, you know, the, the, the pricing opportunity for us there is, still compelling. But it just is not as compelling as it has been, compared to branded.
Speaker #7: Yeah, I think the only thing I'd add, Andrew, is our private label and cereal obviously skews to Walmart, and they've seen quite a pullback in foot traffic.
Speaker #7: So, we think there's some impact there as well, given our exposure there.
Speaker #9: Okay. Great. Thanks so much.
Speaker #6: Thank ou.
Speaker #1: And our xt question will come from Matt Smith with Steeple. Please go head.
Speaker #10: Hi. Good morning. Thank you for ing my question. I wanted to come back to the food service performance in the quarter. There was a comment about the pricing reflecting the AI recovery.
Speaker #10: Should we the pricing was up, you ow, low double digits. Was that full amount the pricing, recovery of cost you incurred of 2Q, or there some underlying pricing as well?
Speaker #10: I guess I'm just trying to get a sense relative to the 30 or 35 million that you expected to recover, how much was delivered above that?
Speaker #6: Yeah, I, I think there was I mean, a couple of factors. One is the recovery of Q2, largely happened in Q3, and then also you ow, again, we continue to see elevated egg markets.
Speaker #6: So we have continued pricing to recover that as well. So it's kind of an ongoing, process. And, once we get our egg supply back, as we get through Q4 here, obviously we'll need that pricing and we'll see kind of a normalized view and that's, you know, kind back to the 115 that Jeff talked about is, is how we'd like recalibrate the business.
Speaker #9: And, and then the only thing I would add is on a year-over-year basis, there's a normal pricing that we would take as we renegotiate contracts.
Speaker #9: So there's some of that phenomenon in place as well. Year-over-year.
Speaker #10: Thank you. And as a follow-up, I wanted to ask about the, the CapEx moving higher in the guidance. for both the PCB projects as well as, food service investments.
Speaker #10: is that incremental scope to these projects or has the cost gone up due to inflation? Just any color there would be helpful and I'll pass it on.
Speaker #10: Thank you.
Speaker #6: No, 's really a matter of pacing that more than cost growth. So it's just we're spending little faster. We have an opportunity to do that and we want to accelerate those projects where we can.
Speaker #6: So it's not a matter of higher cost; it's just faster. Faster spend.
Speaker #1: Thank ou. We'll take our next question from Michael Lavery with Piper Sandler. Please go head.
Speaker #11: Thank you. Good morning. And congrats to Jeff and Nico both. I want to...
Speaker #9: Thank you.
Speaker #11: to, come back to, just thoughts on M&A. You've obviously just done the Eighth Avenue deal, but with, fairly, you ow, very modest impact on your balance sheet.
Speaker #11: would it be fair, you know, could you give a sense of just how much appetite you still have for, for more? And what, if any, challenges you're seeing in the marketplace or, you know, how to think about just what, what's, on your radar and I, I know you've ioned, repurchases as an alternative as well.
Speaker #11: Obviously, we'll, 'll look for those in the absence of a deal, but just any thoughts on how the, the M&A landscape looks for ou would be great.
Speaker #6: Yeah. I mean, I think if you look at some of the opportunities right now, they're impacted by the uncertainty of base earnings with tariffs and, and, some of the impacts that could have, come from food ingredient changes that we called out in the, prepared remarks.
Speaker #6: You know, I think it's an interesting commentary that the two large opportunities or transactions that have happened in the last couple of months, or probably longer than that, are both private companies buying public companies.
Speaker #6: so I think the transactions of public to, public are, impacted by the uncertainty. I just, mentioned. at the same time, multiples across the segment, including ours, are quite low.
Speaker #6: And the opportunity to use our stronger balance sheet to buy back shares is pretty attractive. So we, you know, as we talked about, I think in the past, we look at it as a balancing process of what are the opportunities externally, i.e. &A, what are the opportunities internally, meaning fair, share buybacks, and what do we need do from a managing our, leverage perspective.
