Post Holdings (POST) Q4 2019 earnings summary

Executive summary

• FY19 delivered Adjusted EBITDA of $1.210 billion and free cash flow of $414 million; share price rose ~8%, outperforming broad market indices but below the long-term growth rate.

• Reported net sales fell 9% as the 8th Avenue private-label business was deconsolidated; organic growth across several segments and Bob Evans contributions partly offset the change.

• Operating priorities included multi-year flexibility, customer-service and cost projects; leadership described 2020 as a transition year for Post Consumer Brands, with more meaningful benefits expected from 2021.

Financial highlights

• FY19 net sales were $5,681.1 million, down 9% YoY; gross profit was $1,792.1 million versus $1,854.0 million.

• Operating profit rose 36% to $781.0 million; reported net earnings available to common shareholders fell to $121.7 million from $457.3 million.

• Diluted EPS was $1.66 versus $6.16; Adjusted diluted EPS increased to $4.91 from $4.20, and Adjusted EBITDA was $1,210.4 million versus $1,230.7 million.

• Operating cash flow was $688.0 million; free cash flow was $414 million, with higher inventory investment and growth capital spending weighing on cash generation.

• Excluding impairment, legal-settlement and 8th Avenue/warehouse sale effects in both years, operating profit increased slightly; reported results included a $126.6 million 8th Avenue gain and $63.3 million of impairment charges in FY19.

Outlook and guidance

• Post Consumer Brands expected modest payoffs from its process overhaul in 2020, with more material impact beginning in 2021.

• Management expected to continue pursuing M&A; the proposed TreeHouse Foods private-label RTE cereal acquisition remained under regulatory review as of the shareholder letter.

• Foodservice planned to seek acquisitions that leverage its capabilities; 2020 competition was approached with a bias for adapting and acting on opportunities.