Speaker #6: So with all of that saying, you know, we continue be open-minded to transactions, small and large, and we just wait for the time to be right.
Speaker #10: Okay. That's pful. And just a follow-up on the food service quarterly EBITDA run rate. it, it, it feels like it's got upside and some headroom there, especially as mix keeps driving tailwinds and, you've got both the, you ow, kind of sticky pricing on top of, of some of the, temporary, you know, the, the pull to catch up from, from second quarter.
Speaker #10: Is it a just a bit of conservative posture to not push that higher yet or are there any kind of incremental headwinds we should keep in mind?
Speaker #10: And, and can you ive a sense of maybe what some of your umptions are for shakes in that in terms of, you know, the, the latest on how it's progressing or, you know, what maybe utilization assumptions you may have there?
Speaker #6: So I'll start with the last part first. the, the shake contribution in that number is pretty modest. while we're continuing to make progress, and know we've said that, probably three, four quarters in a row, and it, it's, it's accurate.
Speaker #6: It's just, it's a slow slog. So, we're still climbing up, to where we think normalized, profitability would be. So over time, depending on your time horizon, over time that is certainly a, a tailwind that we would expect to provide incremental profit as we progress through 2026 and, beyond.
Speaker #6: In s of the, the first part of the estion, I think that's a, you know, 's a reflection of what we currently see as the run rate of the business.
Speaker #6: but recall that we view, food service as a, modest grower on a year-over-year basis. which has been the case throughout our ownership period and prior to our ownership period.
Speaker #6: So, you know, that's a point in time, and we would expect that over time it would grow from there.
Speaker #10: Okay. That's helpful. Thank you.
Speaker #1: And our next question comes from David Palmer with Evercore ISI. Please go head.
Speaker #12: Thank you. I was just maybe hoping that we could do a little bit of a, you know, market insights on the big two categories within PCB.
Speaker #12: And first of all, Jeff, all, all the best in retirement. Congratulations on your career and all the best to ou too, Rico. but with regard to pet and cereal, you know, the categories up in pet, a uple percent, the sales seem to be moving quickly to the, to the premium and private label sides the category.
Speaker #12: You know, value brands, big brands, you know, basically across the board are losing share there. And I wonder maybe what the insight is there, other than you know, perhaps, you know, drive, drive versus wet and some of those dynamics and in s of fresh.
Speaker #12: But, and then in cereal, the category is down a couple percent. It's incredible, that private label's really benefiting. It seems maybe to be going to the tidy and low carb type smaller brands seem to be flourishing.
Speaker #12: And so I'm not really sure how all of this is really informing what you're going to be doing and maybe even spending heading into fiscal '26.
Speaker #12: Do ou feel like you have a plan for each to pivot and adjust to these, to sort of get back to market share and just really curious about the plan and the spending levels in particular.
Speaker #12: Thanks so much.
Speaker #6: Yeah, I think, starting with pet, again, we've got some, as we talked about at the beginning of the fiscal year, some profit-enhancing items and some decisions we made that we wouldn't lap until we got through the end of this fiscal year.
Speaker #6: And I think what you saw in the quarter was down 13%. I'd say those are about half of that. So as we lap the year, those would fall way and you're left with the consumption trends, challenges we've seen mainly around nutrition, and then also gravy train that Jeff talked about.
Speaker #6: Again, we've got plans in place to address both those. Obviously, the nutrition launched and, and we're making some course corrections as we, as we move through that as well.
Speaker #6: It's going to take a little time than I think we initially anticipated. But we feel good about both of those, you know, leveling out or improving that consumption as we get into fiscal '26.
Speaker #6: And then the other piece was around just some private label business that we lost. we've got clear line of sight to replacement of that over the next couple of quarters.
Speaker #6: So I think from a, a volume standpoint, we feel by the, the middle of, next fiscal year, we will largely, you ow, be closing in on flat relative to what 're seeing today.
Speaker #6: And then, in terms of spend, obviously we’re putting some dollars behind Gravy Train and nutrition, in particular, to support the relaunch on the cereal side.
Speaker #6: from a spend standpoint, I think we continue to be really rational around spending. and in terms of supporting the brands, we that on a targeted basis.
Speaker #6: We still think there's additional network optimization we can do. It's not plants, but maybe more lines. But again, I think we're also keeping an eye on the category.
Speaker #6: it's been a, a tough year and thinking as we lap next year, expect to see some, you know, year-over-year comps improving in s of just the, the rate of decline we've seen in cereal.
Speaker #6: But we'll keep an eye on that as we think about additional optimization.
Speaker #10: so it sounds just a summary is that you don't expect to have a, a, very significant increase in the spending levels promotion and otherwise.
Speaker #10: rather just tactical changes with regard to brands.
Speaker #6: Well, yes. I think tactical is a great way to describe it. Yep.
Speaker #10: Thank you.
Speaker #1: Our next question comes from Scott Marks with Jeffries. Please go head.
Speaker #13: Hey, good morning. Thanks so much for taking our questions. The first thing I wanted to ask about—you made a comment in the prepared remarks about some higher input costs because of the product reformulations and some regulatory changes.
Speaker #13: So maybe just wondering if you can kind of walk us through how you're thinking the shape of the portfolio and how you intend maybe to, adjust the portfolio a little bit to meet some of these new, you ow, trends and, and, and policy updates.
Speaker #6: So I think we're going , we're going , certainly have some innovation. so to David's question before, you know, one of the things that we're going to do is, attempt some innovation in cereal that's more targeted at the, the types of products that are, performing well, prone to enhanced cereals, that sort of thing.
Speaker #6: more broadly with regard to ingredients, I think we're going to take a pragmatic approach, you've en some commitment from some of our peers to eliminate, some of the ingredients.
Speaker #6: we're certainly going to, look at reformulation, of our products over time. But are going to take a, a pragmatic view as to how quickly we do that and, whether we that across the board or within certain products.
Speaker #6: So I, I, I think, h, to the, the short answer is to say we're going to take a, a tactical view, we're going to make tweaks along the edges, but we're not anticipating any major changes in in fiscal '26.
Speaker #6: With regard to those items.
Speaker #13: Got it. Thanks for that. And then maybe as a follow-up, earlier in the call, you mentioned, obviously the, the buyout of WK Kellogg. Maybe, if you can share your thoughts around, you ow, a possible new, new entrant into the category with, deeper pockets for innovation and investment and how you think about that maybe changing the, dynamics within the cereal category from here.
Speaker #6: I think, you have a situation of one very large and very, respected, company. being, acquiring a smaller but also very well-respected, company with a, with the likely outcome being the category will be enhanced by the size of the, acquirer.
Speaker #6: But I think until we actually see the transaction close, we would be, hesitant to make further comment.
Speaker #13: Got it. We'll pass it on. Thanks.
Speaker #1: Our next question comes from Mark Terenzi with Wells Fargo Security. Please go head.
Speaker #14: Hi. Good morning. And thank you the questions. And Jeff, congratulations on the retirement. I, I ess first on Eighth Avenue, kind of two parts.
Speaker #14: How has that business and its categories been tracking over the last couple of quarters? Top line and profitability. And you previously increased your outlook to account for the deal closing, the deal close on time, any change to our, your expected contribution for this year and then going forward.
Speaker #14: Any seasonality considerations for that business? Should that track more or less in line with PCB? Thanks.
Speaker #6: Yeah. No, no material changes to this fiscal year contribution. And then, as the, the outlook for, for next year remains, similar. I'd say what we found and not surprising as, as we watch the businesses with the backdrop it was under over the last six or nine months and uncertainty about where the business was going to land, I definitely saw a pullback in performance of the business, here as of the last couple of quarters.
Speaker #6: We see a path to improvement in line with what we called out when we acquired the business for next year, but no seasonality I would really call out.
Speaker #6: it's material within the business and, if there's thing else you'd add, Jeff, but I think that's.
Speaker #13: Yeah, I think that covers it.
Speaker #14: Okay. Great. And then, maybe just an update some of the timing of the plan optimization savings. It sounds as though the, step up in CapEx could pull some of that forward.
Speaker #14: And then just given how the cereal category has trended, where do you ink this takes you for, your utilization and how does that compare versus your optimal outlook?
Speaker #14: Thanks.
Speaker #6: Yeah. I, so again, I, it doesn't really pull forward what the actions we're taking on the, the plan optimization. They're still on track for the end of the calendar year.
Speaker #6: and in terms of utilization, you know, we would expect that would get us back up into the mid-80s. and then I think it's really a matter of, of like I said, how does the cereal category perform?
Speaker #6: if it's more like this year, we'd have to move quicker on additional steps. If it's, levels out and becomes more normalized for what we've seen historically, then, I feel like we're in a od spot for next fiscal year.
Speaker #14: Great. Thank ou.
Speaker #1: Our next question comes from John Baumgartner with Mizuho. Please go head.
Speaker #15: Good morning. Thanks for the estion. And, Jeff, congrats on retirement. Really appreciated all of your, h, your insights over the years.
Speaker #6: Thank ou.
Speaker #15: I, I ess first off for me in pet, I like to follow up there given the portfolio adjustments. It, it seems as though you had a fast start out of gate, rebuilding with existing customers in the old Smucker business.
Speaker #15: But as that's normalized, how do you think about portfolio balance at this point? Are there opportunities to maybe participate more heavily in different channels, e-commerce, specialty?
Speaker #15: Are there opportunities to have a presence in some the specialized formulas? Just how do you envision the portfolio from where it sits today with steady-state brands and distribution and where it could maybe evolve from here?
Speaker #6: Well, I think there are many opportunities to change the composition of the portfolio, whether it's channel, price point, or even breed. So, I think there are many opportunities there.
Speaker #6: however, I think the most important thing to realize is that, you know, we want to make sure that we, that what we bought sticks.
Speaker #6: And we, part of what we bought was a, brand in nutrition that we knew needed work. So we will continue to, make sure that nutrition is where it needs to be before we do too much portfolio management.
Speaker #15: Okay, great. And then as a follow-up on refrigerated retail and the side dishes business, it looked like the volumes have been performing pretty well, at least in the scanner data.
Speaker #15: And you've done it with, I guess, reasonably stable pricing. Can you dig in a bit more into the drivers there, you know, what's behind the performance and how to think about maybe next 12 months in terms of growth through distribution, innovation, you know, next steps for that business?
Speaker #6: Sure. I, I, I think we, we, we feel good, es, to your point. Obviously, we had a ift with Easter and then we've had good performance this quarter.
Speaker #6: you know, last year we had some challenges with trade, where we, overshot on trade eight into the base performance of the, of the business.
Speaker #6: And we, of course, corrected that and then a much better spot this year. I think we are seeing additional opportunities and gains within distribution.
Speaker #6: And also price points, we've targeted opportunities there as well in terms of alternative products within our, that we can offer us in diversify similar to what we see in PCB.
Speaker #6: so I think as we look to next year, I think we, we feel really good about some top line opportunities for, for that piece of the business.
Speaker #15: Good. Thanks, Matt. Thanks for your email.
Speaker #1: Thank ou. And our next question comes from Carla Costello with JP Morgan. Please go head.
Speaker #16: Hi. just a quick question. On the Eighth Avenue acquisition, you're funding it with revolver and cash. But any thoughts about coming in, in issuing bonds to eventually or term loan to eventually put in longer-term financing for that?
Speaker #6: Yeah. It's something that we definitely, obviously, keep an eye on. The market's really closely. I, you know, I think right , just more a, in a monitoring mode.
Speaker #6: But, you know, I, I ink at some point that certainly could be an option for us. but right now in a really good spot from a cash flow, liquidity standpoint.
Speaker #6: So, and no rush. I think we'll remain opportunistic.
Speaker #16: Okay. Great. That's all I had.
Speaker #6: Thanks.